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FRY-6
(J CO PY OMB Number 7100-0297 Approval expires December 31 2015 Page 1 of 2
Board of Governors of the Federal Reserve System
Annual Report of Holding Companies-FR Y-6
Report at the close of business as of the end of fiscal year
This Report is required by law Section 5(c)(1)(A) of the Bank Holding Company Act (12 USC sect 1844 (c)(1)(A)) Section 8(a) of the International Banking Act (12 USC sect 3106(a)) Sections 11(a)(1) 25 and 25A of the Federal Reserve Act (12 USC sectsect 248(a)(1) 602 and 611a) Section 211 13(c) of Regulation K (12 CFR sect 21113(c)) and Section 2255(b) of Regulation Y (12 CFR sect 2255(b)) and section 10(c)(2)(H) of the Home Owners Loan Act Return to the appropriate Federal Reserve Bank the original and the number of copies specified
NOTE The Annual Report of Holding Companies must be signed by one director of the top-tier holding company This individual should also be a senior official of the top-tier holding company In the event that the top-tier holding company does not have an individual who is a senior official and is also a director the chairshyman of the board must sign the report
1 James W Aldrich Name of the Holding Company Director and Official
Chairman Title of the Holding Company Director and Official
attest that the Annual Report of Holding Companies (including the supporting attachments) for this report date has been preshypared in conformance with the instructions issued by the Federal Reserve System and are true and correct to the best of my knowledge and belief
With respect to information regarding individuals contained in this report the Reporter certifies that it has the authority to provide this information to the Federal ReseNe The Reporter also certifies that it has the authority on behalf of each individual to consent or object to public release of information regarding that individual The Federal ReseNe may assume in the absence of a request for confidential treatment submitted in accordance with the Boards Regarding Availability of Information 12 CFR Part 261 fat the eporter and individual consent to public release of all details in he report concerning th individual
k)
of Holding Company Director and Official
72015 Date of Signature
For holding companies f1Q1 registered with the SEC-Indicate status of Annual Report to Shareholders
D is included with the FR Y-6 report
will be sent under separate cover
D is not prepared
For Federal Reserve Bank Use Only
RSSDID cL lft SJ 7 CI
This report form is to be filed by all top-tier bank holding compashynies and top-tier savings and loan holding companies organized under US law and by any foreign banking organization that does not meet the requirements of and is not treated as a qualifyshying foreign banking organization under Section 21123 of Regulation K (12 CFR sect 21123) (See page one of the general instructions for more detail of who must file) The Federal Reserve may not conduct or sponsor and an organization (or a person) is not required to respond to an information collection unless it displays a currently valid OMB control number
Date of Report (top-tier holding companys fiscal year-end)
December 31 2014 Month I Day I Year
NONE Reporters Legal Entity Identifier (LEI) (20-Character LEI Code)
Reporters Name Street and Mailing Address
Chicago Shore Corporation Legal Title of Holding Company
190 East Delaware Place (Mailing Address of the Holding Company) Street I PO Box
Chicago IL 60611 City State Zip Code
Physical Location (if different from mailing address)
Person to whom questions about this report should be directed Maurice J Lewis Treasurer Name
312-202-7508 Area Code I Phone Number I Extension
312-280-0383 Area Code I FAX Number
mlewisdelawareplacecom E-mail Address
wwwdelawareplacebankcom
Title
Address (URL) for the Holding Companys web page
Does the reporter request confidential treatment for any portion of this submission
D Yes Please identify the report items to which this request applies
No
D In accordance with the instructions on pages GEN-2 and 3 a letter justifying the request is being provided
D The information for which confidential treatment is sought is being submitted separately labeled Confidential
Public reporting burden for this information collection is estimated to vary from 13 to 101 hours per response with an average of 525 hours per response including time to gather and maintain data in the required form and to review instructions and complete the information collection Send comments regarding this burden estimate or any other aspect of this collection of information including suggestions for reducing this burden to Secretary Board of Governors of the Federal Reserve System 20th and C Streets NW washlngton DC 20551 and to the Office of Management and Budget Paperworlc Reduction Project (7100-0297) washington DC 20503
102014
For Use By Tiered Holding Companies
FRY-6 Page2of2
Top-tiered holding companies must list the names mailing address and physical locations of each of their subsidiary holding companies below
Security Chicago Corporation Legal Title of Subsidiary Holding Company Legal Title of Subsidiary Holding Company
190 East Delaware Place (Mailing Address of the Subsidiary Holding Company) Street I PO Box (Mailing Address of the Subsidiary Holding Company) Street I PO Box
Chicago IL 60611 City State Zip Code City State Zip Code
Physical Location (if different from mailing address) Physical Location (if different from mailing address)
Legal Title of Subsidiary Holding Company Legal litre of Subsidiary Holding Company
(Mailing Address of the Subsidiary Holding Company) Street I PO Box (Mailing Address of the Subsidiary Holding Company) Street I PO Box
City State Zip Code City State Zip Code
Physical Location (if different from mailing address) Physical Location (if different from mailing address)
Legal Title of Subsidiary Holding Company Legal Title of Subsidiary Holding Company
(Mailing Address of the Subsidiary Holding Company) Street I PO Box (Mailing Address of the Subsidiary Holding Company) Street I PO Box
City State Zip Code City State Zip Code
Physical Location (if different from mailing address) Physical Location (if different from mailing address)
legal Titre of Subsidiary Holding Company Legal Title of Subsidiary Holding Company
(Mailing Address of the Subsidiary Holding Company) Street I PO Box (Mailing Address of the Subsidiary Holding Company) Street I PO Box
City State Zip Code City State Zip Code
Physical Location (if different from mailing address) Physical Location (if different from mailing address)
1212012
c
Chicago Shore Corporation and Subidirtes
_- 3middot_middot
Consolidated Financial Report
December 3 I 20 14
Chicago Shore Corporation and S-absidiaries
Report Letter
Consolidated Financial Statements
Balance Sheet
Statement of Operations
Statement of Comprehensive Income (Loss)
Statement of Changes in Stockholders Equity
Statement of Cash Flows
Notes to Consol idated Financial Statements
ontents
1 -2
3
4
5
6
7
8-41
Qlante ------moran
Independent Auditors Report
To the Board of Directors
Chicago Shore Corporation and Subsidiaries
Plante amp Moran PLLC 10 South Riverside Plaza
9th Floor
Chicago IL 60606 Tel 3122071040
Fax 3122071066
plantemorancom
We have audited the accompanying consolidated financial statements of Chicago Shore Corporation and
Subsidiaries (the Company) which comprise the consolidated balance sheet as of December 31 2014 and the related consolidated statements of operations comprehensive income (loss) stockholders equity and cash flows for the year then ended and the related notes to the consolidated financial statements
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with accounting principles generally accepted in the United States of America this includes the design implementation and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement whether due to fraud or error
Auditors Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit We conducted our audit in accordance with auditing standards generally accepted in the United States of America Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements The procedures selected depend on the auditors judgment including the assessment of the risks of material misstatement of the consolidated financial statements whether due to fraud or error In making those risk assessments the auditor considers internal control relevant to the entitys preparation and fair presentation of the consolidated financial statements in order
to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control Accordingly we express no such opinion An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management as well as evaluating the overall
presentation of the consolidated financial statements
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion
Opinion
In our opinion the consolidated financial statements referred to above present fairly in all material respects the financial position of Chicago Shore Corporation and Subsidiaries as of December 3 I 2014 and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America
Praxitymiddot MEMBERbull
GLOBAL AlllAtJCE OF lfJOEPEUOErJT FIAr1s
middot middotmiddot
To the Board of Directors Chicago Shore Corporation and Subsidiaries
Report on Prior Year Consolidated Financial Statements
The consolidated financial statements of Chicago Shore Corporation and Subsidiaries a of and for the
year ended December 3 1 20 I 3 were audited by other audirors whose reporrcdated February 2 20 I 5 expressed an unqualified opinion on those statements
April 1 3 2015
2
middot
Chicago Shore Corporation and Subsidiaries
Consolidated Balance Sheet
December 3 I 20 I 4 Assets
Cash and due from banks $ 22274125
Federal funds sold 6478902
Total cash and cash equivalents 28753027
Investment securities - Available for sale (Note 3) 22745730 Investment securities - Held to maturity ( Note 3) 4 127891 Federal Home Loan Bank stock I 000000 Loans - Net of allowance for loan losses of $5626979 and $5333892 at
December 3 I 2014 and 2013 respectively (Note 4) I 67 I 26085 Other real estate owned 5486 I 6 I Premises and equipment (Note 5) 6 I 58323 Goodwill 2748077 Accrued interest receivable 623819 Deferred tax asset - Net (Note 8) 655324 I Bank-owned life insurance 4266529 Investment in Chicago Shore Capital Trusts (Note 7) 342000
Other assets 393737
Total assets $ 250324620
Liabilities and Stockholders Equity
Liabilities Deposits
Noninterest-bearing
Interest-bearing
Total deposits ( Note 6)
junior subordinated notes (Note 7) Accrued interest payable Repurchase agreements
Accrued and other liabilities
Total liabilities
Stockholders Equity Preferred shares - Series A net of discount - $I 0 par value
Issued and outstanding -7000 shares at December 3 I 20 I 4 and 20 I 3 Liquidation value - $ I 000 per share ( Note I 2)
Preferred shares - Series B - $I 0 par value Issued and outstanding - 350 shares at December 3 I 20 I 4 and 20 I 3 Liquidation value - $ I 000 per share (Note 12)
Common shares - $ I par value Authorized - 2000000 shares Issued and outstanding - I 206720 and I I 97665 shares at December 3 I 20 I 4 and 20 I 3 respectively
Additional paid-in capital Share subscriptions - 38000 shares subscribed at December 3I 2014 and
2013 (Note I I) Accumulated deficit
Accumulated other comprehensive loss
Total stockholders equity
Total liabilities and stockholders equity
See Notes to Consolidated Financial Statements 3
$ 62956469 I 5323 I 305
2 I 6 I 87774
I 1212335 80063
627959 240490 I
2305 I 3032
7000000
350000
I 206720 12913080
(475000) (526078) (657 134)
I 9811588
$ 250324620
December 3 I 20 I 3
$ 59464227 9595876
69060 I 03
29415214 3303774 1000000
I 25644342 5723065 6335768 2748077
535004 6436242 4 1338 Io
342000 326847
$ 255004246
$ 56029979 I 64628276
220658255
I 1205687 79362
I 33 I 274 I 966690
23524 I 268
69 I 9272
398749
I I 97665 12530480
(475000) (I 2505)
(795683)
I 9762978
$ 255004246
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Operations
Interest and Dividend Income
Loans - Including fees $ Investment securities
Taxable Tax-exempt
Dividend income Federal funds sold
Total interest and dividend income
Interest Expense
Deposits Repurchase agreements
Junior subordinated notes
Total interest expense
Net Interest and Dividend Income
Provision for Loan Losses (Note 4)
Net Interest and Dividend Income After Provision for Loan Losses
Noninterest Income
Service charges and fees on deposits Net gain on investment securities Bank-owned life insurance income
Other
Total noninterest income
Noninterest Expense Salaries and employee benefits (Note 9) Occupancy and equipment Data processing Loss on sale of other real estate owned Loan collection and other real estate owned costs Professional and marketing fees
Other
Total noninterest expenses
Loss - Before income taxes
Income Tax Benefit (Note 8)
Net Loss
Preferred Stock Dividends declared Discount accretionpremium amortization
Net Loss Applicable to Common Shares $
See Notes to Consolidated Financial Statements 4
Year Ended
December 3 I 2014
6800 I 87
I 26536 265 I 89 189837 I 39750
7521 499
719548 526
358400
I 078474
6443025
143004
6300021
332707
132719 369 I 73
834599
3788299 738 I 72 36 I 606
869257 714590 864 154
7336078
(20 I 458)
(171364)
(30094)
(45 I 500) (3 I 979)
(5 I 3573)
December 3 I
$
$
2013
7492261
I 28587 152974 I 88253 161624
8 123699
943671 1034
364645
I 309350
6814349
5 I 06979
I 707370
35 I 304 18026
133810 463 I 20
966260
3810184 740222 346406 749901 64439 I 67 I 354 767652
7730 I JO
(5056480)
( I 978282)
(3078 I 98)
(38 I 500) (8 I 075)
(3540773)
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Comprehensive Income (loss)
Net Loss
Other Comprehensive Income (Loss) Unrealized gain (loss) on investment securities - Available for sale
net of tax Less reclassification adjustment for gains included in net income
net of tax
Total other comprehensive income (loss)
Comprehensive Income (Loss)
See Notes to Consolidated Financial Statements 5
Year Ended
December 3 I December 3 I
$
$
20 1 4 20 1 3
(30094) $ (3078 1 98)
1 38549
1 38549
(285394)
(1 1 358)
(274036)
I 08455 $ (3352234)
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Changes in Stockholders Equity
Retained Accumulated Series A Series B Earnings Other
Preferred Preferred Common Additional Share Accumulated Comprehensive Shares Shares Shares Paid-in Cnital Subscritions Deficit) Loss Total Eguil
Balance - January [ 20 1 3 $ 6838 I 97 $ 398749 $ 1 1 9 1 415 $ 1 2486792 $ (475000) $ 3528268 $ (52 1 647) $ 23446774
Comprehensive loss Net loss (3078 I 98) (3078 I 98) Net unrealized loss on investment securities -
Available for sale - Net of tax (274036) (274036)
Total comprehensive loss (3352234)
Dividends declared on preferred shares (381 500) (381 500)
Discount accretion on preferred shares Bl 075 (BI 075)
Common shares issued 6250 43688 49938
Balance - December 3 1 2 0 1 3 69 1 9272 398749 I 1 97665 1 2530480 (475000) ( 1 2 505) (795683) 1 9762978
Comprehensive income Net loss (30094) (30094) Net unrealized gains on lnvestment securities -
138549 Available for sale - Net of tax 1 38549
Total comprehensive income I 08455
Dividends declared on preferred shares (451 500) (451 500)
Discount accretion (premium amortization) on preferred shares 80728 (48749) (3 1 979)
Common shares issued 9055 40928 49983
Stock-based compensation expense 34 1 672 34 1 672
Balance - December 3 1 20 1 4 $ 7000000 $ 350000 $ 1206720 $ 12913080 $ (475000) $ (526078) $ (657 134) $ 19811588
See Notes to Consolidated Financial Statements 6
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Cash Flows
Cash Flows from Operating Activities Net loss Adjustments to reconcile net loss to net cash provided by
operating activities Depreciation Provision for loan losses Accretion and amortization of securities Gctln on sale of investment securities net Amortization of deferred loan fees Loss on sale of other real estate owned Increase in cash surrender value of bank-owned life insurance Restricted stock unit expense Deferred tax benefit Net change in
Accrued interest receivable and other assets
Accrued interest payable and other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities Activity in available-for-sale securities
Sales Maturities prepayments and calls Purchases
Purchase of investment securities - held to maturity Purchases
Net (increase) decrease in loans Proceeds from sales of other real estate owned Redemption of Federal Home Loan Bank stock Purchase of bank owned life insurance
Purchases of premises and equipment
Net cash ( used in) provided by investing activities
Cash Flows from Financing Activities Net increase in deposits Dividends on preferred shares Decrease in repurchase agreements Change in accrued debt issuance costs
Proceeds from issuance of common shares
Net cash ( used in) provided by financing activities
Net (Decrease) Increase in Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning of year
Cash and Cash Equivalents - End of year
Supplemental Cash Flow Information Cash paid for
Interest Income taxes
Loans transferred to other real estate owned
See Notes to Consolidated Financial Statements 7
$
$
$
Year Ended December 3 I
2014
(30094) $
326383 143004 351601
(42451)
(132719) 121877 ( I 85304)
(I 55705) 658707
I 055299
I 8863923 (I 230354 I)
(859762) (42042639)
697247
(148938)
(35793710)
(4470481) (45 I 500) (7033 I 5)
6648 49983
(5568665)
(40307076)
69060 I 03
28753027 $
1077774 $
460343
2013
(3078 I 98)
317863 5 I 06979
348058 (I 8026) (39044)
749901 (I 338 I 0) 121877
(2021 608)
4 I 8900 904576
2677468
18026 37635
(33 I 0630) 7210658 I I 35496
148657 (4000000)
(335068)
904774
7744446 (381500)
(I 364851) 6648
49938
6054681
9636923
59423180
69060 I 03
1320945 27837
594490
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies
Basis of Presentation and Consolidation - The consolidated fi nancial statements include the accounts of Chicago Shore Corporation (the Company) and its wholly owned subsidiary Delaware Place B ank (the Bank) All significant intercompany balances and transactions have been eliminated in consolidation
Nature of Operations - The Company provides a variety of f inancial services to individuals and businesses in the Chicago metropol itan area through their primary location in Chicago I l l inois Their primary deposit products are demand deposits savings money market and term certif icate accounts and their primary lending products are commercial and commercial mortgage loans
Use of Estimates - In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting period Actual results could d iffer from those estimates Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses the valuation of investment securities other real estate owned deferred tax assets goodwill and the fair value of financial instruments
Cash and Cash Equivalents - For the purpose of the consolidated statement of cash flows cash and cash equivalents include cash and balances due fr om banks and federal funds sold which mature within 90 days
Investment Securities - Debt securities that management has the positive intent and ability to hold to maturity are classified as held to maturity and recorded at amort ized cost Securities not classified as held to maturity including equity securities with readily determinable fair values are classif ied as available for sale and are recorded at fair value with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss)
Purchase premiums and discounts are recognized in interest income using the effective interest method through the maturity or expected repayment period of the securities Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses In estimating other-than-temporary impairment losses management considers ( I ) the length of time and the extent to which the fair value has been less than cost (2) the financia l condition and near-term prospects of the issuer and (3) the i nten t an d ability of the Company to retain its investment in the issuer for a period of time suff icient to allow for any anticipated recovery in fair value Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method
8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Federal Home Loan Bank Stock - The Company is a member of the Federal Home Loan Bank of Chicago (the FHLB ) and is required to maintain a minimu m investment in stock of the FHLB that varies with th e level of advances outstanding with the FHLB Th e stock does not have a readily determinable fair value and is carried at cost and is periodically evaluated for impairment
Loans - Th e Company grants mortgage commercial and consu mer loans to customers A substantial portion of the loan portfolio is represented by commercial loans in the Ch icago metropolitan area Th e abil ity of the B ank s debtors to honor their contracts is dependent upon th e real estate and general economic conditions in this area
Loans that management has th e intent and abil ity to h old for the foreseeable future or u ntil maturity or pay-off are reported at their outstanding unpaid principal balances adjusted for charge-offs the allowance for loan losses and any deferred fees or costs on originated loans Interest income is accrued on the unpaid principal balance Loan origination fees net of certain direct origination costs are deferred and recognized as an adjustment of the related loan yield u sing the interest meth od
The accrual of interest on loans is discontinued at th e time th e loan is 90 days del inquent unless the credit is well-secu red and in process of collection In all cases loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered dou btfu l
Al l interest accru ed but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income The interest on th ese loans is accounted for on the cash basis or cost-recovery meth od u ntil qualifying for return to accru al Loans are returned to accrual status wh en all the principal and interest amounts contractually due are brought current and futu re payments are reasonably assured
Loans are considered delinqu ent when customers fail to make their payments in accordance with the contractual loan agreement If a loan matures and principal remains outstanding the loan is considered delinquent u ntil the loan is paid off or renewed
Gross l oans are reported at th e Companys recorded investment The recorded investment is th e borrowers principal balance less partial charge-offs if any
Allowance for Loan Losses - Th e allowance for loan losses (the allowance) is established as losses are estimated to have occurred through a provision fo r loan losses charged to earnings Loan losses are charged against the allowance when management believes the u ncollectibi lity of a loan balance is confirmed Subsequ ent recoveries if any are credited to the allowance
9
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
The allowance for loan losses is evaluated on a r egu lar basis by management and is based upon managements per iodic r eview of the collectibility of the loans in light of h istor ical exper ience the nature and volu me of the loan portfolio adverse situations that may affect the borrowers abil ity to repay estimated value of any u nder lying col lateral and prevailing economic conditions This evaluation is inher ently subjective as it r equ ires estimates that are susceptible to significant r evision as mor e infor mation becomes available
The allowance consists of specific general and unallocated components The specific component r elates to loans that are classified as impaired For such loans an al lowance is established when the discounted cash flows (or collateral value or observable mar ket pr ice) of the impair ed loan is lower than the car rying value of that loan The general component covers nonimpaired loans and is based on histor ical loss exper ience adju sted for qualitative factor s An unallocated component is maintained to cover u ncer tainties that cou ld affect managements estimate of probable losses The unallocated component of the al lowance reflects the margin of imprecision inher ent in the u nder lying assumptions u sed in the methodologies for estimating specific and general losses in the portfolio
A loan is considered impaired when based on current information and events it is probable that the Company will be u nable to collect the schedu led payments of pr incipal or interest when due according to the contractual ter ms of the loan agr eement Factors consider ed by management in deter mining impair ment include payment status collateral value and the probability of collecting scheduled pr incipal and interest payments when du e Loans that exper ience insignificant payment delays and payment shortfal ls gener ally ar e not classified as impair ed Management deter mines the significance of payment delays and payment shortfalls on a case- by-case basis taking into consideration all of the cir cumstances surrounding the loan and the borrower including length of the delay the r easons for the delay the borrowers pr ior payment recor d and the amou nt of the shortfal l in relation to the pr incipal and interest owed Impairment is measured on a loan-by-loan basis for loans by either the present value of expected future cash flows discou nted at the loans effect ive inter est rate the J oans obtainabl e mar ket pr ice or t he fair value of the collateral if the loan is collateral dependent
Large groups of homogeneous loans are collectively evaluated for impair ment Accor dingly the Company does not separ ately identify individual consumer loans for impairment disclosures
1 0
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Troubled debt rest ruct uring (TDR) of loans is undertaken t o improve the l ikelihood t hat t he loan will be repaid in f ull under t he modif ied t erms in accordance wit h a reasonable repayment schedule All modif ied loans are evaluat ed to det ermine whet her t he loans should be report ed as a TDR A loan is a TDR when t he Company for economic or legal reasons relat ed t o t he borrowers f inancial d ifficult ies grants a concession t o t he borrower by modifying or renewing a loan that t he Company would not otherwise consider To make t his det erminat ion t he Company must det ermine whet her (a) t h e borrower is experiencing financial diff icult ies and (b) t h e Company grant ed t he borrower a concession This det erminat ion requires considerat ion of all t he fact s and circumstances surrounding t he modificat ion An overall general decline in the economy or some det eriorat ion in a borrowers f inancial condit ion does not automat ically mean t he borrower is experiencing f inancial difficult ies Loans t hat are considered TDR are considered impaired and a specif ic reserve is est ablished in the allowance consist ent ly wit h ot her impaired loans
Other Real Estate Owned - Asset s acquired through or in lieu of loan f oreclosure are held f or sale and are initially recorded at fair value less costs t o sell at t he dat e of t he foreclosure est ablishing a new cost basis Subsequent t o f oreclosure valuat ions are periodically perf ormed by management and t he assets are carried at the lower of carrying amount or fair value less cost t o sel l Revenue and expenses f rom operat ions and changes in the valuat ion allowance are included in loan collect ion and other real est at e owned expenses
Premises and Equipment - Land is carried at cost Bu ildings and equipment are carried at cost less accumulat ed depreciat ion comput ed on t he st raight -line met hod over t he est imat ed usef ul l ives of the assets ranging from I to 39 years
Bank Owned Life Insurance - The B ank has purchased life insurance pol icies on certain key offi cers B ank owned life insurance (BOLi) is recorded at it s cash surrender value or t he amount t hat can be realized upon immediate liquidat ion
Goodwill - Goodwill result s f rom prior business acquisit ions and represent s t h e excess of t he purchase price over the fair value of acquired tangible asset s and liabilit ies and ident ifiable intangible assets Goodwill is assessed at least annually f or impairment and any such impairment will be recognized in the period identified There has been no impairment ident if ied during t he years ended December 3 1 20 1 4 and 20 1 3
Income Taxes - Def erred income tax asset s and liabilit ies are det ermined using t h e liabil ity (or balance sheet) met hod Under t his met hod t he net def erred t ax asset or liability is det ermined based on t he t ax effect s of t he various t emporary d iff erences between t he book and tax basis of t he various consolidat ed balance sheet asset s and liabilities and gives current recognit ion t o changes in t ax rat es and laws
1 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
At December 3 1 20 1 4 and 20 1 3 the Company evaluated tax positions taken for filing with the Internal Revenue Service and the State of I l l inois The Company believes that income tax filing positions will be sustained under examination and does not anticipate any adjustments that would result in a material adverse eff ect on the Companys consolidated financial condition results of operations or cash flows Accordingly the Company has not recorded any reserves or related accr uals for interest and penalties for uncertai n tax positions at December 3 1 20 1 4 and 20 1 3 The Company believes it is no longer subject to tax examinati ons for years pri or to 20 I I
Comprehensive Income - Accounting principles generally require that recognized revenue expenses gains and losses be included in net income (loss) Although certain changes in assets and liabilities such as unrealized gains and losses on investment securities - available for sal e are reported as a separate component of the equity section of the consolidated balance sheet such items along with net income (loss) are components of comprehensive income
Stock-based Compensation - The Company applies the recogniti on and measurement provisions of the Compensation - Stock Compensation topi c of the Accounting Standards Codification (ASC) to account for employee stock option costs which is referred to as the calculated value method Compensation costs are measured based on the fair value of the instrument at the date of grant Those compensation costs are expensed on a straight-line basis over the vesting period of the specific instrument There were no stock-based awards granted in 20 1 4 and 20 1 3
Off-balance-sheet Instruments - In the ordinary course of business the Company has entered into commitments under commercial letters of credit and standby letters of credit Such financial instruments are recorded when they are funded
Reclassification - Certain amounts appearing in the prior years consolidated financial statements have been reclassified to conform to the current years consolidated financial statements
12
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Comprehensive Income (Topic 220) -
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income - The Financial Accounting Standards B oard (FASB) issued Accou nting Standards Update (ASU) No 20 1 3-02 Comprehensive Income (Topic 220) - Reporting of Amounts Recossified Out of Accumulated Other Comprehensive Income The ASU requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is requ ired under US generally accepted accounting principles (US GAAP) to be reclassified in its entirety to net income For other amounts that are not requ ired u nder US GAAP to be reclassified in their entirety to net income in the same reporting period an entity is requ ired to cross-reference other disclosures required under US GAAP that provide additional detail about those amounts For nonpu blic entities the ASU is effective prospectively for reporting periods beginning after December 1 5 20 1 3 (therefore for the year ended December 3 I 20 1 4 fo r the Company) and early adoption was allowed Adoption of this update did not have a material effect on the consolidated financial statements
New Accounting Pronouncement - Receivables - Troubled Debt Restructurings by
Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateral
Consumer Mortgage Loans upon Foreclosure - The FASB issued ASU No 20 1 4-04 Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure The amendments in this u pdate clarify that when an in-substance repossession or foreclosu re occu rs and a creditor is considered to have received physical possession of residential property col lateral izing a consu mer mortgage loan u pon either ( I ) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy the loan through completion of a deed in l ieu of foreclosure or through a similar legal agreement Additionally the amendment requ ires disclosure of both ( I ) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans col lateralized by residential real estate property that are in the process of foreclosure according to local requ irements of the applicable jurisdiction The amendments in this u pdate are effective for annual periods beginning after December I 5 20 1 4 (therefore December 3 I 20 I 5 for the Company) Management does not expect the update to have a material effect on the Companys consol idated financial statements
1 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Revenue from Contracts with Customers
(Topic 606) - In May 20 1 4 the Financial Accounting Standards Board issued Accounting Standards Update No 20 1 4-09 Revenue from Contracts with Customers (Topic 606) which will supersede the current revenue recognition requirements in Topic 605 Revenue Recognition The ASU is based o n the princip le that revenue is recognized to depict the transfer of goods or services to customers in an amount that refl ects the consideration to wh ich the entity expects to be entitled in exchange for those goods or services Th e ASU also requ ires additional disclosure about the nature amount timing and uncertainty of revenue and cash fl ows arising from customer contracts including significant judgments and changes in judgments and assets recognized from costs incu rred to obtain or fulfill a contract The new gu idance will be effective for periods beginning af ter December 1 5 201 7 (th erefo re for the year ending December 3 I 20 1 8 for th e Company) Th e ASU permits the new revenue recognition gu idance to be appl ied u sing one of two retrospective application methods The Company h as not yet determined wh ich application method it will use or th e potential eff ects of th e new standard on th e financial statements i f any
Subsequent Events - Th e financial statements and related disclosures include evaluation of events up through and including April 1 3 20 15 wh ich is the date the consolidated financial statements were available to be issued
Note 2 - Restrictions on Cash and Amounts Due from Banks
Th e B ank is required to maintain average cash balances on hand or on deposit with the Federal Reserve B ank At December 3 1 20 1 4 and 20 1 3 th ese reserve balances amounted to $ 1 5 67000 and $ 1 45 2000 respectively
1 4
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities
The amortized cost and estimated fair value of secu rities with gross unreal ized gains and losses are as fol lows
December 3 1 20 1 4 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $ 6988 1 44 $ 86 1 05 $ (2793) $ 707 1 456 M unicipal securities 6363935 438 1 4 6407749 Mortgage-backed securities 5 29975 1 9020 (2264) 5 306507 Other 5 1 50000 ( 1 1 89982) 3 9600 1 8
Total available-for-sale securities $2380 1 830 $ 1 38939 $ ( I I 95039) $ 22745730
Held-to-maturity securities -Mun icipal securities $ 4 I 2789 I $ 305 1 32 $ $ 4433 023
December 3 I 20 I 3 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $187 1 5 1 05 $ 93349 $ $ I 8808454 State and municipal 6 8 I 3 063 77408 (SO I 48) 6 840323 Other 5 I 50000 ( I 383563) 3 766437
Total available-for-sale securities $30678 I 68 $ I 70757 $ ( 1 433 7 1 I ) $ 29 4 1 5 2 1 4
Held-to-maturity secu rities -Municipal securities $ 3 303 774 $ $ (22364) $ 3 28 I 4 I 0
At December 3 I 20 1 4 and 20 1 3 securities with a carrying value of $503498 1 and $8595033 respectively were pledged to secure publ ic deposits repu rchase agreements and for other purposes requ ired or permitted by law
15
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
The amort ized cost and estimated fair value of debt securities by contractual maturity at December 3 1 20 1 4 are as fo llows
Available for Sale Held to Maturity Amort ized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
Due in one year or less $ 5 1 42415 $ 5 1 70 1 88 $ $ Due in one through five
years 32805 35 3 293 783 Due after five years through
ten years 4929 1 29 5 0 1 5 234 Due after ten years 5 000000 3824400 4 1 27891 4433 023
Total 1 8352079 1 7303605 4 1 2789 1 4433 023
Mortgage-backed securities 5 29975 1 5 306507 No stated maturity 1 5 0000 1 35 6 1 8
Total $2380 1 830 $22745 730 $ 4 1 2789 I $ 4433 023
There were no sales of investments during the year ended December 3 I 20 I 4 During the year ended December 3 1 20 I 3 the Company sold securities availabl e for sale with a book value of $0 resulting in realized gains of $ I 8026 There were no gross realized losses on sales of securities available for sale for the year ended December 3 I 20 1 3
1 6
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Information pertain ing to securi ti es with gross un realized losses at December 31 20 1 4 an d 20 1 3 aggregated by investment category an d length of time that in dividual securities have been in a continuous loss position is as follows
December 3 1 20 1 4 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Unrealized Estimated
Losses Fair Value Losses Fair Val ue Available-for-sale securities
US government agen cies $ (2793) $ 2056 222 $ $ Mortgage-backed securities (2264) 25247 1 0 Other ( 1 1 89982) 3 960018
Total available-for-sale secu rities $ (5 05 7) $ 45 80932 $ ( 1 1 89982) $ 3 9600 1 8
December 3 I 20 1 3 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Un realized Estimated
Losses Fair Value Losses Fair Valu e Available-for-sale securities
Mun icipal securities $ (50 1 48) $ 677262 $ $ Other ( 1 383 5 63) 3 766437
Total available-for-sale securities $ (SO 1 48) $ 677262 $ ( 1 3835 63) $ 3 766437
Un realized l osses on securities have n ot been recogn ized into in come because the issu ers bonds are of high credit quality we have the inten t and ability to hold the secu rities for the foreseeable futu re and the declin e in fair value is primarily due to increased market interest rates The fair values a re generally expected to recover as the bonds approach their maturity dates
1 7
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Within other secu rities there is $ 1 1 75 600 of u nrealized losses related to two perpetual preferred secu rities to two large international bank holding companies The u nrealized losses on the perpetual preferred secu rities is attributable to the cu rrent variable dividend rates compared to similar fixed-rate instru ments at each institution The fair value of the Companys perpetual preferred secu rities is expected to increase as the variable dividend rate increases which is contingent u pon the three-month LIB O R rate The Company has the ability and intent to hold the secu rities u ntil their estimated fair values increase
Note 4 - Loans
A summary of the balances of loans follows (in thousands)
20 1 4 20 1 3
Residential $ 1 1 493 $ 1 1 686 Construction and land 5 298 1 303 Commercial real estate 60262 48570 Commercial 38472 7844 I nventory 1 0239 9 649 Professional practice 45890 48224 Life insurance contracts 1 933 Automobile 1 22 789 Consu mer 1 038 1 083
Total gross loans 1 728 1 4 1 3 1 08 1
Less Allowance for loan losses (5 627) (5 334) Net deferred loan fees (6 1 ) ( I 03)
Net loans $ 1 67 1 26 $ 1 25 644
1 8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Loans and the all owance for loan losses ar e disaggregated by segment as foll ows (i n thousands)
Allowance for loan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Allowance for Joan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Ending allowance attributable to loans
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Beginning
Balance
$ 276 $ 2 1 3 900 377
3250 259
12 9
38
$ 5334 $
Beginning
Balance
$ 392 $ 72
849 338 626 587 106
5 54
$ 3029 $
1 9
Year Ended December 3 1 2014
Charge-offs Recoveries Provision Ending Balance
$ $ (45) $ 23 1 42 255
( 142) 758 144 (8) 5 1 3
1 85 3435 ( 1 9) 240
(4) 1 0 ( 1 7) I ( I ) 8
148 1 86
(4) $ 1 54 $ 143 $ 5627
Year Ended December 3 1 2013
Charge-offs Recoveries Provision Ending Balance
$ $ ( 1 1 6) $ 276 ( I 33) 274 2 1 3
5 1 900 9 30 377
(2658) 5282 3250 (328) 259
(36) 1 6 (74) 1 2 4 9
( 1 6) 38
(2827) $ 25 $ 5 107 $ 5334
Year Ended December 3 I bull 2014 Individually Collectively
Evaluated for Evaluated for
Impairment Impairment Ending Balance
$ 130 $ 1 0 1 $ 23 1 255 255
180 578 758 5 1 3 5 1 3
3335 1 00 3435 240 240
I I 8 8
186 186
$ 3645 $ 1 982 $ 5627
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 2014 and 2013
Note 4 - Loans (Continued)
Individually Collectively Evaluated for Evaluated for Impairment Impairment Ending Balance
Loans
Residential $ 595 $ 1 0898 $ 1 1 493 Construction and land 5298 5298 Commercial real estate 1 297 58965 60262 Commercial 38472 38472 Inventory 5576 4663 1 0239 Professional practice 45890 45890 Automobile 122 122 Consumer l 038 1038
Total $ 7468 $ 1 65346 $ 1728 1 4
Year Ended December 3 1 20 1 3 Individually Collectively
Evaluated for Evaluated for Impairment Impairment Ending Balance
Ending allowance attributable to loans
Residential $ 130 $ 146 $ 276 Construction and land 2 13 2 13 Commercial real estate 250 650 900 Commercial 269 1 08 377 Inventory 3000 250 3250 Professional practice 259 259 Automobile 12 12 Consumer 9 9 Unallocated 38 38
Total $ 3649 $ 1685 $ 5334
Individually Collectively Evaluated for Evaluated for Impairment lmpaiffilent Ending Balance
Loans
Residential $ 595 $ 1 1 09 1 $ 1 1 686 Construction and land 1303 1303 Commercial real estate 1 298 47272 48570 Commercial 1587 6257 7844 Inventory 5215 4434 9649 Professional practice 48224 48224 Life insurance contraets 1933 1 933 Automobile 789 789 Consumer 1 083 l 083
Total $ 8695 $ 122386 $ 1 3 1 08 1
20
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 201 4 and 2013
Note 4 - Loans (Continued)
Credit Risk Grading
The Company util izes a loan rating system as a means of identifying problem and potential problem loans The Company assigned the fo llowing loan ratings to loans disaggregated by segment and class as of December 3 1 20 1 4 and 20 1 3 (in thousands)
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile
Consumer
Total
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Life insurance contracts Automobile
Consumer
Total
December 3 1 20 14 Loans rated Loans rated Loans rated
1-5
$ 1 0898 $ 5298
58965 38472
4663 45890
1 22 1 038
$ 1 65346 $
6
===
$
$
7 Total
595 $ 1 1 493 5298
1 297 60262 38472
5576 I 0239 45890
1 22 1 038
7468 $ 1 728 1 4 ====
December 3 1 20 1 3 Loans rated Loans rated Loans rated
1-5 6 7 Total
$ 1 0626 $ 465 $ 595 $ 1 1 686 1 303 1 303
47272 1 298 48570 6257 J 587 7844 4434 52 1 5 9649
48224 48224 I 933 I 933
789 789 1 083 1 083
$ 1 2 1 921 $ 465 $ 8695 $ 1 3 1 08 1
The Company categorized each loan into credit risk categori es based on current fi nancial information overall debt service coverage comparison against industry averages col lateral coverage historical payment experience and current economic trends The Company uses the following definitions for credit risk ratings
2 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
For Use By Tiered Holding Companies
FRY-6 Page2of2
Top-tiered holding companies must list the names mailing address and physical locations of each of their subsidiary holding companies below
Security Chicago Corporation Legal Title of Subsidiary Holding Company Legal Title of Subsidiary Holding Company
190 East Delaware Place (Mailing Address of the Subsidiary Holding Company) Street I PO Box (Mailing Address of the Subsidiary Holding Company) Street I PO Box
Chicago IL 60611 City State Zip Code City State Zip Code
Physical Location (if different from mailing address) Physical Location (if different from mailing address)
Legal Title of Subsidiary Holding Company Legal litre of Subsidiary Holding Company
(Mailing Address of the Subsidiary Holding Company) Street I PO Box (Mailing Address of the Subsidiary Holding Company) Street I PO Box
City State Zip Code City State Zip Code
Physical Location (if different from mailing address) Physical Location (if different from mailing address)
Legal Title of Subsidiary Holding Company Legal Title of Subsidiary Holding Company
(Mailing Address of the Subsidiary Holding Company) Street I PO Box (Mailing Address of the Subsidiary Holding Company) Street I PO Box
City State Zip Code City State Zip Code
Physical Location (if different from mailing address) Physical Location (if different from mailing address)
legal Titre of Subsidiary Holding Company Legal Title of Subsidiary Holding Company
(Mailing Address of the Subsidiary Holding Company) Street I PO Box (Mailing Address of the Subsidiary Holding Company) Street I PO Box
City State Zip Code City State Zip Code
Physical Location (if different from mailing address) Physical Location (if different from mailing address)
1212012
c
Chicago Shore Corporation and Subidirtes
_- 3middot_middot
Consolidated Financial Report
December 3 I 20 14
Chicago Shore Corporation and S-absidiaries
Report Letter
Consolidated Financial Statements
Balance Sheet
Statement of Operations
Statement of Comprehensive Income (Loss)
Statement of Changes in Stockholders Equity
Statement of Cash Flows
Notes to Consol idated Financial Statements
ontents
1 -2
3
4
5
6
7
8-41
Qlante ------moran
Independent Auditors Report
To the Board of Directors
Chicago Shore Corporation and Subsidiaries
Plante amp Moran PLLC 10 South Riverside Plaza
9th Floor
Chicago IL 60606 Tel 3122071040
Fax 3122071066
plantemorancom
We have audited the accompanying consolidated financial statements of Chicago Shore Corporation and
Subsidiaries (the Company) which comprise the consolidated balance sheet as of December 31 2014 and the related consolidated statements of operations comprehensive income (loss) stockholders equity and cash flows for the year then ended and the related notes to the consolidated financial statements
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with accounting principles generally accepted in the United States of America this includes the design implementation and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement whether due to fraud or error
Auditors Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit We conducted our audit in accordance with auditing standards generally accepted in the United States of America Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements The procedures selected depend on the auditors judgment including the assessment of the risks of material misstatement of the consolidated financial statements whether due to fraud or error In making those risk assessments the auditor considers internal control relevant to the entitys preparation and fair presentation of the consolidated financial statements in order
to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control Accordingly we express no such opinion An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management as well as evaluating the overall
presentation of the consolidated financial statements
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion
Opinion
In our opinion the consolidated financial statements referred to above present fairly in all material respects the financial position of Chicago Shore Corporation and Subsidiaries as of December 3 I 2014 and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America
Praxitymiddot MEMBERbull
GLOBAL AlllAtJCE OF lfJOEPEUOErJT FIAr1s
middot middotmiddot
To the Board of Directors Chicago Shore Corporation and Subsidiaries
Report on Prior Year Consolidated Financial Statements
The consolidated financial statements of Chicago Shore Corporation and Subsidiaries a of and for the
year ended December 3 1 20 I 3 were audited by other audirors whose reporrcdated February 2 20 I 5 expressed an unqualified opinion on those statements
April 1 3 2015
2
middot
Chicago Shore Corporation and Subsidiaries
Consolidated Balance Sheet
December 3 I 20 I 4 Assets
Cash and due from banks $ 22274125
Federal funds sold 6478902
Total cash and cash equivalents 28753027
Investment securities - Available for sale (Note 3) 22745730 Investment securities - Held to maturity ( Note 3) 4 127891 Federal Home Loan Bank stock I 000000 Loans - Net of allowance for loan losses of $5626979 and $5333892 at
December 3 I 2014 and 2013 respectively (Note 4) I 67 I 26085 Other real estate owned 5486 I 6 I Premises and equipment (Note 5) 6 I 58323 Goodwill 2748077 Accrued interest receivable 623819 Deferred tax asset - Net (Note 8) 655324 I Bank-owned life insurance 4266529 Investment in Chicago Shore Capital Trusts (Note 7) 342000
Other assets 393737
Total assets $ 250324620
Liabilities and Stockholders Equity
Liabilities Deposits
Noninterest-bearing
Interest-bearing
Total deposits ( Note 6)
junior subordinated notes (Note 7) Accrued interest payable Repurchase agreements
Accrued and other liabilities
Total liabilities
Stockholders Equity Preferred shares - Series A net of discount - $I 0 par value
Issued and outstanding -7000 shares at December 3 I 20 I 4 and 20 I 3 Liquidation value - $ I 000 per share ( Note I 2)
Preferred shares - Series B - $I 0 par value Issued and outstanding - 350 shares at December 3 I 20 I 4 and 20 I 3 Liquidation value - $ I 000 per share (Note 12)
Common shares - $ I par value Authorized - 2000000 shares Issued and outstanding - I 206720 and I I 97665 shares at December 3 I 20 I 4 and 20 I 3 respectively
Additional paid-in capital Share subscriptions - 38000 shares subscribed at December 3I 2014 and
2013 (Note I I) Accumulated deficit
Accumulated other comprehensive loss
Total stockholders equity
Total liabilities and stockholders equity
See Notes to Consolidated Financial Statements 3
$ 62956469 I 5323 I 305
2 I 6 I 87774
I 1212335 80063
627959 240490 I
2305 I 3032
7000000
350000
I 206720 12913080
(475000) (526078) (657 134)
I 9811588
$ 250324620
December 3 I 20 I 3
$ 59464227 9595876
69060 I 03
29415214 3303774 1000000
I 25644342 5723065 6335768 2748077
535004 6436242 4 1338 Io
342000 326847
$ 255004246
$ 56029979 I 64628276
220658255
I 1205687 79362
I 33 I 274 I 966690
23524 I 268
69 I 9272
398749
I I 97665 12530480
(475000) (I 2505)
(795683)
I 9762978
$ 255004246
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Operations
Interest and Dividend Income
Loans - Including fees $ Investment securities
Taxable Tax-exempt
Dividend income Federal funds sold
Total interest and dividend income
Interest Expense
Deposits Repurchase agreements
Junior subordinated notes
Total interest expense
Net Interest and Dividend Income
Provision for Loan Losses (Note 4)
Net Interest and Dividend Income After Provision for Loan Losses
Noninterest Income
Service charges and fees on deposits Net gain on investment securities Bank-owned life insurance income
Other
Total noninterest income
Noninterest Expense Salaries and employee benefits (Note 9) Occupancy and equipment Data processing Loss on sale of other real estate owned Loan collection and other real estate owned costs Professional and marketing fees
Other
Total noninterest expenses
Loss - Before income taxes
Income Tax Benefit (Note 8)
Net Loss
Preferred Stock Dividends declared Discount accretionpremium amortization
Net Loss Applicable to Common Shares $
See Notes to Consolidated Financial Statements 4
Year Ended
December 3 I 2014
6800 I 87
I 26536 265 I 89 189837 I 39750
7521 499
719548 526
358400
I 078474
6443025
143004
6300021
332707
132719 369 I 73
834599
3788299 738 I 72 36 I 606
869257 714590 864 154
7336078
(20 I 458)
(171364)
(30094)
(45 I 500) (3 I 979)
(5 I 3573)
December 3 I
$
$
2013
7492261
I 28587 152974 I 88253 161624
8 123699
943671 1034
364645
I 309350
6814349
5 I 06979
I 707370
35 I 304 18026
133810 463 I 20
966260
3810184 740222 346406 749901 64439 I 67 I 354 767652
7730 I JO
(5056480)
( I 978282)
(3078 I 98)
(38 I 500) (8 I 075)
(3540773)
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Comprehensive Income (loss)
Net Loss
Other Comprehensive Income (Loss) Unrealized gain (loss) on investment securities - Available for sale
net of tax Less reclassification adjustment for gains included in net income
net of tax
Total other comprehensive income (loss)
Comprehensive Income (Loss)
See Notes to Consolidated Financial Statements 5
Year Ended
December 3 I December 3 I
$
$
20 1 4 20 1 3
(30094) $ (3078 1 98)
1 38549
1 38549
(285394)
(1 1 358)
(274036)
I 08455 $ (3352234)
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Changes in Stockholders Equity
Retained Accumulated Series A Series B Earnings Other
Preferred Preferred Common Additional Share Accumulated Comprehensive Shares Shares Shares Paid-in Cnital Subscritions Deficit) Loss Total Eguil
Balance - January [ 20 1 3 $ 6838 I 97 $ 398749 $ 1 1 9 1 415 $ 1 2486792 $ (475000) $ 3528268 $ (52 1 647) $ 23446774
Comprehensive loss Net loss (3078 I 98) (3078 I 98) Net unrealized loss on investment securities -
Available for sale - Net of tax (274036) (274036)
Total comprehensive loss (3352234)
Dividends declared on preferred shares (381 500) (381 500)
Discount accretion on preferred shares Bl 075 (BI 075)
Common shares issued 6250 43688 49938
Balance - December 3 1 2 0 1 3 69 1 9272 398749 I 1 97665 1 2530480 (475000) ( 1 2 505) (795683) 1 9762978
Comprehensive income Net loss (30094) (30094) Net unrealized gains on lnvestment securities -
138549 Available for sale - Net of tax 1 38549
Total comprehensive income I 08455
Dividends declared on preferred shares (451 500) (451 500)
Discount accretion (premium amortization) on preferred shares 80728 (48749) (3 1 979)
Common shares issued 9055 40928 49983
Stock-based compensation expense 34 1 672 34 1 672
Balance - December 3 1 20 1 4 $ 7000000 $ 350000 $ 1206720 $ 12913080 $ (475000) $ (526078) $ (657 134) $ 19811588
See Notes to Consolidated Financial Statements 6
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Cash Flows
Cash Flows from Operating Activities Net loss Adjustments to reconcile net loss to net cash provided by
operating activities Depreciation Provision for loan losses Accretion and amortization of securities Gctln on sale of investment securities net Amortization of deferred loan fees Loss on sale of other real estate owned Increase in cash surrender value of bank-owned life insurance Restricted stock unit expense Deferred tax benefit Net change in
Accrued interest receivable and other assets
Accrued interest payable and other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities Activity in available-for-sale securities
Sales Maturities prepayments and calls Purchases
Purchase of investment securities - held to maturity Purchases
Net (increase) decrease in loans Proceeds from sales of other real estate owned Redemption of Federal Home Loan Bank stock Purchase of bank owned life insurance
Purchases of premises and equipment
Net cash ( used in) provided by investing activities
Cash Flows from Financing Activities Net increase in deposits Dividends on preferred shares Decrease in repurchase agreements Change in accrued debt issuance costs
Proceeds from issuance of common shares
Net cash ( used in) provided by financing activities
Net (Decrease) Increase in Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning of year
Cash and Cash Equivalents - End of year
Supplemental Cash Flow Information Cash paid for
Interest Income taxes
Loans transferred to other real estate owned
See Notes to Consolidated Financial Statements 7
$
$
$
Year Ended December 3 I
2014
(30094) $
326383 143004 351601
(42451)
(132719) 121877 ( I 85304)
(I 55705) 658707
I 055299
I 8863923 (I 230354 I)
(859762) (42042639)
697247
(148938)
(35793710)
(4470481) (45 I 500) (7033 I 5)
6648 49983
(5568665)
(40307076)
69060 I 03
28753027 $
1077774 $
460343
2013
(3078 I 98)
317863 5 I 06979
348058 (I 8026) (39044)
749901 (I 338 I 0) 121877
(2021 608)
4 I 8900 904576
2677468
18026 37635
(33 I 0630) 7210658 I I 35496
148657 (4000000)
(335068)
904774
7744446 (381500)
(I 364851) 6648
49938
6054681
9636923
59423180
69060 I 03
1320945 27837
594490
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies
Basis of Presentation and Consolidation - The consolidated fi nancial statements include the accounts of Chicago Shore Corporation (the Company) and its wholly owned subsidiary Delaware Place B ank (the Bank) All significant intercompany balances and transactions have been eliminated in consolidation
Nature of Operations - The Company provides a variety of f inancial services to individuals and businesses in the Chicago metropol itan area through their primary location in Chicago I l l inois Their primary deposit products are demand deposits savings money market and term certif icate accounts and their primary lending products are commercial and commercial mortgage loans
Use of Estimates - In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting period Actual results could d iffer from those estimates Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses the valuation of investment securities other real estate owned deferred tax assets goodwill and the fair value of financial instruments
Cash and Cash Equivalents - For the purpose of the consolidated statement of cash flows cash and cash equivalents include cash and balances due fr om banks and federal funds sold which mature within 90 days
Investment Securities - Debt securities that management has the positive intent and ability to hold to maturity are classified as held to maturity and recorded at amort ized cost Securities not classified as held to maturity including equity securities with readily determinable fair values are classif ied as available for sale and are recorded at fair value with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss)
Purchase premiums and discounts are recognized in interest income using the effective interest method through the maturity or expected repayment period of the securities Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses In estimating other-than-temporary impairment losses management considers ( I ) the length of time and the extent to which the fair value has been less than cost (2) the financia l condition and near-term prospects of the issuer and (3) the i nten t an d ability of the Company to retain its investment in the issuer for a period of time suff icient to allow for any anticipated recovery in fair value Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method
8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Federal Home Loan Bank Stock - The Company is a member of the Federal Home Loan Bank of Chicago (the FHLB ) and is required to maintain a minimu m investment in stock of the FHLB that varies with th e level of advances outstanding with the FHLB Th e stock does not have a readily determinable fair value and is carried at cost and is periodically evaluated for impairment
Loans - Th e Company grants mortgage commercial and consu mer loans to customers A substantial portion of the loan portfolio is represented by commercial loans in the Ch icago metropolitan area Th e abil ity of the B ank s debtors to honor their contracts is dependent upon th e real estate and general economic conditions in this area
Loans that management has th e intent and abil ity to h old for the foreseeable future or u ntil maturity or pay-off are reported at their outstanding unpaid principal balances adjusted for charge-offs the allowance for loan losses and any deferred fees or costs on originated loans Interest income is accrued on the unpaid principal balance Loan origination fees net of certain direct origination costs are deferred and recognized as an adjustment of the related loan yield u sing the interest meth od
The accrual of interest on loans is discontinued at th e time th e loan is 90 days del inquent unless the credit is well-secu red and in process of collection In all cases loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered dou btfu l
Al l interest accru ed but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income The interest on th ese loans is accounted for on the cash basis or cost-recovery meth od u ntil qualifying for return to accru al Loans are returned to accrual status wh en all the principal and interest amounts contractually due are brought current and futu re payments are reasonably assured
Loans are considered delinqu ent when customers fail to make their payments in accordance with the contractual loan agreement If a loan matures and principal remains outstanding the loan is considered delinquent u ntil the loan is paid off or renewed
Gross l oans are reported at th e Companys recorded investment The recorded investment is th e borrowers principal balance less partial charge-offs if any
Allowance for Loan Losses - Th e allowance for loan losses (the allowance) is established as losses are estimated to have occurred through a provision fo r loan losses charged to earnings Loan losses are charged against the allowance when management believes the u ncollectibi lity of a loan balance is confirmed Subsequ ent recoveries if any are credited to the allowance
9
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
The allowance for loan losses is evaluated on a r egu lar basis by management and is based upon managements per iodic r eview of the collectibility of the loans in light of h istor ical exper ience the nature and volu me of the loan portfolio adverse situations that may affect the borrowers abil ity to repay estimated value of any u nder lying col lateral and prevailing economic conditions This evaluation is inher ently subjective as it r equ ires estimates that are susceptible to significant r evision as mor e infor mation becomes available
The allowance consists of specific general and unallocated components The specific component r elates to loans that are classified as impaired For such loans an al lowance is established when the discounted cash flows (or collateral value or observable mar ket pr ice) of the impair ed loan is lower than the car rying value of that loan The general component covers nonimpaired loans and is based on histor ical loss exper ience adju sted for qualitative factor s An unallocated component is maintained to cover u ncer tainties that cou ld affect managements estimate of probable losses The unallocated component of the al lowance reflects the margin of imprecision inher ent in the u nder lying assumptions u sed in the methodologies for estimating specific and general losses in the portfolio
A loan is considered impaired when based on current information and events it is probable that the Company will be u nable to collect the schedu led payments of pr incipal or interest when due according to the contractual ter ms of the loan agr eement Factors consider ed by management in deter mining impair ment include payment status collateral value and the probability of collecting scheduled pr incipal and interest payments when du e Loans that exper ience insignificant payment delays and payment shortfal ls gener ally ar e not classified as impair ed Management deter mines the significance of payment delays and payment shortfalls on a case- by-case basis taking into consideration all of the cir cumstances surrounding the loan and the borrower including length of the delay the r easons for the delay the borrowers pr ior payment recor d and the amou nt of the shortfal l in relation to the pr incipal and interest owed Impairment is measured on a loan-by-loan basis for loans by either the present value of expected future cash flows discou nted at the loans effect ive inter est rate the J oans obtainabl e mar ket pr ice or t he fair value of the collateral if the loan is collateral dependent
Large groups of homogeneous loans are collectively evaluated for impair ment Accor dingly the Company does not separ ately identify individual consumer loans for impairment disclosures
1 0
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Troubled debt rest ruct uring (TDR) of loans is undertaken t o improve the l ikelihood t hat t he loan will be repaid in f ull under t he modif ied t erms in accordance wit h a reasonable repayment schedule All modif ied loans are evaluat ed to det ermine whet her t he loans should be report ed as a TDR A loan is a TDR when t he Company for economic or legal reasons relat ed t o t he borrowers f inancial d ifficult ies grants a concession t o t he borrower by modifying or renewing a loan that t he Company would not otherwise consider To make t his det erminat ion t he Company must det ermine whet her (a) t h e borrower is experiencing financial diff icult ies and (b) t h e Company grant ed t he borrower a concession This det erminat ion requires considerat ion of all t he fact s and circumstances surrounding t he modificat ion An overall general decline in the economy or some det eriorat ion in a borrowers f inancial condit ion does not automat ically mean t he borrower is experiencing f inancial difficult ies Loans t hat are considered TDR are considered impaired and a specif ic reserve is est ablished in the allowance consist ent ly wit h ot her impaired loans
Other Real Estate Owned - Asset s acquired through or in lieu of loan f oreclosure are held f or sale and are initially recorded at fair value less costs t o sell at t he dat e of t he foreclosure est ablishing a new cost basis Subsequent t o f oreclosure valuat ions are periodically perf ormed by management and t he assets are carried at the lower of carrying amount or fair value less cost t o sel l Revenue and expenses f rom operat ions and changes in the valuat ion allowance are included in loan collect ion and other real est at e owned expenses
Premises and Equipment - Land is carried at cost Bu ildings and equipment are carried at cost less accumulat ed depreciat ion comput ed on t he st raight -line met hod over t he est imat ed usef ul l ives of the assets ranging from I to 39 years
Bank Owned Life Insurance - The B ank has purchased life insurance pol icies on certain key offi cers B ank owned life insurance (BOLi) is recorded at it s cash surrender value or t he amount t hat can be realized upon immediate liquidat ion
Goodwill - Goodwill result s f rom prior business acquisit ions and represent s t h e excess of t he purchase price over the fair value of acquired tangible asset s and liabilit ies and ident ifiable intangible assets Goodwill is assessed at least annually f or impairment and any such impairment will be recognized in the period identified There has been no impairment ident if ied during t he years ended December 3 1 20 1 4 and 20 1 3
Income Taxes - Def erred income tax asset s and liabilit ies are det ermined using t h e liabil ity (or balance sheet) met hod Under t his met hod t he net def erred t ax asset or liability is det ermined based on t he t ax effect s of t he various t emporary d iff erences between t he book and tax basis of t he various consolidat ed balance sheet asset s and liabilities and gives current recognit ion t o changes in t ax rat es and laws
1 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
At December 3 1 20 1 4 and 20 1 3 the Company evaluated tax positions taken for filing with the Internal Revenue Service and the State of I l l inois The Company believes that income tax filing positions will be sustained under examination and does not anticipate any adjustments that would result in a material adverse eff ect on the Companys consolidated financial condition results of operations or cash flows Accordingly the Company has not recorded any reserves or related accr uals for interest and penalties for uncertai n tax positions at December 3 1 20 1 4 and 20 1 3 The Company believes it is no longer subject to tax examinati ons for years pri or to 20 I I
Comprehensive Income - Accounting principles generally require that recognized revenue expenses gains and losses be included in net income (loss) Although certain changes in assets and liabilities such as unrealized gains and losses on investment securities - available for sal e are reported as a separate component of the equity section of the consolidated balance sheet such items along with net income (loss) are components of comprehensive income
Stock-based Compensation - The Company applies the recogniti on and measurement provisions of the Compensation - Stock Compensation topi c of the Accounting Standards Codification (ASC) to account for employee stock option costs which is referred to as the calculated value method Compensation costs are measured based on the fair value of the instrument at the date of grant Those compensation costs are expensed on a straight-line basis over the vesting period of the specific instrument There were no stock-based awards granted in 20 1 4 and 20 1 3
Off-balance-sheet Instruments - In the ordinary course of business the Company has entered into commitments under commercial letters of credit and standby letters of credit Such financial instruments are recorded when they are funded
Reclassification - Certain amounts appearing in the prior years consolidated financial statements have been reclassified to conform to the current years consolidated financial statements
12
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Comprehensive Income (Topic 220) -
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income - The Financial Accounting Standards B oard (FASB) issued Accou nting Standards Update (ASU) No 20 1 3-02 Comprehensive Income (Topic 220) - Reporting of Amounts Recossified Out of Accumulated Other Comprehensive Income The ASU requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is requ ired under US generally accepted accounting principles (US GAAP) to be reclassified in its entirety to net income For other amounts that are not requ ired u nder US GAAP to be reclassified in their entirety to net income in the same reporting period an entity is requ ired to cross-reference other disclosures required under US GAAP that provide additional detail about those amounts For nonpu blic entities the ASU is effective prospectively for reporting periods beginning after December 1 5 20 1 3 (therefore for the year ended December 3 I 20 1 4 fo r the Company) and early adoption was allowed Adoption of this update did not have a material effect on the consolidated financial statements
New Accounting Pronouncement - Receivables - Troubled Debt Restructurings by
Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateral
Consumer Mortgage Loans upon Foreclosure - The FASB issued ASU No 20 1 4-04 Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure The amendments in this u pdate clarify that when an in-substance repossession or foreclosu re occu rs and a creditor is considered to have received physical possession of residential property col lateral izing a consu mer mortgage loan u pon either ( I ) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy the loan through completion of a deed in l ieu of foreclosure or through a similar legal agreement Additionally the amendment requ ires disclosure of both ( I ) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans col lateralized by residential real estate property that are in the process of foreclosure according to local requ irements of the applicable jurisdiction The amendments in this u pdate are effective for annual periods beginning after December I 5 20 1 4 (therefore December 3 I 20 I 5 for the Company) Management does not expect the update to have a material effect on the Companys consol idated financial statements
1 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Revenue from Contracts with Customers
(Topic 606) - In May 20 1 4 the Financial Accounting Standards Board issued Accounting Standards Update No 20 1 4-09 Revenue from Contracts with Customers (Topic 606) which will supersede the current revenue recognition requirements in Topic 605 Revenue Recognition The ASU is based o n the princip le that revenue is recognized to depict the transfer of goods or services to customers in an amount that refl ects the consideration to wh ich the entity expects to be entitled in exchange for those goods or services Th e ASU also requ ires additional disclosure about the nature amount timing and uncertainty of revenue and cash fl ows arising from customer contracts including significant judgments and changes in judgments and assets recognized from costs incu rred to obtain or fulfill a contract The new gu idance will be effective for periods beginning af ter December 1 5 201 7 (th erefo re for the year ending December 3 I 20 1 8 for th e Company) Th e ASU permits the new revenue recognition gu idance to be appl ied u sing one of two retrospective application methods The Company h as not yet determined wh ich application method it will use or th e potential eff ects of th e new standard on th e financial statements i f any
Subsequent Events - Th e financial statements and related disclosures include evaluation of events up through and including April 1 3 20 15 wh ich is the date the consolidated financial statements were available to be issued
Note 2 - Restrictions on Cash and Amounts Due from Banks
Th e B ank is required to maintain average cash balances on hand or on deposit with the Federal Reserve B ank At December 3 1 20 1 4 and 20 1 3 th ese reserve balances amounted to $ 1 5 67000 and $ 1 45 2000 respectively
1 4
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities
The amortized cost and estimated fair value of secu rities with gross unreal ized gains and losses are as fol lows
December 3 1 20 1 4 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $ 6988 1 44 $ 86 1 05 $ (2793) $ 707 1 456 M unicipal securities 6363935 438 1 4 6407749 Mortgage-backed securities 5 29975 1 9020 (2264) 5 306507 Other 5 1 50000 ( 1 1 89982) 3 9600 1 8
Total available-for-sale securities $2380 1 830 $ 1 38939 $ ( I I 95039) $ 22745730
Held-to-maturity securities -Mun icipal securities $ 4 I 2789 I $ 305 1 32 $ $ 4433 023
December 3 I 20 I 3 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $187 1 5 1 05 $ 93349 $ $ I 8808454 State and municipal 6 8 I 3 063 77408 (SO I 48) 6 840323 Other 5 I 50000 ( I 383563) 3 766437
Total available-for-sale securities $30678 I 68 $ I 70757 $ ( 1 433 7 1 I ) $ 29 4 1 5 2 1 4
Held-to-maturity secu rities -Municipal securities $ 3 303 774 $ $ (22364) $ 3 28 I 4 I 0
At December 3 I 20 1 4 and 20 1 3 securities with a carrying value of $503498 1 and $8595033 respectively were pledged to secure publ ic deposits repu rchase agreements and for other purposes requ ired or permitted by law
15
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
The amort ized cost and estimated fair value of debt securities by contractual maturity at December 3 1 20 1 4 are as fo llows
Available for Sale Held to Maturity Amort ized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
Due in one year or less $ 5 1 42415 $ 5 1 70 1 88 $ $ Due in one through five
years 32805 35 3 293 783 Due after five years through
ten years 4929 1 29 5 0 1 5 234 Due after ten years 5 000000 3824400 4 1 27891 4433 023
Total 1 8352079 1 7303605 4 1 2789 1 4433 023
Mortgage-backed securities 5 29975 1 5 306507 No stated maturity 1 5 0000 1 35 6 1 8
Total $2380 1 830 $22745 730 $ 4 1 2789 I $ 4433 023
There were no sales of investments during the year ended December 3 I 20 I 4 During the year ended December 3 1 20 I 3 the Company sold securities availabl e for sale with a book value of $0 resulting in realized gains of $ I 8026 There were no gross realized losses on sales of securities available for sale for the year ended December 3 I 20 1 3
1 6
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Information pertain ing to securi ti es with gross un realized losses at December 31 20 1 4 an d 20 1 3 aggregated by investment category an d length of time that in dividual securities have been in a continuous loss position is as follows
December 3 1 20 1 4 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Unrealized Estimated
Losses Fair Value Losses Fair Val ue Available-for-sale securities
US government agen cies $ (2793) $ 2056 222 $ $ Mortgage-backed securities (2264) 25247 1 0 Other ( 1 1 89982) 3 960018
Total available-for-sale secu rities $ (5 05 7) $ 45 80932 $ ( 1 1 89982) $ 3 9600 1 8
December 3 I 20 1 3 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Un realized Estimated
Losses Fair Value Losses Fair Valu e Available-for-sale securities
Mun icipal securities $ (50 1 48) $ 677262 $ $ Other ( 1 383 5 63) 3 766437
Total available-for-sale securities $ (SO 1 48) $ 677262 $ ( 1 3835 63) $ 3 766437
Un realized l osses on securities have n ot been recogn ized into in come because the issu ers bonds are of high credit quality we have the inten t and ability to hold the secu rities for the foreseeable futu re and the declin e in fair value is primarily due to increased market interest rates The fair values a re generally expected to recover as the bonds approach their maturity dates
1 7
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Within other secu rities there is $ 1 1 75 600 of u nrealized losses related to two perpetual preferred secu rities to two large international bank holding companies The u nrealized losses on the perpetual preferred secu rities is attributable to the cu rrent variable dividend rates compared to similar fixed-rate instru ments at each institution The fair value of the Companys perpetual preferred secu rities is expected to increase as the variable dividend rate increases which is contingent u pon the three-month LIB O R rate The Company has the ability and intent to hold the secu rities u ntil their estimated fair values increase
Note 4 - Loans
A summary of the balances of loans follows (in thousands)
20 1 4 20 1 3
Residential $ 1 1 493 $ 1 1 686 Construction and land 5 298 1 303 Commercial real estate 60262 48570 Commercial 38472 7844 I nventory 1 0239 9 649 Professional practice 45890 48224 Life insurance contracts 1 933 Automobile 1 22 789 Consu mer 1 038 1 083
Total gross loans 1 728 1 4 1 3 1 08 1
Less Allowance for loan losses (5 627) (5 334) Net deferred loan fees (6 1 ) ( I 03)
Net loans $ 1 67 1 26 $ 1 25 644
1 8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Loans and the all owance for loan losses ar e disaggregated by segment as foll ows (i n thousands)
Allowance for loan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Allowance for Joan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Ending allowance attributable to loans
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Beginning
Balance
$ 276 $ 2 1 3 900 377
3250 259
12 9
38
$ 5334 $
Beginning
Balance
$ 392 $ 72
849 338 626 587 106
5 54
$ 3029 $
1 9
Year Ended December 3 1 2014
Charge-offs Recoveries Provision Ending Balance
$ $ (45) $ 23 1 42 255
( 142) 758 144 (8) 5 1 3
1 85 3435 ( 1 9) 240
(4) 1 0 ( 1 7) I ( I ) 8
148 1 86
(4) $ 1 54 $ 143 $ 5627
Year Ended December 3 1 2013
Charge-offs Recoveries Provision Ending Balance
$ $ ( 1 1 6) $ 276 ( I 33) 274 2 1 3
5 1 900 9 30 377
(2658) 5282 3250 (328) 259
(36) 1 6 (74) 1 2 4 9
( 1 6) 38
(2827) $ 25 $ 5 107 $ 5334
Year Ended December 3 I bull 2014 Individually Collectively
Evaluated for Evaluated for
Impairment Impairment Ending Balance
$ 130 $ 1 0 1 $ 23 1 255 255
180 578 758 5 1 3 5 1 3
3335 1 00 3435 240 240
I I 8 8
186 186
$ 3645 $ 1 982 $ 5627
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 2014 and 2013
Note 4 - Loans (Continued)
Individually Collectively Evaluated for Evaluated for Impairment Impairment Ending Balance
Loans
Residential $ 595 $ 1 0898 $ 1 1 493 Construction and land 5298 5298 Commercial real estate 1 297 58965 60262 Commercial 38472 38472 Inventory 5576 4663 1 0239 Professional practice 45890 45890 Automobile 122 122 Consumer l 038 1038
Total $ 7468 $ 1 65346 $ 1728 1 4
Year Ended December 3 1 20 1 3 Individually Collectively
Evaluated for Evaluated for Impairment Impairment Ending Balance
Ending allowance attributable to loans
Residential $ 130 $ 146 $ 276 Construction and land 2 13 2 13 Commercial real estate 250 650 900 Commercial 269 1 08 377 Inventory 3000 250 3250 Professional practice 259 259 Automobile 12 12 Consumer 9 9 Unallocated 38 38
Total $ 3649 $ 1685 $ 5334
Individually Collectively Evaluated for Evaluated for Impairment lmpaiffilent Ending Balance
Loans
Residential $ 595 $ 1 1 09 1 $ 1 1 686 Construction and land 1303 1303 Commercial real estate 1 298 47272 48570 Commercial 1587 6257 7844 Inventory 5215 4434 9649 Professional practice 48224 48224 Life insurance contraets 1933 1 933 Automobile 789 789 Consumer 1 083 l 083
Total $ 8695 $ 122386 $ 1 3 1 08 1
20
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 201 4 and 2013
Note 4 - Loans (Continued)
Credit Risk Grading
The Company util izes a loan rating system as a means of identifying problem and potential problem loans The Company assigned the fo llowing loan ratings to loans disaggregated by segment and class as of December 3 1 20 1 4 and 20 1 3 (in thousands)
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile
Consumer
Total
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Life insurance contracts Automobile
Consumer
Total
December 3 1 20 14 Loans rated Loans rated Loans rated
1-5
$ 1 0898 $ 5298
58965 38472
4663 45890
1 22 1 038
$ 1 65346 $
6
===
$
$
7 Total
595 $ 1 1 493 5298
1 297 60262 38472
5576 I 0239 45890
1 22 1 038
7468 $ 1 728 1 4 ====
December 3 1 20 1 3 Loans rated Loans rated Loans rated
1-5 6 7 Total
$ 1 0626 $ 465 $ 595 $ 1 1 686 1 303 1 303
47272 1 298 48570 6257 J 587 7844 4434 52 1 5 9649
48224 48224 I 933 I 933
789 789 1 083 1 083
$ 1 2 1 921 $ 465 $ 8695 $ 1 3 1 08 1
The Company categorized each loan into credit risk categori es based on current fi nancial information overall debt service coverage comparison against industry averages col lateral coverage historical payment experience and current economic trends The Company uses the following definitions for credit risk ratings
2 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
c
Chicago Shore Corporation and Subidirtes
_- 3middot_middot
Consolidated Financial Report
December 3 I 20 14
Chicago Shore Corporation and S-absidiaries
Report Letter
Consolidated Financial Statements
Balance Sheet
Statement of Operations
Statement of Comprehensive Income (Loss)
Statement of Changes in Stockholders Equity
Statement of Cash Flows
Notes to Consol idated Financial Statements
ontents
1 -2
3
4
5
6
7
8-41
Qlante ------moran
Independent Auditors Report
To the Board of Directors
Chicago Shore Corporation and Subsidiaries
Plante amp Moran PLLC 10 South Riverside Plaza
9th Floor
Chicago IL 60606 Tel 3122071040
Fax 3122071066
plantemorancom
We have audited the accompanying consolidated financial statements of Chicago Shore Corporation and
Subsidiaries (the Company) which comprise the consolidated balance sheet as of December 31 2014 and the related consolidated statements of operations comprehensive income (loss) stockholders equity and cash flows for the year then ended and the related notes to the consolidated financial statements
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with accounting principles generally accepted in the United States of America this includes the design implementation and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement whether due to fraud or error
Auditors Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit We conducted our audit in accordance with auditing standards generally accepted in the United States of America Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements The procedures selected depend on the auditors judgment including the assessment of the risks of material misstatement of the consolidated financial statements whether due to fraud or error In making those risk assessments the auditor considers internal control relevant to the entitys preparation and fair presentation of the consolidated financial statements in order
to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control Accordingly we express no such opinion An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management as well as evaluating the overall
presentation of the consolidated financial statements
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion
Opinion
In our opinion the consolidated financial statements referred to above present fairly in all material respects the financial position of Chicago Shore Corporation and Subsidiaries as of December 3 I 2014 and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America
Praxitymiddot MEMBERbull
GLOBAL AlllAtJCE OF lfJOEPEUOErJT FIAr1s
middot middotmiddot
To the Board of Directors Chicago Shore Corporation and Subsidiaries
Report on Prior Year Consolidated Financial Statements
The consolidated financial statements of Chicago Shore Corporation and Subsidiaries a of and for the
year ended December 3 1 20 I 3 were audited by other audirors whose reporrcdated February 2 20 I 5 expressed an unqualified opinion on those statements
April 1 3 2015
2
middot
Chicago Shore Corporation and Subsidiaries
Consolidated Balance Sheet
December 3 I 20 I 4 Assets
Cash and due from banks $ 22274125
Federal funds sold 6478902
Total cash and cash equivalents 28753027
Investment securities - Available for sale (Note 3) 22745730 Investment securities - Held to maturity ( Note 3) 4 127891 Federal Home Loan Bank stock I 000000 Loans - Net of allowance for loan losses of $5626979 and $5333892 at
December 3 I 2014 and 2013 respectively (Note 4) I 67 I 26085 Other real estate owned 5486 I 6 I Premises and equipment (Note 5) 6 I 58323 Goodwill 2748077 Accrued interest receivable 623819 Deferred tax asset - Net (Note 8) 655324 I Bank-owned life insurance 4266529 Investment in Chicago Shore Capital Trusts (Note 7) 342000
Other assets 393737
Total assets $ 250324620
Liabilities and Stockholders Equity
Liabilities Deposits
Noninterest-bearing
Interest-bearing
Total deposits ( Note 6)
junior subordinated notes (Note 7) Accrued interest payable Repurchase agreements
Accrued and other liabilities
Total liabilities
Stockholders Equity Preferred shares - Series A net of discount - $I 0 par value
Issued and outstanding -7000 shares at December 3 I 20 I 4 and 20 I 3 Liquidation value - $ I 000 per share ( Note I 2)
Preferred shares - Series B - $I 0 par value Issued and outstanding - 350 shares at December 3 I 20 I 4 and 20 I 3 Liquidation value - $ I 000 per share (Note 12)
Common shares - $ I par value Authorized - 2000000 shares Issued and outstanding - I 206720 and I I 97665 shares at December 3 I 20 I 4 and 20 I 3 respectively
Additional paid-in capital Share subscriptions - 38000 shares subscribed at December 3I 2014 and
2013 (Note I I) Accumulated deficit
Accumulated other comprehensive loss
Total stockholders equity
Total liabilities and stockholders equity
See Notes to Consolidated Financial Statements 3
$ 62956469 I 5323 I 305
2 I 6 I 87774
I 1212335 80063
627959 240490 I
2305 I 3032
7000000
350000
I 206720 12913080
(475000) (526078) (657 134)
I 9811588
$ 250324620
December 3 I 20 I 3
$ 59464227 9595876
69060 I 03
29415214 3303774 1000000
I 25644342 5723065 6335768 2748077
535004 6436242 4 1338 Io
342000 326847
$ 255004246
$ 56029979 I 64628276
220658255
I 1205687 79362
I 33 I 274 I 966690
23524 I 268
69 I 9272
398749
I I 97665 12530480
(475000) (I 2505)
(795683)
I 9762978
$ 255004246
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Operations
Interest and Dividend Income
Loans - Including fees $ Investment securities
Taxable Tax-exempt
Dividend income Federal funds sold
Total interest and dividend income
Interest Expense
Deposits Repurchase agreements
Junior subordinated notes
Total interest expense
Net Interest and Dividend Income
Provision for Loan Losses (Note 4)
Net Interest and Dividend Income After Provision for Loan Losses
Noninterest Income
Service charges and fees on deposits Net gain on investment securities Bank-owned life insurance income
Other
Total noninterest income
Noninterest Expense Salaries and employee benefits (Note 9) Occupancy and equipment Data processing Loss on sale of other real estate owned Loan collection and other real estate owned costs Professional and marketing fees
Other
Total noninterest expenses
Loss - Before income taxes
Income Tax Benefit (Note 8)
Net Loss
Preferred Stock Dividends declared Discount accretionpremium amortization
Net Loss Applicable to Common Shares $
See Notes to Consolidated Financial Statements 4
Year Ended
December 3 I 2014
6800 I 87
I 26536 265 I 89 189837 I 39750
7521 499
719548 526
358400
I 078474
6443025
143004
6300021
332707
132719 369 I 73
834599
3788299 738 I 72 36 I 606
869257 714590 864 154
7336078
(20 I 458)
(171364)
(30094)
(45 I 500) (3 I 979)
(5 I 3573)
December 3 I
$
$
2013
7492261
I 28587 152974 I 88253 161624
8 123699
943671 1034
364645
I 309350
6814349
5 I 06979
I 707370
35 I 304 18026
133810 463 I 20
966260
3810184 740222 346406 749901 64439 I 67 I 354 767652
7730 I JO
(5056480)
( I 978282)
(3078 I 98)
(38 I 500) (8 I 075)
(3540773)
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Comprehensive Income (loss)
Net Loss
Other Comprehensive Income (Loss) Unrealized gain (loss) on investment securities - Available for sale
net of tax Less reclassification adjustment for gains included in net income
net of tax
Total other comprehensive income (loss)
Comprehensive Income (Loss)
See Notes to Consolidated Financial Statements 5
Year Ended
December 3 I December 3 I
$
$
20 1 4 20 1 3
(30094) $ (3078 1 98)
1 38549
1 38549
(285394)
(1 1 358)
(274036)
I 08455 $ (3352234)
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Changes in Stockholders Equity
Retained Accumulated Series A Series B Earnings Other
Preferred Preferred Common Additional Share Accumulated Comprehensive Shares Shares Shares Paid-in Cnital Subscritions Deficit) Loss Total Eguil
Balance - January [ 20 1 3 $ 6838 I 97 $ 398749 $ 1 1 9 1 415 $ 1 2486792 $ (475000) $ 3528268 $ (52 1 647) $ 23446774
Comprehensive loss Net loss (3078 I 98) (3078 I 98) Net unrealized loss on investment securities -
Available for sale - Net of tax (274036) (274036)
Total comprehensive loss (3352234)
Dividends declared on preferred shares (381 500) (381 500)
Discount accretion on preferred shares Bl 075 (BI 075)
Common shares issued 6250 43688 49938
Balance - December 3 1 2 0 1 3 69 1 9272 398749 I 1 97665 1 2530480 (475000) ( 1 2 505) (795683) 1 9762978
Comprehensive income Net loss (30094) (30094) Net unrealized gains on lnvestment securities -
138549 Available for sale - Net of tax 1 38549
Total comprehensive income I 08455
Dividends declared on preferred shares (451 500) (451 500)
Discount accretion (premium amortization) on preferred shares 80728 (48749) (3 1 979)
Common shares issued 9055 40928 49983
Stock-based compensation expense 34 1 672 34 1 672
Balance - December 3 1 20 1 4 $ 7000000 $ 350000 $ 1206720 $ 12913080 $ (475000) $ (526078) $ (657 134) $ 19811588
See Notes to Consolidated Financial Statements 6
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Cash Flows
Cash Flows from Operating Activities Net loss Adjustments to reconcile net loss to net cash provided by
operating activities Depreciation Provision for loan losses Accretion and amortization of securities Gctln on sale of investment securities net Amortization of deferred loan fees Loss on sale of other real estate owned Increase in cash surrender value of bank-owned life insurance Restricted stock unit expense Deferred tax benefit Net change in
Accrued interest receivable and other assets
Accrued interest payable and other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities Activity in available-for-sale securities
Sales Maturities prepayments and calls Purchases
Purchase of investment securities - held to maturity Purchases
Net (increase) decrease in loans Proceeds from sales of other real estate owned Redemption of Federal Home Loan Bank stock Purchase of bank owned life insurance
Purchases of premises and equipment
Net cash ( used in) provided by investing activities
Cash Flows from Financing Activities Net increase in deposits Dividends on preferred shares Decrease in repurchase agreements Change in accrued debt issuance costs
Proceeds from issuance of common shares
Net cash ( used in) provided by financing activities
Net (Decrease) Increase in Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning of year
Cash and Cash Equivalents - End of year
Supplemental Cash Flow Information Cash paid for
Interest Income taxes
Loans transferred to other real estate owned
See Notes to Consolidated Financial Statements 7
$
$
$
Year Ended December 3 I
2014
(30094) $
326383 143004 351601
(42451)
(132719) 121877 ( I 85304)
(I 55705) 658707
I 055299
I 8863923 (I 230354 I)
(859762) (42042639)
697247
(148938)
(35793710)
(4470481) (45 I 500) (7033 I 5)
6648 49983
(5568665)
(40307076)
69060 I 03
28753027 $
1077774 $
460343
2013
(3078 I 98)
317863 5 I 06979
348058 (I 8026) (39044)
749901 (I 338 I 0) 121877
(2021 608)
4 I 8900 904576
2677468
18026 37635
(33 I 0630) 7210658 I I 35496
148657 (4000000)
(335068)
904774
7744446 (381500)
(I 364851) 6648
49938
6054681
9636923
59423180
69060 I 03
1320945 27837
594490
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies
Basis of Presentation and Consolidation - The consolidated fi nancial statements include the accounts of Chicago Shore Corporation (the Company) and its wholly owned subsidiary Delaware Place B ank (the Bank) All significant intercompany balances and transactions have been eliminated in consolidation
Nature of Operations - The Company provides a variety of f inancial services to individuals and businesses in the Chicago metropol itan area through their primary location in Chicago I l l inois Their primary deposit products are demand deposits savings money market and term certif icate accounts and their primary lending products are commercial and commercial mortgage loans
Use of Estimates - In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting period Actual results could d iffer from those estimates Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses the valuation of investment securities other real estate owned deferred tax assets goodwill and the fair value of financial instruments
Cash and Cash Equivalents - For the purpose of the consolidated statement of cash flows cash and cash equivalents include cash and balances due fr om banks and federal funds sold which mature within 90 days
Investment Securities - Debt securities that management has the positive intent and ability to hold to maturity are classified as held to maturity and recorded at amort ized cost Securities not classified as held to maturity including equity securities with readily determinable fair values are classif ied as available for sale and are recorded at fair value with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss)
Purchase premiums and discounts are recognized in interest income using the effective interest method through the maturity or expected repayment period of the securities Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses In estimating other-than-temporary impairment losses management considers ( I ) the length of time and the extent to which the fair value has been less than cost (2) the financia l condition and near-term prospects of the issuer and (3) the i nten t an d ability of the Company to retain its investment in the issuer for a period of time suff icient to allow for any anticipated recovery in fair value Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method
8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Federal Home Loan Bank Stock - The Company is a member of the Federal Home Loan Bank of Chicago (the FHLB ) and is required to maintain a minimu m investment in stock of the FHLB that varies with th e level of advances outstanding with the FHLB Th e stock does not have a readily determinable fair value and is carried at cost and is periodically evaluated for impairment
Loans - Th e Company grants mortgage commercial and consu mer loans to customers A substantial portion of the loan portfolio is represented by commercial loans in the Ch icago metropolitan area Th e abil ity of the B ank s debtors to honor their contracts is dependent upon th e real estate and general economic conditions in this area
Loans that management has th e intent and abil ity to h old for the foreseeable future or u ntil maturity or pay-off are reported at their outstanding unpaid principal balances adjusted for charge-offs the allowance for loan losses and any deferred fees or costs on originated loans Interest income is accrued on the unpaid principal balance Loan origination fees net of certain direct origination costs are deferred and recognized as an adjustment of the related loan yield u sing the interest meth od
The accrual of interest on loans is discontinued at th e time th e loan is 90 days del inquent unless the credit is well-secu red and in process of collection In all cases loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered dou btfu l
Al l interest accru ed but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income The interest on th ese loans is accounted for on the cash basis or cost-recovery meth od u ntil qualifying for return to accru al Loans are returned to accrual status wh en all the principal and interest amounts contractually due are brought current and futu re payments are reasonably assured
Loans are considered delinqu ent when customers fail to make their payments in accordance with the contractual loan agreement If a loan matures and principal remains outstanding the loan is considered delinquent u ntil the loan is paid off or renewed
Gross l oans are reported at th e Companys recorded investment The recorded investment is th e borrowers principal balance less partial charge-offs if any
Allowance for Loan Losses - Th e allowance for loan losses (the allowance) is established as losses are estimated to have occurred through a provision fo r loan losses charged to earnings Loan losses are charged against the allowance when management believes the u ncollectibi lity of a loan balance is confirmed Subsequ ent recoveries if any are credited to the allowance
9
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
The allowance for loan losses is evaluated on a r egu lar basis by management and is based upon managements per iodic r eview of the collectibility of the loans in light of h istor ical exper ience the nature and volu me of the loan portfolio adverse situations that may affect the borrowers abil ity to repay estimated value of any u nder lying col lateral and prevailing economic conditions This evaluation is inher ently subjective as it r equ ires estimates that are susceptible to significant r evision as mor e infor mation becomes available
The allowance consists of specific general and unallocated components The specific component r elates to loans that are classified as impaired For such loans an al lowance is established when the discounted cash flows (or collateral value or observable mar ket pr ice) of the impair ed loan is lower than the car rying value of that loan The general component covers nonimpaired loans and is based on histor ical loss exper ience adju sted for qualitative factor s An unallocated component is maintained to cover u ncer tainties that cou ld affect managements estimate of probable losses The unallocated component of the al lowance reflects the margin of imprecision inher ent in the u nder lying assumptions u sed in the methodologies for estimating specific and general losses in the portfolio
A loan is considered impaired when based on current information and events it is probable that the Company will be u nable to collect the schedu led payments of pr incipal or interest when due according to the contractual ter ms of the loan agr eement Factors consider ed by management in deter mining impair ment include payment status collateral value and the probability of collecting scheduled pr incipal and interest payments when du e Loans that exper ience insignificant payment delays and payment shortfal ls gener ally ar e not classified as impair ed Management deter mines the significance of payment delays and payment shortfalls on a case- by-case basis taking into consideration all of the cir cumstances surrounding the loan and the borrower including length of the delay the r easons for the delay the borrowers pr ior payment recor d and the amou nt of the shortfal l in relation to the pr incipal and interest owed Impairment is measured on a loan-by-loan basis for loans by either the present value of expected future cash flows discou nted at the loans effect ive inter est rate the J oans obtainabl e mar ket pr ice or t he fair value of the collateral if the loan is collateral dependent
Large groups of homogeneous loans are collectively evaluated for impair ment Accor dingly the Company does not separ ately identify individual consumer loans for impairment disclosures
1 0
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Troubled debt rest ruct uring (TDR) of loans is undertaken t o improve the l ikelihood t hat t he loan will be repaid in f ull under t he modif ied t erms in accordance wit h a reasonable repayment schedule All modif ied loans are evaluat ed to det ermine whet her t he loans should be report ed as a TDR A loan is a TDR when t he Company for economic or legal reasons relat ed t o t he borrowers f inancial d ifficult ies grants a concession t o t he borrower by modifying or renewing a loan that t he Company would not otherwise consider To make t his det erminat ion t he Company must det ermine whet her (a) t h e borrower is experiencing financial diff icult ies and (b) t h e Company grant ed t he borrower a concession This det erminat ion requires considerat ion of all t he fact s and circumstances surrounding t he modificat ion An overall general decline in the economy or some det eriorat ion in a borrowers f inancial condit ion does not automat ically mean t he borrower is experiencing f inancial difficult ies Loans t hat are considered TDR are considered impaired and a specif ic reserve is est ablished in the allowance consist ent ly wit h ot her impaired loans
Other Real Estate Owned - Asset s acquired through or in lieu of loan f oreclosure are held f or sale and are initially recorded at fair value less costs t o sell at t he dat e of t he foreclosure est ablishing a new cost basis Subsequent t o f oreclosure valuat ions are periodically perf ormed by management and t he assets are carried at the lower of carrying amount or fair value less cost t o sel l Revenue and expenses f rom operat ions and changes in the valuat ion allowance are included in loan collect ion and other real est at e owned expenses
Premises and Equipment - Land is carried at cost Bu ildings and equipment are carried at cost less accumulat ed depreciat ion comput ed on t he st raight -line met hod over t he est imat ed usef ul l ives of the assets ranging from I to 39 years
Bank Owned Life Insurance - The B ank has purchased life insurance pol icies on certain key offi cers B ank owned life insurance (BOLi) is recorded at it s cash surrender value or t he amount t hat can be realized upon immediate liquidat ion
Goodwill - Goodwill result s f rom prior business acquisit ions and represent s t h e excess of t he purchase price over the fair value of acquired tangible asset s and liabilit ies and ident ifiable intangible assets Goodwill is assessed at least annually f or impairment and any such impairment will be recognized in the period identified There has been no impairment ident if ied during t he years ended December 3 1 20 1 4 and 20 1 3
Income Taxes - Def erred income tax asset s and liabilit ies are det ermined using t h e liabil ity (or balance sheet) met hod Under t his met hod t he net def erred t ax asset or liability is det ermined based on t he t ax effect s of t he various t emporary d iff erences between t he book and tax basis of t he various consolidat ed balance sheet asset s and liabilities and gives current recognit ion t o changes in t ax rat es and laws
1 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
At December 3 1 20 1 4 and 20 1 3 the Company evaluated tax positions taken for filing with the Internal Revenue Service and the State of I l l inois The Company believes that income tax filing positions will be sustained under examination and does not anticipate any adjustments that would result in a material adverse eff ect on the Companys consolidated financial condition results of operations or cash flows Accordingly the Company has not recorded any reserves or related accr uals for interest and penalties for uncertai n tax positions at December 3 1 20 1 4 and 20 1 3 The Company believes it is no longer subject to tax examinati ons for years pri or to 20 I I
Comprehensive Income - Accounting principles generally require that recognized revenue expenses gains and losses be included in net income (loss) Although certain changes in assets and liabilities such as unrealized gains and losses on investment securities - available for sal e are reported as a separate component of the equity section of the consolidated balance sheet such items along with net income (loss) are components of comprehensive income
Stock-based Compensation - The Company applies the recogniti on and measurement provisions of the Compensation - Stock Compensation topi c of the Accounting Standards Codification (ASC) to account for employee stock option costs which is referred to as the calculated value method Compensation costs are measured based on the fair value of the instrument at the date of grant Those compensation costs are expensed on a straight-line basis over the vesting period of the specific instrument There were no stock-based awards granted in 20 1 4 and 20 1 3
Off-balance-sheet Instruments - In the ordinary course of business the Company has entered into commitments under commercial letters of credit and standby letters of credit Such financial instruments are recorded when they are funded
Reclassification - Certain amounts appearing in the prior years consolidated financial statements have been reclassified to conform to the current years consolidated financial statements
12
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Comprehensive Income (Topic 220) -
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income - The Financial Accounting Standards B oard (FASB) issued Accou nting Standards Update (ASU) No 20 1 3-02 Comprehensive Income (Topic 220) - Reporting of Amounts Recossified Out of Accumulated Other Comprehensive Income The ASU requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is requ ired under US generally accepted accounting principles (US GAAP) to be reclassified in its entirety to net income For other amounts that are not requ ired u nder US GAAP to be reclassified in their entirety to net income in the same reporting period an entity is requ ired to cross-reference other disclosures required under US GAAP that provide additional detail about those amounts For nonpu blic entities the ASU is effective prospectively for reporting periods beginning after December 1 5 20 1 3 (therefore for the year ended December 3 I 20 1 4 fo r the Company) and early adoption was allowed Adoption of this update did not have a material effect on the consolidated financial statements
New Accounting Pronouncement - Receivables - Troubled Debt Restructurings by
Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateral
Consumer Mortgage Loans upon Foreclosure - The FASB issued ASU No 20 1 4-04 Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure The amendments in this u pdate clarify that when an in-substance repossession or foreclosu re occu rs and a creditor is considered to have received physical possession of residential property col lateral izing a consu mer mortgage loan u pon either ( I ) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy the loan through completion of a deed in l ieu of foreclosure or through a similar legal agreement Additionally the amendment requ ires disclosure of both ( I ) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans col lateralized by residential real estate property that are in the process of foreclosure according to local requ irements of the applicable jurisdiction The amendments in this u pdate are effective for annual periods beginning after December I 5 20 1 4 (therefore December 3 I 20 I 5 for the Company) Management does not expect the update to have a material effect on the Companys consol idated financial statements
1 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Revenue from Contracts with Customers
(Topic 606) - In May 20 1 4 the Financial Accounting Standards Board issued Accounting Standards Update No 20 1 4-09 Revenue from Contracts with Customers (Topic 606) which will supersede the current revenue recognition requirements in Topic 605 Revenue Recognition The ASU is based o n the princip le that revenue is recognized to depict the transfer of goods or services to customers in an amount that refl ects the consideration to wh ich the entity expects to be entitled in exchange for those goods or services Th e ASU also requ ires additional disclosure about the nature amount timing and uncertainty of revenue and cash fl ows arising from customer contracts including significant judgments and changes in judgments and assets recognized from costs incu rred to obtain or fulfill a contract The new gu idance will be effective for periods beginning af ter December 1 5 201 7 (th erefo re for the year ending December 3 I 20 1 8 for th e Company) Th e ASU permits the new revenue recognition gu idance to be appl ied u sing one of two retrospective application methods The Company h as not yet determined wh ich application method it will use or th e potential eff ects of th e new standard on th e financial statements i f any
Subsequent Events - Th e financial statements and related disclosures include evaluation of events up through and including April 1 3 20 15 wh ich is the date the consolidated financial statements were available to be issued
Note 2 - Restrictions on Cash and Amounts Due from Banks
Th e B ank is required to maintain average cash balances on hand or on deposit with the Federal Reserve B ank At December 3 1 20 1 4 and 20 1 3 th ese reserve balances amounted to $ 1 5 67000 and $ 1 45 2000 respectively
1 4
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities
The amortized cost and estimated fair value of secu rities with gross unreal ized gains and losses are as fol lows
December 3 1 20 1 4 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $ 6988 1 44 $ 86 1 05 $ (2793) $ 707 1 456 M unicipal securities 6363935 438 1 4 6407749 Mortgage-backed securities 5 29975 1 9020 (2264) 5 306507 Other 5 1 50000 ( 1 1 89982) 3 9600 1 8
Total available-for-sale securities $2380 1 830 $ 1 38939 $ ( I I 95039) $ 22745730
Held-to-maturity securities -Mun icipal securities $ 4 I 2789 I $ 305 1 32 $ $ 4433 023
December 3 I 20 I 3 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $187 1 5 1 05 $ 93349 $ $ I 8808454 State and municipal 6 8 I 3 063 77408 (SO I 48) 6 840323 Other 5 I 50000 ( I 383563) 3 766437
Total available-for-sale securities $30678 I 68 $ I 70757 $ ( 1 433 7 1 I ) $ 29 4 1 5 2 1 4
Held-to-maturity secu rities -Municipal securities $ 3 303 774 $ $ (22364) $ 3 28 I 4 I 0
At December 3 I 20 1 4 and 20 1 3 securities with a carrying value of $503498 1 and $8595033 respectively were pledged to secure publ ic deposits repu rchase agreements and for other purposes requ ired or permitted by law
15
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
The amort ized cost and estimated fair value of debt securities by contractual maturity at December 3 1 20 1 4 are as fo llows
Available for Sale Held to Maturity Amort ized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
Due in one year or less $ 5 1 42415 $ 5 1 70 1 88 $ $ Due in one through five
years 32805 35 3 293 783 Due after five years through
ten years 4929 1 29 5 0 1 5 234 Due after ten years 5 000000 3824400 4 1 27891 4433 023
Total 1 8352079 1 7303605 4 1 2789 1 4433 023
Mortgage-backed securities 5 29975 1 5 306507 No stated maturity 1 5 0000 1 35 6 1 8
Total $2380 1 830 $22745 730 $ 4 1 2789 I $ 4433 023
There were no sales of investments during the year ended December 3 I 20 I 4 During the year ended December 3 1 20 I 3 the Company sold securities availabl e for sale with a book value of $0 resulting in realized gains of $ I 8026 There were no gross realized losses on sales of securities available for sale for the year ended December 3 I 20 1 3
1 6
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Information pertain ing to securi ti es with gross un realized losses at December 31 20 1 4 an d 20 1 3 aggregated by investment category an d length of time that in dividual securities have been in a continuous loss position is as follows
December 3 1 20 1 4 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Unrealized Estimated
Losses Fair Value Losses Fair Val ue Available-for-sale securities
US government agen cies $ (2793) $ 2056 222 $ $ Mortgage-backed securities (2264) 25247 1 0 Other ( 1 1 89982) 3 960018
Total available-for-sale secu rities $ (5 05 7) $ 45 80932 $ ( 1 1 89982) $ 3 9600 1 8
December 3 I 20 1 3 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Un realized Estimated
Losses Fair Value Losses Fair Valu e Available-for-sale securities
Mun icipal securities $ (50 1 48) $ 677262 $ $ Other ( 1 383 5 63) 3 766437
Total available-for-sale securities $ (SO 1 48) $ 677262 $ ( 1 3835 63) $ 3 766437
Un realized l osses on securities have n ot been recogn ized into in come because the issu ers bonds are of high credit quality we have the inten t and ability to hold the secu rities for the foreseeable futu re and the declin e in fair value is primarily due to increased market interest rates The fair values a re generally expected to recover as the bonds approach their maturity dates
1 7
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Within other secu rities there is $ 1 1 75 600 of u nrealized losses related to two perpetual preferred secu rities to two large international bank holding companies The u nrealized losses on the perpetual preferred secu rities is attributable to the cu rrent variable dividend rates compared to similar fixed-rate instru ments at each institution The fair value of the Companys perpetual preferred secu rities is expected to increase as the variable dividend rate increases which is contingent u pon the three-month LIB O R rate The Company has the ability and intent to hold the secu rities u ntil their estimated fair values increase
Note 4 - Loans
A summary of the balances of loans follows (in thousands)
20 1 4 20 1 3
Residential $ 1 1 493 $ 1 1 686 Construction and land 5 298 1 303 Commercial real estate 60262 48570 Commercial 38472 7844 I nventory 1 0239 9 649 Professional practice 45890 48224 Life insurance contracts 1 933 Automobile 1 22 789 Consu mer 1 038 1 083
Total gross loans 1 728 1 4 1 3 1 08 1
Less Allowance for loan losses (5 627) (5 334) Net deferred loan fees (6 1 ) ( I 03)
Net loans $ 1 67 1 26 $ 1 25 644
1 8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Loans and the all owance for loan losses ar e disaggregated by segment as foll ows (i n thousands)
Allowance for loan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Allowance for Joan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Ending allowance attributable to loans
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Beginning
Balance
$ 276 $ 2 1 3 900 377
3250 259
12 9
38
$ 5334 $
Beginning
Balance
$ 392 $ 72
849 338 626 587 106
5 54
$ 3029 $
1 9
Year Ended December 3 1 2014
Charge-offs Recoveries Provision Ending Balance
$ $ (45) $ 23 1 42 255
( 142) 758 144 (8) 5 1 3
1 85 3435 ( 1 9) 240
(4) 1 0 ( 1 7) I ( I ) 8
148 1 86
(4) $ 1 54 $ 143 $ 5627
Year Ended December 3 1 2013
Charge-offs Recoveries Provision Ending Balance
$ $ ( 1 1 6) $ 276 ( I 33) 274 2 1 3
5 1 900 9 30 377
(2658) 5282 3250 (328) 259
(36) 1 6 (74) 1 2 4 9
( 1 6) 38
(2827) $ 25 $ 5 107 $ 5334
Year Ended December 3 I bull 2014 Individually Collectively
Evaluated for Evaluated for
Impairment Impairment Ending Balance
$ 130 $ 1 0 1 $ 23 1 255 255
180 578 758 5 1 3 5 1 3
3335 1 00 3435 240 240
I I 8 8
186 186
$ 3645 $ 1 982 $ 5627
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 2014 and 2013
Note 4 - Loans (Continued)
Individually Collectively Evaluated for Evaluated for Impairment Impairment Ending Balance
Loans
Residential $ 595 $ 1 0898 $ 1 1 493 Construction and land 5298 5298 Commercial real estate 1 297 58965 60262 Commercial 38472 38472 Inventory 5576 4663 1 0239 Professional practice 45890 45890 Automobile 122 122 Consumer l 038 1038
Total $ 7468 $ 1 65346 $ 1728 1 4
Year Ended December 3 1 20 1 3 Individually Collectively
Evaluated for Evaluated for Impairment Impairment Ending Balance
Ending allowance attributable to loans
Residential $ 130 $ 146 $ 276 Construction and land 2 13 2 13 Commercial real estate 250 650 900 Commercial 269 1 08 377 Inventory 3000 250 3250 Professional practice 259 259 Automobile 12 12 Consumer 9 9 Unallocated 38 38
Total $ 3649 $ 1685 $ 5334
Individually Collectively Evaluated for Evaluated for Impairment lmpaiffilent Ending Balance
Loans
Residential $ 595 $ 1 1 09 1 $ 1 1 686 Construction and land 1303 1303 Commercial real estate 1 298 47272 48570 Commercial 1587 6257 7844 Inventory 5215 4434 9649 Professional practice 48224 48224 Life insurance contraets 1933 1 933 Automobile 789 789 Consumer 1 083 l 083
Total $ 8695 $ 122386 $ 1 3 1 08 1
20
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 201 4 and 2013
Note 4 - Loans (Continued)
Credit Risk Grading
The Company util izes a loan rating system as a means of identifying problem and potential problem loans The Company assigned the fo llowing loan ratings to loans disaggregated by segment and class as of December 3 1 20 1 4 and 20 1 3 (in thousands)
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile
Consumer
Total
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Life insurance contracts Automobile
Consumer
Total
December 3 1 20 14 Loans rated Loans rated Loans rated
1-5
$ 1 0898 $ 5298
58965 38472
4663 45890
1 22 1 038
$ 1 65346 $
6
===
$
$
7 Total
595 $ 1 1 493 5298
1 297 60262 38472
5576 I 0239 45890
1 22 1 038
7468 $ 1 728 1 4 ====
December 3 1 20 1 3 Loans rated Loans rated Loans rated
1-5 6 7 Total
$ 1 0626 $ 465 $ 595 $ 1 1 686 1 303 1 303
47272 1 298 48570 6257 J 587 7844 4434 52 1 5 9649
48224 48224 I 933 I 933
789 789 1 083 1 083
$ 1 2 1 921 $ 465 $ 8695 $ 1 3 1 08 1
The Company categorized each loan into credit risk categori es based on current fi nancial information overall debt service coverage comparison against industry averages col lateral coverage historical payment experience and current economic trends The Company uses the following definitions for credit risk ratings
2 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and S-absidiaries
Report Letter
Consolidated Financial Statements
Balance Sheet
Statement of Operations
Statement of Comprehensive Income (Loss)
Statement of Changes in Stockholders Equity
Statement of Cash Flows
Notes to Consol idated Financial Statements
ontents
1 -2
3
4
5
6
7
8-41
Qlante ------moran
Independent Auditors Report
To the Board of Directors
Chicago Shore Corporation and Subsidiaries
Plante amp Moran PLLC 10 South Riverside Plaza
9th Floor
Chicago IL 60606 Tel 3122071040
Fax 3122071066
plantemorancom
We have audited the accompanying consolidated financial statements of Chicago Shore Corporation and
Subsidiaries (the Company) which comprise the consolidated balance sheet as of December 31 2014 and the related consolidated statements of operations comprehensive income (loss) stockholders equity and cash flows for the year then ended and the related notes to the consolidated financial statements
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with accounting principles generally accepted in the United States of America this includes the design implementation and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement whether due to fraud or error
Auditors Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit We conducted our audit in accordance with auditing standards generally accepted in the United States of America Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements The procedures selected depend on the auditors judgment including the assessment of the risks of material misstatement of the consolidated financial statements whether due to fraud or error In making those risk assessments the auditor considers internal control relevant to the entitys preparation and fair presentation of the consolidated financial statements in order
to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control Accordingly we express no such opinion An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management as well as evaluating the overall
presentation of the consolidated financial statements
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion
Opinion
In our opinion the consolidated financial statements referred to above present fairly in all material respects the financial position of Chicago Shore Corporation and Subsidiaries as of December 3 I 2014 and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America
Praxitymiddot MEMBERbull
GLOBAL AlllAtJCE OF lfJOEPEUOErJT FIAr1s
middot middotmiddot
To the Board of Directors Chicago Shore Corporation and Subsidiaries
Report on Prior Year Consolidated Financial Statements
The consolidated financial statements of Chicago Shore Corporation and Subsidiaries a of and for the
year ended December 3 1 20 I 3 were audited by other audirors whose reporrcdated February 2 20 I 5 expressed an unqualified opinion on those statements
April 1 3 2015
2
middot
Chicago Shore Corporation and Subsidiaries
Consolidated Balance Sheet
December 3 I 20 I 4 Assets
Cash and due from banks $ 22274125
Federal funds sold 6478902
Total cash and cash equivalents 28753027
Investment securities - Available for sale (Note 3) 22745730 Investment securities - Held to maturity ( Note 3) 4 127891 Federal Home Loan Bank stock I 000000 Loans - Net of allowance for loan losses of $5626979 and $5333892 at
December 3 I 2014 and 2013 respectively (Note 4) I 67 I 26085 Other real estate owned 5486 I 6 I Premises and equipment (Note 5) 6 I 58323 Goodwill 2748077 Accrued interest receivable 623819 Deferred tax asset - Net (Note 8) 655324 I Bank-owned life insurance 4266529 Investment in Chicago Shore Capital Trusts (Note 7) 342000
Other assets 393737
Total assets $ 250324620
Liabilities and Stockholders Equity
Liabilities Deposits
Noninterest-bearing
Interest-bearing
Total deposits ( Note 6)
junior subordinated notes (Note 7) Accrued interest payable Repurchase agreements
Accrued and other liabilities
Total liabilities
Stockholders Equity Preferred shares - Series A net of discount - $I 0 par value
Issued and outstanding -7000 shares at December 3 I 20 I 4 and 20 I 3 Liquidation value - $ I 000 per share ( Note I 2)
Preferred shares - Series B - $I 0 par value Issued and outstanding - 350 shares at December 3 I 20 I 4 and 20 I 3 Liquidation value - $ I 000 per share (Note 12)
Common shares - $ I par value Authorized - 2000000 shares Issued and outstanding - I 206720 and I I 97665 shares at December 3 I 20 I 4 and 20 I 3 respectively
Additional paid-in capital Share subscriptions - 38000 shares subscribed at December 3I 2014 and
2013 (Note I I) Accumulated deficit
Accumulated other comprehensive loss
Total stockholders equity
Total liabilities and stockholders equity
See Notes to Consolidated Financial Statements 3
$ 62956469 I 5323 I 305
2 I 6 I 87774
I 1212335 80063
627959 240490 I
2305 I 3032
7000000
350000
I 206720 12913080
(475000) (526078) (657 134)
I 9811588
$ 250324620
December 3 I 20 I 3
$ 59464227 9595876
69060 I 03
29415214 3303774 1000000
I 25644342 5723065 6335768 2748077
535004 6436242 4 1338 Io
342000 326847
$ 255004246
$ 56029979 I 64628276
220658255
I 1205687 79362
I 33 I 274 I 966690
23524 I 268
69 I 9272
398749
I I 97665 12530480
(475000) (I 2505)
(795683)
I 9762978
$ 255004246
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Operations
Interest and Dividend Income
Loans - Including fees $ Investment securities
Taxable Tax-exempt
Dividend income Federal funds sold
Total interest and dividend income
Interest Expense
Deposits Repurchase agreements
Junior subordinated notes
Total interest expense
Net Interest and Dividend Income
Provision for Loan Losses (Note 4)
Net Interest and Dividend Income After Provision for Loan Losses
Noninterest Income
Service charges and fees on deposits Net gain on investment securities Bank-owned life insurance income
Other
Total noninterest income
Noninterest Expense Salaries and employee benefits (Note 9) Occupancy and equipment Data processing Loss on sale of other real estate owned Loan collection and other real estate owned costs Professional and marketing fees
Other
Total noninterest expenses
Loss - Before income taxes
Income Tax Benefit (Note 8)
Net Loss
Preferred Stock Dividends declared Discount accretionpremium amortization
Net Loss Applicable to Common Shares $
See Notes to Consolidated Financial Statements 4
Year Ended
December 3 I 2014
6800 I 87
I 26536 265 I 89 189837 I 39750
7521 499
719548 526
358400
I 078474
6443025
143004
6300021
332707
132719 369 I 73
834599
3788299 738 I 72 36 I 606
869257 714590 864 154
7336078
(20 I 458)
(171364)
(30094)
(45 I 500) (3 I 979)
(5 I 3573)
December 3 I
$
$
2013
7492261
I 28587 152974 I 88253 161624
8 123699
943671 1034
364645
I 309350
6814349
5 I 06979
I 707370
35 I 304 18026
133810 463 I 20
966260
3810184 740222 346406 749901 64439 I 67 I 354 767652
7730 I JO
(5056480)
( I 978282)
(3078 I 98)
(38 I 500) (8 I 075)
(3540773)
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Comprehensive Income (loss)
Net Loss
Other Comprehensive Income (Loss) Unrealized gain (loss) on investment securities - Available for sale
net of tax Less reclassification adjustment for gains included in net income
net of tax
Total other comprehensive income (loss)
Comprehensive Income (Loss)
See Notes to Consolidated Financial Statements 5
Year Ended
December 3 I December 3 I
$
$
20 1 4 20 1 3
(30094) $ (3078 1 98)
1 38549
1 38549
(285394)
(1 1 358)
(274036)
I 08455 $ (3352234)
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Changes in Stockholders Equity
Retained Accumulated Series A Series B Earnings Other
Preferred Preferred Common Additional Share Accumulated Comprehensive Shares Shares Shares Paid-in Cnital Subscritions Deficit) Loss Total Eguil
Balance - January [ 20 1 3 $ 6838 I 97 $ 398749 $ 1 1 9 1 415 $ 1 2486792 $ (475000) $ 3528268 $ (52 1 647) $ 23446774
Comprehensive loss Net loss (3078 I 98) (3078 I 98) Net unrealized loss on investment securities -
Available for sale - Net of tax (274036) (274036)
Total comprehensive loss (3352234)
Dividends declared on preferred shares (381 500) (381 500)
Discount accretion on preferred shares Bl 075 (BI 075)
Common shares issued 6250 43688 49938
Balance - December 3 1 2 0 1 3 69 1 9272 398749 I 1 97665 1 2530480 (475000) ( 1 2 505) (795683) 1 9762978
Comprehensive income Net loss (30094) (30094) Net unrealized gains on lnvestment securities -
138549 Available for sale - Net of tax 1 38549
Total comprehensive income I 08455
Dividends declared on preferred shares (451 500) (451 500)
Discount accretion (premium amortization) on preferred shares 80728 (48749) (3 1 979)
Common shares issued 9055 40928 49983
Stock-based compensation expense 34 1 672 34 1 672
Balance - December 3 1 20 1 4 $ 7000000 $ 350000 $ 1206720 $ 12913080 $ (475000) $ (526078) $ (657 134) $ 19811588
See Notes to Consolidated Financial Statements 6
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Cash Flows
Cash Flows from Operating Activities Net loss Adjustments to reconcile net loss to net cash provided by
operating activities Depreciation Provision for loan losses Accretion and amortization of securities Gctln on sale of investment securities net Amortization of deferred loan fees Loss on sale of other real estate owned Increase in cash surrender value of bank-owned life insurance Restricted stock unit expense Deferred tax benefit Net change in
Accrued interest receivable and other assets
Accrued interest payable and other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities Activity in available-for-sale securities
Sales Maturities prepayments and calls Purchases
Purchase of investment securities - held to maturity Purchases
Net (increase) decrease in loans Proceeds from sales of other real estate owned Redemption of Federal Home Loan Bank stock Purchase of bank owned life insurance
Purchases of premises and equipment
Net cash ( used in) provided by investing activities
Cash Flows from Financing Activities Net increase in deposits Dividends on preferred shares Decrease in repurchase agreements Change in accrued debt issuance costs
Proceeds from issuance of common shares
Net cash ( used in) provided by financing activities
Net (Decrease) Increase in Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning of year
Cash and Cash Equivalents - End of year
Supplemental Cash Flow Information Cash paid for
Interest Income taxes
Loans transferred to other real estate owned
See Notes to Consolidated Financial Statements 7
$
$
$
Year Ended December 3 I
2014
(30094) $
326383 143004 351601
(42451)
(132719) 121877 ( I 85304)
(I 55705) 658707
I 055299
I 8863923 (I 230354 I)
(859762) (42042639)
697247
(148938)
(35793710)
(4470481) (45 I 500) (7033 I 5)
6648 49983
(5568665)
(40307076)
69060 I 03
28753027 $
1077774 $
460343
2013
(3078 I 98)
317863 5 I 06979
348058 (I 8026) (39044)
749901 (I 338 I 0) 121877
(2021 608)
4 I 8900 904576
2677468
18026 37635
(33 I 0630) 7210658 I I 35496
148657 (4000000)
(335068)
904774
7744446 (381500)
(I 364851) 6648
49938
6054681
9636923
59423180
69060 I 03
1320945 27837
594490
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies
Basis of Presentation and Consolidation - The consolidated fi nancial statements include the accounts of Chicago Shore Corporation (the Company) and its wholly owned subsidiary Delaware Place B ank (the Bank) All significant intercompany balances and transactions have been eliminated in consolidation
Nature of Operations - The Company provides a variety of f inancial services to individuals and businesses in the Chicago metropol itan area through their primary location in Chicago I l l inois Their primary deposit products are demand deposits savings money market and term certif icate accounts and their primary lending products are commercial and commercial mortgage loans
Use of Estimates - In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting period Actual results could d iffer from those estimates Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses the valuation of investment securities other real estate owned deferred tax assets goodwill and the fair value of financial instruments
Cash and Cash Equivalents - For the purpose of the consolidated statement of cash flows cash and cash equivalents include cash and balances due fr om banks and federal funds sold which mature within 90 days
Investment Securities - Debt securities that management has the positive intent and ability to hold to maturity are classified as held to maturity and recorded at amort ized cost Securities not classified as held to maturity including equity securities with readily determinable fair values are classif ied as available for sale and are recorded at fair value with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss)
Purchase premiums and discounts are recognized in interest income using the effective interest method through the maturity or expected repayment period of the securities Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses In estimating other-than-temporary impairment losses management considers ( I ) the length of time and the extent to which the fair value has been less than cost (2) the financia l condition and near-term prospects of the issuer and (3) the i nten t an d ability of the Company to retain its investment in the issuer for a period of time suff icient to allow for any anticipated recovery in fair value Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method
8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Federal Home Loan Bank Stock - The Company is a member of the Federal Home Loan Bank of Chicago (the FHLB ) and is required to maintain a minimu m investment in stock of the FHLB that varies with th e level of advances outstanding with the FHLB Th e stock does not have a readily determinable fair value and is carried at cost and is periodically evaluated for impairment
Loans - Th e Company grants mortgage commercial and consu mer loans to customers A substantial portion of the loan portfolio is represented by commercial loans in the Ch icago metropolitan area Th e abil ity of the B ank s debtors to honor their contracts is dependent upon th e real estate and general economic conditions in this area
Loans that management has th e intent and abil ity to h old for the foreseeable future or u ntil maturity or pay-off are reported at their outstanding unpaid principal balances adjusted for charge-offs the allowance for loan losses and any deferred fees or costs on originated loans Interest income is accrued on the unpaid principal balance Loan origination fees net of certain direct origination costs are deferred and recognized as an adjustment of the related loan yield u sing the interest meth od
The accrual of interest on loans is discontinued at th e time th e loan is 90 days del inquent unless the credit is well-secu red and in process of collection In all cases loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered dou btfu l
Al l interest accru ed but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income The interest on th ese loans is accounted for on the cash basis or cost-recovery meth od u ntil qualifying for return to accru al Loans are returned to accrual status wh en all the principal and interest amounts contractually due are brought current and futu re payments are reasonably assured
Loans are considered delinqu ent when customers fail to make their payments in accordance with the contractual loan agreement If a loan matures and principal remains outstanding the loan is considered delinquent u ntil the loan is paid off or renewed
Gross l oans are reported at th e Companys recorded investment The recorded investment is th e borrowers principal balance less partial charge-offs if any
Allowance for Loan Losses - Th e allowance for loan losses (the allowance) is established as losses are estimated to have occurred through a provision fo r loan losses charged to earnings Loan losses are charged against the allowance when management believes the u ncollectibi lity of a loan balance is confirmed Subsequ ent recoveries if any are credited to the allowance
9
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
The allowance for loan losses is evaluated on a r egu lar basis by management and is based upon managements per iodic r eview of the collectibility of the loans in light of h istor ical exper ience the nature and volu me of the loan portfolio adverse situations that may affect the borrowers abil ity to repay estimated value of any u nder lying col lateral and prevailing economic conditions This evaluation is inher ently subjective as it r equ ires estimates that are susceptible to significant r evision as mor e infor mation becomes available
The allowance consists of specific general and unallocated components The specific component r elates to loans that are classified as impaired For such loans an al lowance is established when the discounted cash flows (or collateral value or observable mar ket pr ice) of the impair ed loan is lower than the car rying value of that loan The general component covers nonimpaired loans and is based on histor ical loss exper ience adju sted for qualitative factor s An unallocated component is maintained to cover u ncer tainties that cou ld affect managements estimate of probable losses The unallocated component of the al lowance reflects the margin of imprecision inher ent in the u nder lying assumptions u sed in the methodologies for estimating specific and general losses in the portfolio
A loan is considered impaired when based on current information and events it is probable that the Company will be u nable to collect the schedu led payments of pr incipal or interest when due according to the contractual ter ms of the loan agr eement Factors consider ed by management in deter mining impair ment include payment status collateral value and the probability of collecting scheduled pr incipal and interest payments when du e Loans that exper ience insignificant payment delays and payment shortfal ls gener ally ar e not classified as impair ed Management deter mines the significance of payment delays and payment shortfalls on a case- by-case basis taking into consideration all of the cir cumstances surrounding the loan and the borrower including length of the delay the r easons for the delay the borrowers pr ior payment recor d and the amou nt of the shortfal l in relation to the pr incipal and interest owed Impairment is measured on a loan-by-loan basis for loans by either the present value of expected future cash flows discou nted at the loans effect ive inter est rate the J oans obtainabl e mar ket pr ice or t he fair value of the collateral if the loan is collateral dependent
Large groups of homogeneous loans are collectively evaluated for impair ment Accor dingly the Company does not separ ately identify individual consumer loans for impairment disclosures
1 0
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Troubled debt rest ruct uring (TDR) of loans is undertaken t o improve the l ikelihood t hat t he loan will be repaid in f ull under t he modif ied t erms in accordance wit h a reasonable repayment schedule All modif ied loans are evaluat ed to det ermine whet her t he loans should be report ed as a TDR A loan is a TDR when t he Company for economic or legal reasons relat ed t o t he borrowers f inancial d ifficult ies grants a concession t o t he borrower by modifying or renewing a loan that t he Company would not otherwise consider To make t his det erminat ion t he Company must det ermine whet her (a) t h e borrower is experiencing financial diff icult ies and (b) t h e Company grant ed t he borrower a concession This det erminat ion requires considerat ion of all t he fact s and circumstances surrounding t he modificat ion An overall general decline in the economy or some det eriorat ion in a borrowers f inancial condit ion does not automat ically mean t he borrower is experiencing f inancial difficult ies Loans t hat are considered TDR are considered impaired and a specif ic reserve is est ablished in the allowance consist ent ly wit h ot her impaired loans
Other Real Estate Owned - Asset s acquired through or in lieu of loan f oreclosure are held f or sale and are initially recorded at fair value less costs t o sell at t he dat e of t he foreclosure est ablishing a new cost basis Subsequent t o f oreclosure valuat ions are periodically perf ormed by management and t he assets are carried at the lower of carrying amount or fair value less cost t o sel l Revenue and expenses f rom operat ions and changes in the valuat ion allowance are included in loan collect ion and other real est at e owned expenses
Premises and Equipment - Land is carried at cost Bu ildings and equipment are carried at cost less accumulat ed depreciat ion comput ed on t he st raight -line met hod over t he est imat ed usef ul l ives of the assets ranging from I to 39 years
Bank Owned Life Insurance - The B ank has purchased life insurance pol icies on certain key offi cers B ank owned life insurance (BOLi) is recorded at it s cash surrender value or t he amount t hat can be realized upon immediate liquidat ion
Goodwill - Goodwill result s f rom prior business acquisit ions and represent s t h e excess of t he purchase price over the fair value of acquired tangible asset s and liabilit ies and ident ifiable intangible assets Goodwill is assessed at least annually f or impairment and any such impairment will be recognized in the period identified There has been no impairment ident if ied during t he years ended December 3 1 20 1 4 and 20 1 3
Income Taxes - Def erred income tax asset s and liabilit ies are det ermined using t h e liabil ity (or balance sheet) met hod Under t his met hod t he net def erred t ax asset or liability is det ermined based on t he t ax effect s of t he various t emporary d iff erences between t he book and tax basis of t he various consolidat ed balance sheet asset s and liabilities and gives current recognit ion t o changes in t ax rat es and laws
1 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
At December 3 1 20 1 4 and 20 1 3 the Company evaluated tax positions taken for filing with the Internal Revenue Service and the State of I l l inois The Company believes that income tax filing positions will be sustained under examination and does not anticipate any adjustments that would result in a material adverse eff ect on the Companys consolidated financial condition results of operations or cash flows Accordingly the Company has not recorded any reserves or related accr uals for interest and penalties for uncertai n tax positions at December 3 1 20 1 4 and 20 1 3 The Company believes it is no longer subject to tax examinati ons for years pri or to 20 I I
Comprehensive Income - Accounting principles generally require that recognized revenue expenses gains and losses be included in net income (loss) Although certain changes in assets and liabilities such as unrealized gains and losses on investment securities - available for sal e are reported as a separate component of the equity section of the consolidated balance sheet such items along with net income (loss) are components of comprehensive income
Stock-based Compensation - The Company applies the recogniti on and measurement provisions of the Compensation - Stock Compensation topi c of the Accounting Standards Codification (ASC) to account for employee stock option costs which is referred to as the calculated value method Compensation costs are measured based on the fair value of the instrument at the date of grant Those compensation costs are expensed on a straight-line basis over the vesting period of the specific instrument There were no stock-based awards granted in 20 1 4 and 20 1 3
Off-balance-sheet Instruments - In the ordinary course of business the Company has entered into commitments under commercial letters of credit and standby letters of credit Such financial instruments are recorded when they are funded
Reclassification - Certain amounts appearing in the prior years consolidated financial statements have been reclassified to conform to the current years consolidated financial statements
12
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Comprehensive Income (Topic 220) -
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income - The Financial Accounting Standards B oard (FASB) issued Accou nting Standards Update (ASU) No 20 1 3-02 Comprehensive Income (Topic 220) - Reporting of Amounts Recossified Out of Accumulated Other Comprehensive Income The ASU requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is requ ired under US generally accepted accounting principles (US GAAP) to be reclassified in its entirety to net income For other amounts that are not requ ired u nder US GAAP to be reclassified in their entirety to net income in the same reporting period an entity is requ ired to cross-reference other disclosures required under US GAAP that provide additional detail about those amounts For nonpu blic entities the ASU is effective prospectively for reporting periods beginning after December 1 5 20 1 3 (therefore for the year ended December 3 I 20 1 4 fo r the Company) and early adoption was allowed Adoption of this update did not have a material effect on the consolidated financial statements
New Accounting Pronouncement - Receivables - Troubled Debt Restructurings by
Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateral
Consumer Mortgage Loans upon Foreclosure - The FASB issued ASU No 20 1 4-04 Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure The amendments in this u pdate clarify that when an in-substance repossession or foreclosu re occu rs and a creditor is considered to have received physical possession of residential property col lateral izing a consu mer mortgage loan u pon either ( I ) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy the loan through completion of a deed in l ieu of foreclosure or through a similar legal agreement Additionally the amendment requ ires disclosure of both ( I ) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans col lateralized by residential real estate property that are in the process of foreclosure according to local requ irements of the applicable jurisdiction The amendments in this u pdate are effective for annual periods beginning after December I 5 20 1 4 (therefore December 3 I 20 I 5 for the Company) Management does not expect the update to have a material effect on the Companys consol idated financial statements
1 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Revenue from Contracts with Customers
(Topic 606) - In May 20 1 4 the Financial Accounting Standards Board issued Accounting Standards Update No 20 1 4-09 Revenue from Contracts with Customers (Topic 606) which will supersede the current revenue recognition requirements in Topic 605 Revenue Recognition The ASU is based o n the princip le that revenue is recognized to depict the transfer of goods or services to customers in an amount that refl ects the consideration to wh ich the entity expects to be entitled in exchange for those goods or services Th e ASU also requ ires additional disclosure about the nature amount timing and uncertainty of revenue and cash fl ows arising from customer contracts including significant judgments and changes in judgments and assets recognized from costs incu rred to obtain or fulfill a contract The new gu idance will be effective for periods beginning af ter December 1 5 201 7 (th erefo re for the year ending December 3 I 20 1 8 for th e Company) Th e ASU permits the new revenue recognition gu idance to be appl ied u sing one of two retrospective application methods The Company h as not yet determined wh ich application method it will use or th e potential eff ects of th e new standard on th e financial statements i f any
Subsequent Events - Th e financial statements and related disclosures include evaluation of events up through and including April 1 3 20 15 wh ich is the date the consolidated financial statements were available to be issued
Note 2 - Restrictions on Cash and Amounts Due from Banks
Th e B ank is required to maintain average cash balances on hand or on deposit with the Federal Reserve B ank At December 3 1 20 1 4 and 20 1 3 th ese reserve balances amounted to $ 1 5 67000 and $ 1 45 2000 respectively
1 4
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities
The amortized cost and estimated fair value of secu rities with gross unreal ized gains and losses are as fol lows
December 3 1 20 1 4 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $ 6988 1 44 $ 86 1 05 $ (2793) $ 707 1 456 M unicipal securities 6363935 438 1 4 6407749 Mortgage-backed securities 5 29975 1 9020 (2264) 5 306507 Other 5 1 50000 ( 1 1 89982) 3 9600 1 8
Total available-for-sale securities $2380 1 830 $ 1 38939 $ ( I I 95039) $ 22745730
Held-to-maturity securities -Mun icipal securities $ 4 I 2789 I $ 305 1 32 $ $ 4433 023
December 3 I 20 I 3 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $187 1 5 1 05 $ 93349 $ $ I 8808454 State and municipal 6 8 I 3 063 77408 (SO I 48) 6 840323 Other 5 I 50000 ( I 383563) 3 766437
Total available-for-sale securities $30678 I 68 $ I 70757 $ ( 1 433 7 1 I ) $ 29 4 1 5 2 1 4
Held-to-maturity secu rities -Municipal securities $ 3 303 774 $ $ (22364) $ 3 28 I 4 I 0
At December 3 I 20 1 4 and 20 1 3 securities with a carrying value of $503498 1 and $8595033 respectively were pledged to secure publ ic deposits repu rchase agreements and for other purposes requ ired or permitted by law
15
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
The amort ized cost and estimated fair value of debt securities by contractual maturity at December 3 1 20 1 4 are as fo llows
Available for Sale Held to Maturity Amort ized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
Due in one year or less $ 5 1 42415 $ 5 1 70 1 88 $ $ Due in one through five
years 32805 35 3 293 783 Due after five years through
ten years 4929 1 29 5 0 1 5 234 Due after ten years 5 000000 3824400 4 1 27891 4433 023
Total 1 8352079 1 7303605 4 1 2789 1 4433 023
Mortgage-backed securities 5 29975 1 5 306507 No stated maturity 1 5 0000 1 35 6 1 8
Total $2380 1 830 $22745 730 $ 4 1 2789 I $ 4433 023
There were no sales of investments during the year ended December 3 I 20 I 4 During the year ended December 3 1 20 I 3 the Company sold securities availabl e for sale with a book value of $0 resulting in realized gains of $ I 8026 There were no gross realized losses on sales of securities available for sale for the year ended December 3 I 20 1 3
1 6
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Information pertain ing to securi ti es with gross un realized losses at December 31 20 1 4 an d 20 1 3 aggregated by investment category an d length of time that in dividual securities have been in a continuous loss position is as follows
December 3 1 20 1 4 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Unrealized Estimated
Losses Fair Value Losses Fair Val ue Available-for-sale securities
US government agen cies $ (2793) $ 2056 222 $ $ Mortgage-backed securities (2264) 25247 1 0 Other ( 1 1 89982) 3 960018
Total available-for-sale secu rities $ (5 05 7) $ 45 80932 $ ( 1 1 89982) $ 3 9600 1 8
December 3 I 20 1 3 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Un realized Estimated
Losses Fair Value Losses Fair Valu e Available-for-sale securities
Mun icipal securities $ (50 1 48) $ 677262 $ $ Other ( 1 383 5 63) 3 766437
Total available-for-sale securities $ (SO 1 48) $ 677262 $ ( 1 3835 63) $ 3 766437
Un realized l osses on securities have n ot been recogn ized into in come because the issu ers bonds are of high credit quality we have the inten t and ability to hold the secu rities for the foreseeable futu re and the declin e in fair value is primarily due to increased market interest rates The fair values a re generally expected to recover as the bonds approach their maturity dates
1 7
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Within other secu rities there is $ 1 1 75 600 of u nrealized losses related to two perpetual preferred secu rities to two large international bank holding companies The u nrealized losses on the perpetual preferred secu rities is attributable to the cu rrent variable dividend rates compared to similar fixed-rate instru ments at each institution The fair value of the Companys perpetual preferred secu rities is expected to increase as the variable dividend rate increases which is contingent u pon the three-month LIB O R rate The Company has the ability and intent to hold the secu rities u ntil their estimated fair values increase
Note 4 - Loans
A summary of the balances of loans follows (in thousands)
20 1 4 20 1 3
Residential $ 1 1 493 $ 1 1 686 Construction and land 5 298 1 303 Commercial real estate 60262 48570 Commercial 38472 7844 I nventory 1 0239 9 649 Professional practice 45890 48224 Life insurance contracts 1 933 Automobile 1 22 789 Consu mer 1 038 1 083
Total gross loans 1 728 1 4 1 3 1 08 1
Less Allowance for loan losses (5 627) (5 334) Net deferred loan fees (6 1 ) ( I 03)
Net loans $ 1 67 1 26 $ 1 25 644
1 8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Loans and the all owance for loan losses ar e disaggregated by segment as foll ows (i n thousands)
Allowance for loan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Allowance for Joan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Ending allowance attributable to loans
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Beginning
Balance
$ 276 $ 2 1 3 900 377
3250 259
12 9
38
$ 5334 $
Beginning
Balance
$ 392 $ 72
849 338 626 587 106
5 54
$ 3029 $
1 9
Year Ended December 3 1 2014
Charge-offs Recoveries Provision Ending Balance
$ $ (45) $ 23 1 42 255
( 142) 758 144 (8) 5 1 3
1 85 3435 ( 1 9) 240
(4) 1 0 ( 1 7) I ( I ) 8
148 1 86
(4) $ 1 54 $ 143 $ 5627
Year Ended December 3 1 2013
Charge-offs Recoveries Provision Ending Balance
$ $ ( 1 1 6) $ 276 ( I 33) 274 2 1 3
5 1 900 9 30 377
(2658) 5282 3250 (328) 259
(36) 1 6 (74) 1 2 4 9
( 1 6) 38
(2827) $ 25 $ 5 107 $ 5334
Year Ended December 3 I bull 2014 Individually Collectively
Evaluated for Evaluated for
Impairment Impairment Ending Balance
$ 130 $ 1 0 1 $ 23 1 255 255
180 578 758 5 1 3 5 1 3
3335 1 00 3435 240 240
I I 8 8
186 186
$ 3645 $ 1 982 $ 5627
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 2014 and 2013
Note 4 - Loans (Continued)
Individually Collectively Evaluated for Evaluated for Impairment Impairment Ending Balance
Loans
Residential $ 595 $ 1 0898 $ 1 1 493 Construction and land 5298 5298 Commercial real estate 1 297 58965 60262 Commercial 38472 38472 Inventory 5576 4663 1 0239 Professional practice 45890 45890 Automobile 122 122 Consumer l 038 1038
Total $ 7468 $ 1 65346 $ 1728 1 4
Year Ended December 3 1 20 1 3 Individually Collectively
Evaluated for Evaluated for Impairment Impairment Ending Balance
Ending allowance attributable to loans
Residential $ 130 $ 146 $ 276 Construction and land 2 13 2 13 Commercial real estate 250 650 900 Commercial 269 1 08 377 Inventory 3000 250 3250 Professional practice 259 259 Automobile 12 12 Consumer 9 9 Unallocated 38 38
Total $ 3649 $ 1685 $ 5334
Individually Collectively Evaluated for Evaluated for Impairment lmpaiffilent Ending Balance
Loans
Residential $ 595 $ 1 1 09 1 $ 1 1 686 Construction and land 1303 1303 Commercial real estate 1 298 47272 48570 Commercial 1587 6257 7844 Inventory 5215 4434 9649 Professional practice 48224 48224 Life insurance contraets 1933 1 933 Automobile 789 789 Consumer 1 083 l 083
Total $ 8695 $ 122386 $ 1 3 1 08 1
20
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 201 4 and 2013
Note 4 - Loans (Continued)
Credit Risk Grading
The Company util izes a loan rating system as a means of identifying problem and potential problem loans The Company assigned the fo llowing loan ratings to loans disaggregated by segment and class as of December 3 1 20 1 4 and 20 1 3 (in thousands)
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile
Consumer
Total
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Life insurance contracts Automobile
Consumer
Total
December 3 1 20 14 Loans rated Loans rated Loans rated
1-5
$ 1 0898 $ 5298
58965 38472
4663 45890
1 22 1 038
$ 1 65346 $
6
===
$
$
7 Total
595 $ 1 1 493 5298
1 297 60262 38472
5576 I 0239 45890
1 22 1 038
7468 $ 1 728 1 4 ====
December 3 1 20 1 3 Loans rated Loans rated Loans rated
1-5 6 7 Total
$ 1 0626 $ 465 $ 595 $ 1 1 686 1 303 1 303
47272 1 298 48570 6257 J 587 7844 4434 52 1 5 9649
48224 48224 I 933 I 933
789 789 1 083 1 083
$ 1 2 1 921 $ 465 $ 8695 $ 1 3 1 08 1
The Company categorized each loan into credit risk categori es based on current fi nancial information overall debt service coverage comparison against industry averages col lateral coverage historical payment experience and current economic trends The Company uses the following definitions for credit risk ratings
2 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Qlante ------moran
Independent Auditors Report
To the Board of Directors
Chicago Shore Corporation and Subsidiaries
Plante amp Moran PLLC 10 South Riverside Plaza
9th Floor
Chicago IL 60606 Tel 3122071040
Fax 3122071066
plantemorancom
We have audited the accompanying consolidated financial statements of Chicago Shore Corporation and
Subsidiaries (the Company) which comprise the consolidated balance sheet as of December 31 2014 and the related consolidated statements of operations comprehensive income (loss) stockholders equity and cash flows for the year then ended and the related notes to the consolidated financial statements
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with accounting principles generally accepted in the United States of America this includes the design implementation and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement whether due to fraud or error
Auditors Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit We conducted our audit in accordance with auditing standards generally accepted in the United States of America Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements The procedures selected depend on the auditors judgment including the assessment of the risks of material misstatement of the consolidated financial statements whether due to fraud or error In making those risk assessments the auditor considers internal control relevant to the entitys preparation and fair presentation of the consolidated financial statements in order
to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control Accordingly we express no such opinion An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management as well as evaluating the overall
presentation of the consolidated financial statements
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion
Opinion
In our opinion the consolidated financial statements referred to above present fairly in all material respects the financial position of Chicago Shore Corporation and Subsidiaries as of December 3 I 2014 and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America
Praxitymiddot MEMBERbull
GLOBAL AlllAtJCE OF lfJOEPEUOErJT FIAr1s
middot middotmiddot
To the Board of Directors Chicago Shore Corporation and Subsidiaries
Report on Prior Year Consolidated Financial Statements
The consolidated financial statements of Chicago Shore Corporation and Subsidiaries a of and for the
year ended December 3 1 20 I 3 were audited by other audirors whose reporrcdated February 2 20 I 5 expressed an unqualified opinion on those statements
April 1 3 2015
2
middot
Chicago Shore Corporation and Subsidiaries
Consolidated Balance Sheet
December 3 I 20 I 4 Assets
Cash and due from banks $ 22274125
Federal funds sold 6478902
Total cash and cash equivalents 28753027
Investment securities - Available for sale (Note 3) 22745730 Investment securities - Held to maturity ( Note 3) 4 127891 Federal Home Loan Bank stock I 000000 Loans - Net of allowance for loan losses of $5626979 and $5333892 at
December 3 I 2014 and 2013 respectively (Note 4) I 67 I 26085 Other real estate owned 5486 I 6 I Premises and equipment (Note 5) 6 I 58323 Goodwill 2748077 Accrued interest receivable 623819 Deferred tax asset - Net (Note 8) 655324 I Bank-owned life insurance 4266529 Investment in Chicago Shore Capital Trusts (Note 7) 342000
Other assets 393737
Total assets $ 250324620
Liabilities and Stockholders Equity
Liabilities Deposits
Noninterest-bearing
Interest-bearing
Total deposits ( Note 6)
junior subordinated notes (Note 7) Accrued interest payable Repurchase agreements
Accrued and other liabilities
Total liabilities
Stockholders Equity Preferred shares - Series A net of discount - $I 0 par value
Issued and outstanding -7000 shares at December 3 I 20 I 4 and 20 I 3 Liquidation value - $ I 000 per share ( Note I 2)
Preferred shares - Series B - $I 0 par value Issued and outstanding - 350 shares at December 3 I 20 I 4 and 20 I 3 Liquidation value - $ I 000 per share (Note 12)
Common shares - $ I par value Authorized - 2000000 shares Issued and outstanding - I 206720 and I I 97665 shares at December 3 I 20 I 4 and 20 I 3 respectively
Additional paid-in capital Share subscriptions - 38000 shares subscribed at December 3I 2014 and
2013 (Note I I) Accumulated deficit
Accumulated other comprehensive loss
Total stockholders equity
Total liabilities and stockholders equity
See Notes to Consolidated Financial Statements 3
$ 62956469 I 5323 I 305
2 I 6 I 87774
I 1212335 80063
627959 240490 I
2305 I 3032
7000000
350000
I 206720 12913080
(475000) (526078) (657 134)
I 9811588
$ 250324620
December 3 I 20 I 3
$ 59464227 9595876
69060 I 03
29415214 3303774 1000000
I 25644342 5723065 6335768 2748077
535004 6436242 4 1338 Io
342000 326847
$ 255004246
$ 56029979 I 64628276
220658255
I 1205687 79362
I 33 I 274 I 966690
23524 I 268
69 I 9272
398749
I I 97665 12530480
(475000) (I 2505)
(795683)
I 9762978
$ 255004246
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Operations
Interest and Dividend Income
Loans - Including fees $ Investment securities
Taxable Tax-exempt
Dividend income Federal funds sold
Total interest and dividend income
Interest Expense
Deposits Repurchase agreements
Junior subordinated notes
Total interest expense
Net Interest and Dividend Income
Provision for Loan Losses (Note 4)
Net Interest and Dividend Income After Provision for Loan Losses
Noninterest Income
Service charges and fees on deposits Net gain on investment securities Bank-owned life insurance income
Other
Total noninterest income
Noninterest Expense Salaries and employee benefits (Note 9) Occupancy and equipment Data processing Loss on sale of other real estate owned Loan collection and other real estate owned costs Professional and marketing fees
Other
Total noninterest expenses
Loss - Before income taxes
Income Tax Benefit (Note 8)
Net Loss
Preferred Stock Dividends declared Discount accretionpremium amortization
Net Loss Applicable to Common Shares $
See Notes to Consolidated Financial Statements 4
Year Ended
December 3 I 2014
6800 I 87
I 26536 265 I 89 189837 I 39750
7521 499
719548 526
358400
I 078474
6443025
143004
6300021
332707
132719 369 I 73
834599
3788299 738 I 72 36 I 606
869257 714590 864 154
7336078
(20 I 458)
(171364)
(30094)
(45 I 500) (3 I 979)
(5 I 3573)
December 3 I
$
$
2013
7492261
I 28587 152974 I 88253 161624
8 123699
943671 1034
364645
I 309350
6814349
5 I 06979
I 707370
35 I 304 18026
133810 463 I 20
966260
3810184 740222 346406 749901 64439 I 67 I 354 767652
7730 I JO
(5056480)
( I 978282)
(3078 I 98)
(38 I 500) (8 I 075)
(3540773)
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Comprehensive Income (loss)
Net Loss
Other Comprehensive Income (Loss) Unrealized gain (loss) on investment securities - Available for sale
net of tax Less reclassification adjustment for gains included in net income
net of tax
Total other comprehensive income (loss)
Comprehensive Income (Loss)
See Notes to Consolidated Financial Statements 5
Year Ended
December 3 I December 3 I
$
$
20 1 4 20 1 3
(30094) $ (3078 1 98)
1 38549
1 38549
(285394)
(1 1 358)
(274036)
I 08455 $ (3352234)
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Changes in Stockholders Equity
Retained Accumulated Series A Series B Earnings Other
Preferred Preferred Common Additional Share Accumulated Comprehensive Shares Shares Shares Paid-in Cnital Subscritions Deficit) Loss Total Eguil
Balance - January [ 20 1 3 $ 6838 I 97 $ 398749 $ 1 1 9 1 415 $ 1 2486792 $ (475000) $ 3528268 $ (52 1 647) $ 23446774
Comprehensive loss Net loss (3078 I 98) (3078 I 98) Net unrealized loss on investment securities -
Available for sale - Net of tax (274036) (274036)
Total comprehensive loss (3352234)
Dividends declared on preferred shares (381 500) (381 500)
Discount accretion on preferred shares Bl 075 (BI 075)
Common shares issued 6250 43688 49938
Balance - December 3 1 2 0 1 3 69 1 9272 398749 I 1 97665 1 2530480 (475000) ( 1 2 505) (795683) 1 9762978
Comprehensive income Net loss (30094) (30094) Net unrealized gains on lnvestment securities -
138549 Available for sale - Net of tax 1 38549
Total comprehensive income I 08455
Dividends declared on preferred shares (451 500) (451 500)
Discount accretion (premium amortization) on preferred shares 80728 (48749) (3 1 979)
Common shares issued 9055 40928 49983
Stock-based compensation expense 34 1 672 34 1 672
Balance - December 3 1 20 1 4 $ 7000000 $ 350000 $ 1206720 $ 12913080 $ (475000) $ (526078) $ (657 134) $ 19811588
See Notes to Consolidated Financial Statements 6
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Cash Flows
Cash Flows from Operating Activities Net loss Adjustments to reconcile net loss to net cash provided by
operating activities Depreciation Provision for loan losses Accretion and amortization of securities Gctln on sale of investment securities net Amortization of deferred loan fees Loss on sale of other real estate owned Increase in cash surrender value of bank-owned life insurance Restricted stock unit expense Deferred tax benefit Net change in
Accrued interest receivable and other assets
Accrued interest payable and other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities Activity in available-for-sale securities
Sales Maturities prepayments and calls Purchases
Purchase of investment securities - held to maturity Purchases
Net (increase) decrease in loans Proceeds from sales of other real estate owned Redemption of Federal Home Loan Bank stock Purchase of bank owned life insurance
Purchases of premises and equipment
Net cash ( used in) provided by investing activities
Cash Flows from Financing Activities Net increase in deposits Dividends on preferred shares Decrease in repurchase agreements Change in accrued debt issuance costs
Proceeds from issuance of common shares
Net cash ( used in) provided by financing activities
Net (Decrease) Increase in Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning of year
Cash and Cash Equivalents - End of year
Supplemental Cash Flow Information Cash paid for
Interest Income taxes
Loans transferred to other real estate owned
See Notes to Consolidated Financial Statements 7
$
$
$
Year Ended December 3 I
2014
(30094) $
326383 143004 351601
(42451)
(132719) 121877 ( I 85304)
(I 55705) 658707
I 055299
I 8863923 (I 230354 I)
(859762) (42042639)
697247
(148938)
(35793710)
(4470481) (45 I 500) (7033 I 5)
6648 49983
(5568665)
(40307076)
69060 I 03
28753027 $
1077774 $
460343
2013
(3078 I 98)
317863 5 I 06979
348058 (I 8026) (39044)
749901 (I 338 I 0) 121877
(2021 608)
4 I 8900 904576
2677468
18026 37635
(33 I 0630) 7210658 I I 35496
148657 (4000000)
(335068)
904774
7744446 (381500)
(I 364851) 6648
49938
6054681
9636923
59423180
69060 I 03
1320945 27837
594490
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies
Basis of Presentation and Consolidation - The consolidated fi nancial statements include the accounts of Chicago Shore Corporation (the Company) and its wholly owned subsidiary Delaware Place B ank (the Bank) All significant intercompany balances and transactions have been eliminated in consolidation
Nature of Operations - The Company provides a variety of f inancial services to individuals and businesses in the Chicago metropol itan area through their primary location in Chicago I l l inois Their primary deposit products are demand deposits savings money market and term certif icate accounts and their primary lending products are commercial and commercial mortgage loans
Use of Estimates - In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting period Actual results could d iffer from those estimates Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses the valuation of investment securities other real estate owned deferred tax assets goodwill and the fair value of financial instruments
Cash and Cash Equivalents - For the purpose of the consolidated statement of cash flows cash and cash equivalents include cash and balances due fr om banks and federal funds sold which mature within 90 days
Investment Securities - Debt securities that management has the positive intent and ability to hold to maturity are classified as held to maturity and recorded at amort ized cost Securities not classified as held to maturity including equity securities with readily determinable fair values are classif ied as available for sale and are recorded at fair value with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss)
Purchase premiums and discounts are recognized in interest income using the effective interest method through the maturity or expected repayment period of the securities Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses In estimating other-than-temporary impairment losses management considers ( I ) the length of time and the extent to which the fair value has been less than cost (2) the financia l condition and near-term prospects of the issuer and (3) the i nten t an d ability of the Company to retain its investment in the issuer for a period of time suff icient to allow for any anticipated recovery in fair value Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method
8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Federal Home Loan Bank Stock - The Company is a member of the Federal Home Loan Bank of Chicago (the FHLB ) and is required to maintain a minimu m investment in stock of the FHLB that varies with th e level of advances outstanding with the FHLB Th e stock does not have a readily determinable fair value and is carried at cost and is periodically evaluated for impairment
Loans - Th e Company grants mortgage commercial and consu mer loans to customers A substantial portion of the loan portfolio is represented by commercial loans in the Ch icago metropolitan area Th e abil ity of the B ank s debtors to honor their contracts is dependent upon th e real estate and general economic conditions in this area
Loans that management has th e intent and abil ity to h old for the foreseeable future or u ntil maturity or pay-off are reported at their outstanding unpaid principal balances adjusted for charge-offs the allowance for loan losses and any deferred fees or costs on originated loans Interest income is accrued on the unpaid principal balance Loan origination fees net of certain direct origination costs are deferred and recognized as an adjustment of the related loan yield u sing the interest meth od
The accrual of interest on loans is discontinued at th e time th e loan is 90 days del inquent unless the credit is well-secu red and in process of collection In all cases loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered dou btfu l
Al l interest accru ed but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income The interest on th ese loans is accounted for on the cash basis or cost-recovery meth od u ntil qualifying for return to accru al Loans are returned to accrual status wh en all the principal and interest amounts contractually due are brought current and futu re payments are reasonably assured
Loans are considered delinqu ent when customers fail to make their payments in accordance with the contractual loan agreement If a loan matures and principal remains outstanding the loan is considered delinquent u ntil the loan is paid off or renewed
Gross l oans are reported at th e Companys recorded investment The recorded investment is th e borrowers principal balance less partial charge-offs if any
Allowance for Loan Losses - Th e allowance for loan losses (the allowance) is established as losses are estimated to have occurred through a provision fo r loan losses charged to earnings Loan losses are charged against the allowance when management believes the u ncollectibi lity of a loan balance is confirmed Subsequ ent recoveries if any are credited to the allowance
9
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
The allowance for loan losses is evaluated on a r egu lar basis by management and is based upon managements per iodic r eview of the collectibility of the loans in light of h istor ical exper ience the nature and volu me of the loan portfolio adverse situations that may affect the borrowers abil ity to repay estimated value of any u nder lying col lateral and prevailing economic conditions This evaluation is inher ently subjective as it r equ ires estimates that are susceptible to significant r evision as mor e infor mation becomes available
The allowance consists of specific general and unallocated components The specific component r elates to loans that are classified as impaired For such loans an al lowance is established when the discounted cash flows (or collateral value or observable mar ket pr ice) of the impair ed loan is lower than the car rying value of that loan The general component covers nonimpaired loans and is based on histor ical loss exper ience adju sted for qualitative factor s An unallocated component is maintained to cover u ncer tainties that cou ld affect managements estimate of probable losses The unallocated component of the al lowance reflects the margin of imprecision inher ent in the u nder lying assumptions u sed in the methodologies for estimating specific and general losses in the portfolio
A loan is considered impaired when based on current information and events it is probable that the Company will be u nable to collect the schedu led payments of pr incipal or interest when due according to the contractual ter ms of the loan agr eement Factors consider ed by management in deter mining impair ment include payment status collateral value and the probability of collecting scheduled pr incipal and interest payments when du e Loans that exper ience insignificant payment delays and payment shortfal ls gener ally ar e not classified as impair ed Management deter mines the significance of payment delays and payment shortfalls on a case- by-case basis taking into consideration all of the cir cumstances surrounding the loan and the borrower including length of the delay the r easons for the delay the borrowers pr ior payment recor d and the amou nt of the shortfal l in relation to the pr incipal and interest owed Impairment is measured on a loan-by-loan basis for loans by either the present value of expected future cash flows discou nted at the loans effect ive inter est rate the J oans obtainabl e mar ket pr ice or t he fair value of the collateral if the loan is collateral dependent
Large groups of homogeneous loans are collectively evaluated for impair ment Accor dingly the Company does not separ ately identify individual consumer loans for impairment disclosures
1 0
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Troubled debt rest ruct uring (TDR) of loans is undertaken t o improve the l ikelihood t hat t he loan will be repaid in f ull under t he modif ied t erms in accordance wit h a reasonable repayment schedule All modif ied loans are evaluat ed to det ermine whet her t he loans should be report ed as a TDR A loan is a TDR when t he Company for economic or legal reasons relat ed t o t he borrowers f inancial d ifficult ies grants a concession t o t he borrower by modifying or renewing a loan that t he Company would not otherwise consider To make t his det erminat ion t he Company must det ermine whet her (a) t h e borrower is experiencing financial diff icult ies and (b) t h e Company grant ed t he borrower a concession This det erminat ion requires considerat ion of all t he fact s and circumstances surrounding t he modificat ion An overall general decline in the economy or some det eriorat ion in a borrowers f inancial condit ion does not automat ically mean t he borrower is experiencing f inancial difficult ies Loans t hat are considered TDR are considered impaired and a specif ic reserve is est ablished in the allowance consist ent ly wit h ot her impaired loans
Other Real Estate Owned - Asset s acquired through or in lieu of loan f oreclosure are held f or sale and are initially recorded at fair value less costs t o sell at t he dat e of t he foreclosure est ablishing a new cost basis Subsequent t o f oreclosure valuat ions are periodically perf ormed by management and t he assets are carried at the lower of carrying amount or fair value less cost t o sel l Revenue and expenses f rom operat ions and changes in the valuat ion allowance are included in loan collect ion and other real est at e owned expenses
Premises and Equipment - Land is carried at cost Bu ildings and equipment are carried at cost less accumulat ed depreciat ion comput ed on t he st raight -line met hod over t he est imat ed usef ul l ives of the assets ranging from I to 39 years
Bank Owned Life Insurance - The B ank has purchased life insurance pol icies on certain key offi cers B ank owned life insurance (BOLi) is recorded at it s cash surrender value or t he amount t hat can be realized upon immediate liquidat ion
Goodwill - Goodwill result s f rom prior business acquisit ions and represent s t h e excess of t he purchase price over the fair value of acquired tangible asset s and liabilit ies and ident ifiable intangible assets Goodwill is assessed at least annually f or impairment and any such impairment will be recognized in the period identified There has been no impairment ident if ied during t he years ended December 3 1 20 1 4 and 20 1 3
Income Taxes - Def erred income tax asset s and liabilit ies are det ermined using t h e liabil ity (or balance sheet) met hod Under t his met hod t he net def erred t ax asset or liability is det ermined based on t he t ax effect s of t he various t emporary d iff erences between t he book and tax basis of t he various consolidat ed balance sheet asset s and liabilities and gives current recognit ion t o changes in t ax rat es and laws
1 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
At December 3 1 20 1 4 and 20 1 3 the Company evaluated tax positions taken for filing with the Internal Revenue Service and the State of I l l inois The Company believes that income tax filing positions will be sustained under examination and does not anticipate any adjustments that would result in a material adverse eff ect on the Companys consolidated financial condition results of operations or cash flows Accordingly the Company has not recorded any reserves or related accr uals for interest and penalties for uncertai n tax positions at December 3 1 20 1 4 and 20 1 3 The Company believes it is no longer subject to tax examinati ons for years pri or to 20 I I
Comprehensive Income - Accounting principles generally require that recognized revenue expenses gains and losses be included in net income (loss) Although certain changes in assets and liabilities such as unrealized gains and losses on investment securities - available for sal e are reported as a separate component of the equity section of the consolidated balance sheet such items along with net income (loss) are components of comprehensive income
Stock-based Compensation - The Company applies the recogniti on and measurement provisions of the Compensation - Stock Compensation topi c of the Accounting Standards Codification (ASC) to account for employee stock option costs which is referred to as the calculated value method Compensation costs are measured based on the fair value of the instrument at the date of grant Those compensation costs are expensed on a straight-line basis over the vesting period of the specific instrument There were no stock-based awards granted in 20 1 4 and 20 1 3
Off-balance-sheet Instruments - In the ordinary course of business the Company has entered into commitments under commercial letters of credit and standby letters of credit Such financial instruments are recorded when they are funded
Reclassification - Certain amounts appearing in the prior years consolidated financial statements have been reclassified to conform to the current years consolidated financial statements
12
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Comprehensive Income (Topic 220) -
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income - The Financial Accounting Standards B oard (FASB) issued Accou nting Standards Update (ASU) No 20 1 3-02 Comprehensive Income (Topic 220) - Reporting of Amounts Recossified Out of Accumulated Other Comprehensive Income The ASU requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is requ ired under US generally accepted accounting principles (US GAAP) to be reclassified in its entirety to net income For other amounts that are not requ ired u nder US GAAP to be reclassified in their entirety to net income in the same reporting period an entity is requ ired to cross-reference other disclosures required under US GAAP that provide additional detail about those amounts For nonpu blic entities the ASU is effective prospectively for reporting periods beginning after December 1 5 20 1 3 (therefore for the year ended December 3 I 20 1 4 fo r the Company) and early adoption was allowed Adoption of this update did not have a material effect on the consolidated financial statements
New Accounting Pronouncement - Receivables - Troubled Debt Restructurings by
Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateral
Consumer Mortgage Loans upon Foreclosure - The FASB issued ASU No 20 1 4-04 Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure The amendments in this u pdate clarify that when an in-substance repossession or foreclosu re occu rs and a creditor is considered to have received physical possession of residential property col lateral izing a consu mer mortgage loan u pon either ( I ) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy the loan through completion of a deed in l ieu of foreclosure or through a similar legal agreement Additionally the amendment requ ires disclosure of both ( I ) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans col lateralized by residential real estate property that are in the process of foreclosure according to local requ irements of the applicable jurisdiction The amendments in this u pdate are effective for annual periods beginning after December I 5 20 1 4 (therefore December 3 I 20 I 5 for the Company) Management does not expect the update to have a material effect on the Companys consol idated financial statements
1 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Revenue from Contracts with Customers
(Topic 606) - In May 20 1 4 the Financial Accounting Standards Board issued Accounting Standards Update No 20 1 4-09 Revenue from Contracts with Customers (Topic 606) which will supersede the current revenue recognition requirements in Topic 605 Revenue Recognition The ASU is based o n the princip le that revenue is recognized to depict the transfer of goods or services to customers in an amount that refl ects the consideration to wh ich the entity expects to be entitled in exchange for those goods or services Th e ASU also requ ires additional disclosure about the nature amount timing and uncertainty of revenue and cash fl ows arising from customer contracts including significant judgments and changes in judgments and assets recognized from costs incu rred to obtain or fulfill a contract The new gu idance will be effective for periods beginning af ter December 1 5 201 7 (th erefo re for the year ending December 3 I 20 1 8 for th e Company) Th e ASU permits the new revenue recognition gu idance to be appl ied u sing one of two retrospective application methods The Company h as not yet determined wh ich application method it will use or th e potential eff ects of th e new standard on th e financial statements i f any
Subsequent Events - Th e financial statements and related disclosures include evaluation of events up through and including April 1 3 20 15 wh ich is the date the consolidated financial statements were available to be issued
Note 2 - Restrictions on Cash and Amounts Due from Banks
Th e B ank is required to maintain average cash balances on hand or on deposit with the Federal Reserve B ank At December 3 1 20 1 4 and 20 1 3 th ese reserve balances amounted to $ 1 5 67000 and $ 1 45 2000 respectively
1 4
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities
The amortized cost and estimated fair value of secu rities with gross unreal ized gains and losses are as fol lows
December 3 1 20 1 4 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $ 6988 1 44 $ 86 1 05 $ (2793) $ 707 1 456 M unicipal securities 6363935 438 1 4 6407749 Mortgage-backed securities 5 29975 1 9020 (2264) 5 306507 Other 5 1 50000 ( 1 1 89982) 3 9600 1 8
Total available-for-sale securities $2380 1 830 $ 1 38939 $ ( I I 95039) $ 22745730
Held-to-maturity securities -Mun icipal securities $ 4 I 2789 I $ 305 1 32 $ $ 4433 023
December 3 I 20 I 3 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $187 1 5 1 05 $ 93349 $ $ I 8808454 State and municipal 6 8 I 3 063 77408 (SO I 48) 6 840323 Other 5 I 50000 ( I 383563) 3 766437
Total available-for-sale securities $30678 I 68 $ I 70757 $ ( 1 433 7 1 I ) $ 29 4 1 5 2 1 4
Held-to-maturity secu rities -Municipal securities $ 3 303 774 $ $ (22364) $ 3 28 I 4 I 0
At December 3 I 20 1 4 and 20 1 3 securities with a carrying value of $503498 1 and $8595033 respectively were pledged to secure publ ic deposits repu rchase agreements and for other purposes requ ired or permitted by law
15
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
The amort ized cost and estimated fair value of debt securities by contractual maturity at December 3 1 20 1 4 are as fo llows
Available for Sale Held to Maturity Amort ized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
Due in one year or less $ 5 1 42415 $ 5 1 70 1 88 $ $ Due in one through five
years 32805 35 3 293 783 Due after five years through
ten years 4929 1 29 5 0 1 5 234 Due after ten years 5 000000 3824400 4 1 27891 4433 023
Total 1 8352079 1 7303605 4 1 2789 1 4433 023
Mortgage-backed securities 5 29975 1 5 306507 No stated maturity 1 5 0000 1 35 6 1 8
Total $2380 1 830 $22745 730 $ 4 1 2789 I $ 4433 023
There were no sales of investments during the year ended December 3 I 20 I 4 During the year ended December 3 1 20 I 3 the Company sold securities availabl e for sale with a book value of $0 resulting in realized gains of $ I 8026 There were no gross realized losses on sales of securities available for sale for the year ended December 3 I 20 1 3
1 6
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Information pertain ing to securi ti es with gross un realized losses at December 31 20 1 4 an d 20 1 3 aggregated by investment category an d length of time that in dividual securities have been in a continuous loss position is as follows
December 3 1 20 1 4 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Unrealized Estimated
Losses Fair Value Losses Fair Val ue Available-for-sale securities
US government agen cies $ (2793) $ 2056 222 $ $ Mortgage-backed securities (2264) 25247 1 0 Other ( 1 1 89982) 3 960018
Total available-for-sale secu rities $ (5 05 7) $ 45 80932 $ ( 1 1 89982) $ 3 9600 1 8
December 3 I 20 1 3 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Un realized Estimated
Losses Fair Value Losses Fair Valu e Available-for-sale securities
Mun icipal securities $ (50 1 48) $ 677262 $ $ Other ( 1 383 5 63) 3 766437
Total available-for-sale securities $ (SO 1 48) $ 677262 $ ( 1 3835 63) $ 3 766437
Un realized l osses on securities have n ot been recogn ized into in come because the issu ers bonds are of high credit quality we have the inten t and ability to hold the secu rities for the foreseeable futu re and the declin e in fair value is primarily due to increased market interest rates The fair values a re generally expected to recover as the bonds approach their maturity dates
1 7
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Within other secu rities there is $ 1 1 75 600 of u nrealized losses related to two perpetual preferred secu rities to two large international bank holding companies The u nrealized losses on the perpetual preferred secu rities is attributable to the cu rrent variable dividend rates compared to similar fixed-rate instru ments at each institution The fair value of the Companys perpetual preferred secu rities is expected to increase as the variable dividend rate increases which is contingent u pon the three-month LIB O R rate The Company has the ability and intent to hold the secu rities u ntil their estimated fair values increase
Note 4 - Loans
A summary of the balances of loans follows (in thousands)
20 1 4 20 1 3
Residential $ 1 1 493 $ 1 1 686 Construction and land 5 298 1 303 Commercial real estate 60262 48570 Commercial 38472 7844 I nventory 1 0239 9 649 Professional practice 45890 48224 Life insurance contracts 1 933 Automobile 1 22 789 Consu mer 1 038 1 083
Total gross loans 1 728 1 4 1 3 1 08 1
Less Allowance for loan losses (5 627) (5 334) Net deferred loan fees (6 1 ) ( I 03)
Net loans $ 1 67 1 26 $ 1 25 644
1 8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Loans and the all owance for loan losses ar e disaggregated by segment as foll ows (i n thousands)
Allowance for loan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Allowance for Joan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Ending allowance attributable to loans
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Beginning
Balance
$ 276 $ 2 1 3 900 377
3250 259
12 9
38
$ 5334 $
Beginning
Balance
$ 392 $ 72
849 338 626 587 106
5 54
$ 3029 $
1 9
Year Ended December 3 1 2014
Charge-offs Recoveries Provision Ending Balance
$ $ (45) $ 23 1 42 255
( 142) 758 144 (8) 5 1 3
1 85 3435 ( 1 9) 240
(4) 1 0 ( 1 7) I ( I ) 8
148 1 86
(4) $ 1 54 $ 143 $ 5627
Year Ended December 3 1 2013
Charge-offs Recoveries Provision Ending Balance
$ $ ( 1 1 6) $ 276 ( I 33) 274 2 1 3
5 1 900 9 30 377
(2658) 5282 3250 (328) 259
(36) 1 6 (74) 1 2 4 9
( 1 6) 38
(2827) $ 25 $ 5 107 $ 5334
Year Ended December 3 I bull 2014 Individually Collectively
Evaluated for Evaluated for
Impairment Impairment Ending Balance
$ 130 $ 1 0 1 $ 23 1 255 255
180 578 758 5 1 3 5 1 3
3335 1 00 3435 240 240
I I 8 8
186 186
$ 3645 $ 1 982 $ 5627
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 2014 and 2013
Note 4 - Loans (Continued)
Individually Collectively Evaluated for Evaluated for Impairment Impairment Ending Balance
Loans
Residential $ 595 $ 1 0898 $ 1 1 493 Construction and land 5298 5298 Commercial real estate 1 297 58965 60262 Commercial 38472 38472 Inventory 5576 4663 1 0239 Professional practice 45890 45890 Automobile 122 122 Consumer l 038 1038
Total $ 7468 $ 1 65346 $ 1728 1 4
Year Ended December 3 1 20 1 3 Individually Collectively
Evaluated for Evaluated for Impairment Impairment Ending Balance
Ending allowance attributable to loans
Residential $ 130 $ 146 $ 276 Construction and land 2 13 2 13 Commercial real estate 250 650 900 Commercial 269 1 08 377 Inventory 3000 250 3250 Professional practice 259 259 Automobile 12 12 Consumer 9 9 Unallocated 38 38
Total $ 3649 $ 1685 $ 5334
Individually Collectively Evaluated for Evaluated for Impairment lmpaiffilent Ending Balance
Loans
Residential $ 595 $ 1 1 09 1 $ 1 1 686 Construction and land 1303 1303 Commercial real estate 1 298 47272 48570 Commercial 1587 6257 7844 Inventory 5215 4434 9649 Professional practice 48224 48224 Life insurance contraets 1933 1 933 Automobile 789 789 Consumer 1 083 l 083
Total $ 8695 $ 122386 $ 1 3 1 08 1
20
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 201 4 and 2013
Note 4 - Loans (Continued)
Credit Risk Grading
The Company util izes a loan rating system as a means of identifying problem and potential problem loans The Company assigned the fo llowing loan ratings to loans disaggregated by segment and class as of December 3 1 20 1 4 and 20 1 3 (in thousands)
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile
Consumer
Total
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Life insurance contracts Automobile
Consumer
Total
December 3 1 20 14 Loans rated Loans rated Loans rated
1-5
$ 1 0898 $ 5298
58965 38472
4663 45890
1 22 1 038
$ 1 65346 $
6
===
$
$
7 Total
595 $ 1 1 493 5298
1 297 60262 38472
5576 I 0239 45890
1 22 1 038
7468 $ 1 728 1 4 ====
December 3 1 20 1 3 Loans rated Loans rated Loans rated
1-5 6 7 Total
$ 1 0626 $ 465 $ 595 $ 1 1 686 1 303 1 303
47272 1 298 48570 6257 J 587 7844 4434 52 1 5 9649
48224 48224 I 933 I 933
789 789 1 083 1 083
$ 1 2 1 921 $ 465 $ 8695 $ 1 3 1 08 1
The Company categorized each loan into credit risk categori es based on current fi nancial information overall debt service coverage comparison against industry averages col lateral coverage historical payment experience and current economic trends The Company uses the following definitions for credit risk ratings
2 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
middot middotmiddot
To the Board of Directors Chicago Shore Corporation and Subsidiaries
Report on Prior Year Consolidated Financial Statements
The consolidated financial statements of Chicago Shore Corporation and Subsidiaries a of and for the
year ended December 3 1 20 I 3 were audited by other audirors whose reporrcdated February 2 20 I 5 expressed an unqualified opinion on those statements
April 1 3 2015
2
middot
Chicago Shore Corporation and Subsidiaries
Consolidated Balance Sheet
December 3 I 20 I 4 Assets
Cash and due from banks $ 22274125
Federal funds sold 6478902
Total cash and cash equivalents 28753027
Investment securities - Available for sale (Note 3) 22745730 Investment securities - Held to maturity ( Note 3) 4 127891 Federal Home Loan Bank stock I 000000 Loans - Net of allowance for loan losses of $5626979 and $5333892 at
December 3 I 2014 and 2013 respectively (Note 4) I 67 I 26085 Other real estate owned 5486 I 6 I Premises and equipment (Note 5) 6 I 58323 Goodwill 2748077 Accrued interest receivable 623819 Deferred tax asset - Net (Note 8) 655324 I Bank-owned life insurance 4266529 Investment in Chicago Shore Capital Trusts (Note 7) 342000
Other assets 393737
Total assets $ 250324620
Liabilities and Stockholders Equity
Liabilities Deposits
Noninterest-bearing
Interest-bearing
Total deposits ( Note 6)
junior subordinated notes (Note 7) Accrued interest payable Repurchase agreements
Accrued and other liabilities
Total liabilities
Stockholders Equity Preferred shares - Series A net of discount - $I 0 par value
Issued and outstanding -7000 shares at December 3 I 20 I 4 and 20 I 3 Liquidation value - $ I 000 per share ( Note I 2)
Preferred shares - Series B - $I 0 par value Issued and outstanding - 350 shares at December 3 I 20 I 4 and 20 I 3 Liquidation value - $ I 000 per share (Note 12)
Common shares - $ I par value Authorized - 2000000 shares Issued and outstanding - I 206720 and I I 97665 shares at December 3 I 20 I 4 and 20 I 3 respectively
Additional paid-in capital Share subscriptions - 38000 shares subscribed at December 3I 2014 and
2013 (Note I I) Accumulated deficit
Accumulated other comprehensive loss
Total stockholders equity
Total liabilities and stockholders equity
See Notes to Consolidated Financial Statements 3
$ 62956469 I 5323 I 305
2 I 6 I 87774
I 1212335 80063
627959 240490 I
2305 I 3032
7000000
350000
I 206720 12913080
(475000) (526078) (657 134)
I 9811588
$ 250324620
December 3 I 20 I 3
$ 59464227 9595876
69060 I 03
29415214 3303774 1000000
I 25644342 5723065 6335768 2748077
535004 6436242 4 1338 Io
342000 326847
$ 255004246
$ 56029979 I 64628276
220658255
I 1205687 79362
I 33 I 274 I 966690
23524 I 268
69 I 9272
398749
I I 97665 12530480
(475000) (I 2505)
(795683)
I 9762978
$ 255004246
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Operations
Interest and Dividend Income
Loans - Including fees $ Investment securities
Taxable Tax-exempt
Dividend income Federal funds sold
Total interest and dividend income
Interest Expense
Deposits Repurchase agreements
Junior subordinated notes
Total interest expense
Net Interest and Dividend Income
Provision for Loan Losses (Note 4)
Net Interest and Dividend Income After Provision for Loan Losses
Noninterest Income
Service charges and fees on deposits Net gain on investment securities Bank-owned life insurance income
Other
Total noninterest income
Noninterest Expense Salaries and employee benefits (Note 9) Occupancy and equipment Data processing Loss on sale of other real estate owned Loan collection and other real estate owned costs Professional and marketing fees
Other
Total noninterest expenses
Loss - Before income taxes
Income Tax Benefit (Note 8)
Net Loss
Preferred Stock Dividends declared Discount accretionpremium amortization
Net Loss Applicable to Common Shares $
See Notes to Consolidated Financial Statements 4
Year Ended
December 3 I 2014
6800 I 87
I 26536 265 I 89 189837 I 39750
7521 499
719548 526
358400
I 078474
6443025
143004
6300021
332707
132719 369 I 73
834599
3788299 738 I 72 36 I 606
869257 714590 864 154
7336078
(20 I 458)
(171364)
(30094)
(45 I 500) (3 I 979)
(5 I 3573)
December 3 I
$
$
2013
7492261
I 28587 152974 I 88253 161624
8 123699
943671 1034
364645
I 309350
6814349
5 I 06979
I 707370
35 I 304 18026
133810 463 I 20
966260
3810184 740222 346406 749901 64439 I 67 I 354 767652
7730 I JO
(5056480)
( I 978282)
(3078 I 98)
(38 I 500) (8 I 075)
(3540773)
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Comprehensive Income (loss)
Net Loss
Other Comprehensive Income (Loss) Unrealized gain (loss) on investment securities - Available for sale
net of tax Less reclassification adjustment for gains included in net income
net of tax
Total other comprehensive income (loss)
Comprehensive Income (Loss)
See Notes to Consolidated Financial Statements 5
Year Ended
December 3 I December 3 I
$
$
20 1 4 20 1 3
(30094) $ (3078 1 98)
1 38549
1 38549
(285394)
(1 1 358)
(274036)
I 08455 $ (3352234)
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Changes in Stockholders Equity
Retained Accumulated Series A Series B Earnings Other
Preferred Preferred Common Additional Share Accumulated Comprehensive Shares Shares Shares Paid-in Cnital Subscritions Deficit) Loss Total Eguil
Balance - January [ 20 1 3 $ 6838 I 97 $ 398749 $ 1 1 9 1 415 $ 1 2486792 $ (475000) $ 3528268 $ (52 1 647) $ 23446774
Comprehensive loss Net loss (3078 I 98) (3078 I 98) Net unrealized loss on investment securities -
Available for sale - Net of tax (274036) (274036)
Total comprehensive loss (3352234)
Dividends declared on preferred shares (381 500) (381 500)
Discount accretion on preferred shares Bl 075 (BI 075)
Common shares issued 6250 43688 49938
Balance - December 3 1 2 0 1 3 69 1 9272 398749 I 1 97665 1 2530480 (475000) ( 1 2 505) (795683) 1 9762978
Comprehensive income Net loss (30094) (30094) Net unrealized gains on lnvestment securities -
138549 Available for sale - Net of tax 1 38549
Total comprehensive income I 08455
Dividends declared on preferred shares (451 500) (451 500)
Discount accretion (premium amortization) on preferred shares 80728 (48749) (3 1 979)
Common shares issued 9055 40928 49983
Stock-based compensation expense 34 1 672 34 1 672
Balance - December 3 1 20 1 4 $ 7000000 $ 350000 $ 1206720 $ 12913080 $ (475000) $ (526078) $ (657 134) $ 19811588
See Notes to Consolidated Financial Statements 6
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Cash Flows
Cash Flows from Operating Activities Net loss Adjustments to reconcile net loss to net cash provided by
operating activities Depreciation Provision for loan losses Accretion and amortization of securities Gctln on sale of investment securities net Amortization of deferred loan fees Loss on sale of other real estate owned Increase in cash surrender value of bank-owned life insurance Restricted stock unit expense Deferred tax benefit Net change in
Accrued interest receivable and other assets
Accrued interest payable and other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities Activity in available-for-sale securities
Sales Maturities prepayments and calls Purchases
Purchase of investment securities - held to maturity Purchases
Net (increase) decrease in loans Proceeds from sales of other real estate owned Redemption of Federal Home Loan Bank stock Purchase of bank owned life insurance
Purchases of premises and equipment
Net cash ( used in) provided by investing activities
Cash Flows from Financing Activities Net increase in deposits Dividends on preferred shares Decrease in repurchase agreements Change in accrued debt issuance costs
Proceeds from issuance of common shares
Net cash ( used in) provided by financing activities
Net (Decrease) Increase in Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning of year
Cash and Cash Equivalents - End of year
Supplemental Cash Flow Information Cash paid for
Interest Income taxes
Loans transferred to other real estate owned
See Notes to Consolidated Financial Statements 7
$
$
$
Year Ended December 3 I
2014
(30094) $
326383 143004 351601
(42451)
(132719) 121877 ( I 85304)
(I 55705) 658707
I 055299
I 8863923 (I 230354 I)
(859762) (42042639)
697247
(148938)
(35793710)
(4470481) (45 I 500) (7033 I 5)
6648 49983
(5568665)
(40307076)
69060 I 03
28753027 $
1077774 $
460343
2013
(3078 I 98)
317863 5 I 06979
348058 (I 8026) (39044)
749901 (I 338 I 0) 121877
(2021 608)
4 I 8900 904576
2677468
18026 37635
(33 I 0630) 7210658 I I 35496
148657 (4000000)
(335068)
904774
7744446 (381500)
(I 364851) 6648
49938
6054681
9636923
59423180
69060 I 03
1320945 27837
594490
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies
Basis of Presentation and Consolidation - The consolidated fi nancial statements include the accounts of Chicago Shore Corporation (the Company) and its wholly owned subsidiary Delaware Place B ank (the Bank) All significant intercompany balances and transactions have been eliminated in consolidation
Nature of Operations - The Company provides a variety of f inancial services to individuals and businesses in the Chicago metropol itan area through their primary location in Chicago I l l inois Their primary deposit products are demand deposits savings money market and term certif icate accounts and their primary lending products are commercial and commercial mortgage loans
Use of Estimates - In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting period Actual results could d iffer from those estimates Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses the valuation of investment securities other real estate owned deferred tax assets goodwill and the fair value of financial instruments
Cash and Cash Equivalents - For the purpose of the consolidated statement of cash flows cash and cash equivalents include cash and balances due fr om banks and federal funds sold which mature within 90 days
Investment Securities - Debt securities that management has the positive intent and ability to hold to maturity are classified as held to maturity and recorded at amort ized cost Securities not classified as held to maturity including equity securities with readily determinable fair values are classif ied as available for sale and are recorded at fair value with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss)
Purchase premiums and discounts are recognized in interest income using the effective interest method through the maturity or expected repayment period of the securities Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses In estimating other-than-temporary impairment losses management considers ( I ) the length of time and the extent to which the fair value has been less than cost (2) the financia l condition and near-term prospects of the issuer and (3) the i nten t an d ability of the Company to retain its investment in the issuer for a period of time suff icient to allow for any anticipated recovery in fair value Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method
8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Federal Home Loan Bank Stock - The Company is a member of the Federal Home Loan Bank of Chicago (the FHLB ) and is required to maintain a minimu m investment in stock of the FHLB that varies with th e level of advances outstanding with the FHLB Th e stock does not have a readily determinable fair value and is carried at cost and is periodically evaluated for impairment
Loans - Th e Company grants mortgage commercial and consu mer loans to customers A substantial portion of the loan portfolio is represented by commercial loans in the Ch icago metropolitan area Th e abil ity of the B ank s debtors to honor their contracts is dependent upon th e real estate and general economic conditions in this area
Loans that management has th e intent and abil ity to h old for the foreseeable future or u ntil maturity or pay-off are reported at their outstanding unpaid principal balances adjusted for charge-offs the allowance for loan losses and any deferred fees or costs on originated loans Interest income is accrued on the unpaid principal balance Loan origination fees net of certain direct origination costs are deferred and recognized as an adjustment of the related loan yield u sing the interest meth od
The accrual of interest on loans is discontinued at th e time th e loan is 90 days del inquent unless the credit is well-secu red and in process of collection In all cases loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered dou btfu l
Al l interest accru ed but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income The interest on th ese loans is accounted for on the cash basis or cost-recovery meth od u ntil qualifying for return to accru al Loans are returned to accrual status wh en all the principal and interest amounts contractually due are brought current and futu re payments are reasonably assured
Loans are considered delinqu ent when customers fail to make their payments in accordance with the contractual loan agreement If a loan matures and principal remains outstanding the loan is considered delinquent u ntil the loan is paid off or renewed
Gross l oans are reported at th e Companys recorded investment The recorded investment is th e borrowers principal balance less partial charge-offs if any
Allowance for Loan Losses - Th e allowance for loan losses (the allowance) is established as losses are estimated to have occurred through a provision fo r loan losses charged to earnings Loan losses are charged against the allowance when management believes the u ncollectibi lity of a loan balance is confirmed Subsequ ent recoveries if any are credited to the allowance
9
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
The allowance for loan losses is evaluated on a r egu lar basis by management and is based upon managements per iodic r eview of the collectibility of the loans in light of h istor ical exper ience the nature and volu me of the loan portfolio adverse situations that may affect the borrowers abil ity to repay estimated value of any u nder lying col lateral and prevailing economic conditions This evaluation is inher ently subjective as it r equ ires estimates that are susceptible to significant r evision as mor e infor mation becomes available
The allowance consists of specific general and unallocated components The specific component r elates to loans that are classified as impaired For such loans an al lowance is established when the discounted cash flows (or collateral value or observable mar ket pr ice) of the impair ed loan is lower than the car rying value of that loan The general component covers nonimpaired loans and is based on histor ical loss exper ience adju sted for qualitative factor s An unallocated component is maintained to cover u ncer tainties that cou ld affect managements estimate of probable losses The unallocated component of the al lowance reflects the margin of imprecision inher ent in the u nder lying assumptions u sed in the methodologies for estimating specific and general losses in the portfolio
A loan is considered impaired when based on current information and events it is probable that the Company will be u nable to collect the schedu led payments of pr incipal or interest when due according to the contractual ter ms of the loan agr eement Factors consider ed by management in deter mining impair ment include payment status collateral value and the probability of collecting scheduled pr incipal and interest payments when du e Loans that exper ience insignificant payment delays and payment shortfal ls gener ally ar e not classified as impair ed Management deter mines the significance of payment delays and payment shortfalls on a case- by-case basis taking into consideration all of the cir cumstances surrounding the loan and the borrower including length of the delay the r easons for the delay the borrowers pr ior payment recor d and the amou nt of the shortfal l in relation to the pr incipal and interest owed Impairment is measured on a loan-by-loan basis for loans by either the present value of expected future cash flows discou nted at the loans effect ive inter est rate the J oans obtainabl e mar ket pr ice or t he fair value of the collateral if the loan is collateral dependent
Large groups of homogeneous loans are collectively evaluated for impair ment Accor dingly the Company does not separ ately identify individual consumer loans for impairment disclosures
1 0
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Troubled debt rest ruct uring (TDR) of loans is undertaken t o improve the l ikelihood t hat t he loan will be repaid in f ull under t he modif ied t erms in accordance wit h a reasonable repayment schedule All modif ied loans are evaluat ed to det ermine whet her t he loans should be report ed as a TDR A loan is a TDR when t he Company for economic or legal reasons relat ed t o t he borrowers f inancial d ifficult ies grants a concession t o t he borrower by modifying or renewing a loan that t he Company would not otherwise consider To make t his det erminat ion t he Company must det ermine whet her (a) t h e borrower is experiencing financial diff icult ies and (b) t h e Company grant ed t he borrower a concession This det erminat ion requires considerat ion of all t he fact s and circumstances surrounding t he modificat ion An overall general decline in the economy or some det eriorat ion in a borrowers f inancial condit ion does not automat ically mean t he borrower is experiencing f inancial difficult ies Loans t hat are considered TDR are considered impaired and a specif ic reserve is est ablished in the allowance consist ent ly wit h ot her impaired loans
Other Real Estate Owned - Asset s acquired through or in lieu of loan f oreclosure are held f or sale and are initially recorded at fair value less costs t o sell at t he dat e of t he foreclosure est ablishing a new cost basis Subsequent t o f oreclosure valuat ions are periodically perf ormed by management and t he assets are carried at the lower of carrying amount or fair value less cost t o sel l Revenue and expenses f rom operat ions and changes in the valuat ion allowance are included in loan collect ion and other real est at e owned expenses
Premises and Equipment - Land is carried at cost Bu ildings and equipment are carried at cost less accumulat ed depreciat ion comput ed on t he st raight -line met hod over t he est imat ed usef ul l ives of the assets ranging from I to 39 years
Bank Owned Life Insurance - The B ank has purchased life insurance pol icies on certain key offi cers B ank owned life insurance (BOLi) is recorded at it s cash surrender value or t he amount t hat can be realized upon immediate liquidat ion
Goodwill - Goodwill result s f rom prior business acquisit ions and represent s t h e excess of t he purchase price over the fair value of acquired tangible asset s and liabilit ies and ident ifiable intangible assets Goodwill is assessed at least annually f or impairment and any such impairment will be recognized in the period identified There has been no impairment ident if ied during t he years ended December 3 1 20 1 4 and 20 1 3
Income Taxes - Def erred income tax asset s and liabilit ies are det ermined using t h e liabil ity (or balance sheet) met hod Under t his met hod t he net def erred t ax asset or liability is det ermined based on t he t ax effect s of t he various t emporary d iff erences between t he book and tax basis of t he various consolidat ed balance sheet asset s and liabilities and gives current recognit ion t o changes in t ax rat es and laws
1 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
At December 3 1 20 1 4 and 20 1 3 the Company evaluated tax positions taken for filing with the Internal Revenue Service and the State of I l l inois The Company believes that income tax filing positions will be sustained under examination and does not anticipate any adjustments that would result in a material adverse eff ect on the Companys consolidated financial condition results of operations or cash flows Accordingly the Company has not recorded any reserves or related accr uals for interest and penalties for uncertai n tax positions at December 3 1 20 1 4 and 20 1 3 The Company believes it is no longer subject to tax examinati ons for years pri or to 20 I I
Comprehensive Income - Accounting principles generally require that recognized revenue expenses gains and losses be included in net income (loss) Although certain changes in assets and liabilities such as unrealized gains and losses on investment securities - available for sal e are reported as a separate component of the equity section of the consolidated balance sheet such items along with net income (loss) are components of comprehensive income
Stock-based Compensation - The Company applies the recogniti on and measurement provisions of the Compensation - Stock Compensation topi c of the Accounting Standards Codification (ASC) to account for employee stock option costs which is referred to as the calculated value method Compensation costs are measured based on the fair value of the instrument at the date of grant Those compensation costs are expensed on a straight-line basis over the vesting period of the specific instrument There were no stock-based awards granted in 20 1 4 and 20 1 3
Off-balance-sheet Instruments - In the ordinary course of business the Company has entered into commitments under commercial letters of credit and standby letters of credit Such financial instruments are recorded when they are funded
Reclassification - Certain amounts appearing in the prior years consolidated financial statements have been reclassified to conform to the current years consolidated financial statements
12
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Comprehensive Income (Topic 220) -
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income - The Financial Accounting Standards B oard (FASB) issued Accou nting Standards Update (ASU) No 20 1 3-02 Comprehensive Income (Topic 220) - Reporting of Amounts Recossified Out of Accumulated Other Comprehensive Income The ASU requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is requ ired under US generally accepted accounting principles (US GAAP) to be reclassified in its entirety to net income For other amounts that are not requ ired u nder US GAAP to be reclassified in their entirety to net income in the same reporting period an entity is requ ired to cross-reference other disclosures required under US GAAP that provide additional detail about those amounts For nonpu blic entities the ASU is effective prospectively for reporting periods beginning after December 1 5 20 1 3 (therefore for the year ended December 3 I 20 1 4 fo r the Company) and early adoption was allowed Adoption of this update did not have a material effect on the consolidated financial statements
New Accounting Pronouncement - Receivables - Troubled Debt Restructurings by
Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateral
Consumer Mortgage Loans upon Foreclosure - The FASB issued ASU No 20 1 4-04 Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure The amendments in this u pdate clarify that when an in-substance repossession or foreclosu re occu rs and a creditor is considered to have received physical possession of residential property col lateral izing a consu mer mortgage loan u pon either ( I ) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy the loan through completion of a deed in l ieu of foreclosure or through a similar legal agreement Additionally the amendment requ ires disclosure of both ( I ) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans col lateralized by residential real estate property that are in the process of foreclosure according to local requ irements of the applicable jurisdiction The amendments in this u pdate are effective for annual periods beginning after December I 5 20 1 4 (therefore December 3 I 20 I 5 for the Company) Management does not expect the update to have a material effect on the Companys consol idated financial statements
1 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Revenue from Contracts with Customers
(Topic 606) - In May 20 1 4 the Financial Accounting Standards Board issued Accounting Standards Update No 20 1 4-09 Revenue from Contracts with Customers (Topic 606) which will supersede the current revenue recognition requirements in Topic 605 Revenue Recognition The ASU is based o n the princip le that revenue is recognized to depict the transfer of goods or services to customers in an amount that refl ects the consideration to wh ich the entity expects to be entitled in exchange for those goods or services Th e ASU also requ ires additional disclosure about the nature amount timing and uncertainty of revenue and cash fl ows arising from customer contracts including significant judgments and changes in judgments and assets recognized from costs incu rred to obtain or fulfill a contract The new gu idance will be effective for periods beginning af ter December 1 5 201 7 (th erefo re for the year ending December 3 I 20 1 8 for th e Company) Th e ASU permits the new revenue recognition gu idance to be appl ied u sing one of two retrospective application methods The Company h as not yet determined wh ich application method it will use or th e potential eff ects of th e new standard on th e financial statements i f any
Subsequent Events - Th e financial statements and related disclosures include evaluation of events up through and including April 1 3 20 15 wh ich is the date the consolidated financial statements were available to be issued
Note 2 - Restrictions on Cash and Amounts Due from Banks
Th e B ank is required to maintain average cash balances on hand or on deposit with the Federal Reserve B ank At December 3 1 20 1 4 and 20 1 3 th ese reserve balances amounted to $ 1 5 67000 and $ 1 45 2000 respectively
1 4
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities
The amortized cost and estimated fair value of secu rities with gross unreal ized gains and losses are as fol lows
December 3 1 20 1 4 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $ 6988 1 44 $ 86 1 05 $ (2793) $ 707 1 456 M unicipal securities 6363935 438 1 4 6407749 Mortgage-backed securities 5 29975 1 9020 (2264) 5 306507 Other 5 1 50000 ( 1 1 89982) 3 9600 1 8
Total available-for-sale securities $2380 1 830 $ 1 38939 $ ( I I 95039) $ 22745730
Held-to-maturity securities -Mun icipal securities $ 4 I 2789 I $ 305 1 32 $ $ 4433 023
December 3 I 20 I 3 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $187 1 5 1 05 $ 93349 $ $ I 8808454 State and municipal 6 8 I 3 063 77408 (SO I 48) 6 840323 Other 5 I 50000 ( I 383563) 3 766437
Total available-for-sale securities $30678 I 68 $ I 70757 $ ( 1 433 7 1 I ) $ 29 4 1 5 2 1 4
Held-to-maturity secu rities -Municipal securities $ 3 303 774 $ $ (22364) $ 3 28 I 4 I 0
At December 3 I 20 1 4 and 20 1 3 securities with a carrying value of $503498 1 and $8595033 respectively were pledged to secure publ ic deposits repu rchase agreements and for other purposes requ ired or permitted by law
15
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
The amort ized cost and estimated fair value of debt securities by contractual maturity at December 3 1 20 1 4 are as fo llows
Available for Sale Held to Maturity Amort ized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
Due in one year or less $ 5 1 42415 $ 5 1 70 1 88 $ $ Due in one through five
years 32805 35 3 293 783 Due after five years through
ten years 4929 1 29 5 0 1 5 234 Due after ten years 5 000000 3824400 4 1 27891 4433 023
Total 1 8352079 1 7303605 4 1 2789 1 4433 023
Mortgage-backed securities 5 29975 1 5 306507 No stated maturity 1 5 0000 1 35 6 1 8
Total $2380 1 830 $22745 730 $ 4 1 2789 I $ 4433 023
There were no sales of investments during the year ended December 3 I 20 I 4 During the year ended December 3 1 20 I 3 the Company sold securities availabl e for sale with a book value of $0 resulting in realized gains of $ I 8026 There were no gross realized losses on sales of securities available for sale for the year ended December 3 I 20 1 3
1 6
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Information pertain ing to securi ti es with gross un realized losses at December 31 20 1 4 an d 20 1 3 aggregated by investment category an d length of time that in dividual securities have been in a continuous loss position is as follows
December 3 1 20 1 4 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Unrealized Estimated
Losses Fair Value Losses Fair Val ue Available-for-sale securities
US government agen cies $ (2793) $ 2056 222 $ $ Mortgage-backed securities (2264) 25247 1 0 Other ( 1 1 89982) 3 960018
Total available-for-sale secu rities $ (5 05 7) $ 45 80932 $ ( 1 1 89982) $ 3 9600 1 8
December 3 I 20 1 3 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Un realized Estimated
Losses Fair Value Losses Fair Valu e Available-for-sale securities
Mun icipal securities $ (50 1 48) $ 677262 $ $ Other ( 1 383 5 63) 3 766437
Total available-for-sale securities $ (SO 1 48) $ 677262 $ ( 1 3835 63) $ 3 766437
Un realized l osses on securities have n ot been recogn ized into in come because the issu ers bonds are of high credit quality we have the inten t and ability to hold the secu rities for the foreseeable futu re and the declin e in fair value is primarily due to increased market interest rates The fair values a re generally expected to recover as the bonds approach their maturity dates
1 7
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Within other secu rities there is $ 1 1 75 600 of u nrealized losses related to two perpetual preferred secu rities to two large international bank holding companies The u nrealized losses on the perpetual preferred secu rities is attributable to the cu rrent variable dividend rates compared to similar fixed-rate instru ments at each institution The fair value of the Companys perpetual preferred secu rities is expected to increase as the variable dividend rate increases which is contingent u pon the three-month LIB O R rate The Company has the ability and intent to hold the secu rities u ntil their estimated fair values increase
Note 4 - Loans
A summary of the balances of loans follows (in thousands)
20 1 4 20 1 3
Residential $ 1 1 493 $ 1 1 686 Construction and land 5 298 1 303 Commercial real estate 60262 48570 Commercial 38472 7844 I nventory 1 0239 9 649 Professional practice 45890 48224 Life insurance contracts 1 933 Automobile 1 22 789 Consu mer 1 038 1 083
Total gross loans 1 728 1 4 1 3 1 08 1
Less Allowance for loan losses (5 627) (5 334) Net deferred loan fees (6 1 ) ( I 03)
Net loans $ 1 67 1 26 $ 1 25 644
1 8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Loans and the all owance for loan losses ar e disaggregated by segment as foll ows (i n thousands)
Allowance for loan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Allowance for Joan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Ending allowance attributable to loans
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Beginning
Balance
$ 276 $ 2 1 3 900 377
3250 259
12 9
38
$ 5334 $
Beginning
Balance
$ 392 $ 72
849 338 626 587 106
5 54
$ 3029 $
1 9
Year Ended December 3 1 2014
Charge-offs Recoveries Provision Ending Balance
$ $ (45) $ 23 1 42 255
( 142) 758 144 (8) 5 1 3
1 85 3435 ( 1 9) 240
(4) 1 0 ( 1 7) I ( I ) 8
148 1 86
(4) $ 1 54 $ 143 $ 5627
Year Ended December 3 1 2013
Charge-offs Recoveries Provision Ending Balance
$ $ ( 1 1 6) $ 276 ( I 33) 274 2 1 3
5 1 900 9 30 377
(2658) 5282 3250 (328) 259
(36) 1 6 (74) 1 2 4 9
( 1 6) 38
(2827) $ 25 $ 5 107 $ 5334
Year Ended December 3 I bull 2014 Individually Collectively
Evaluated for Evaluated for
Impairment Impairment Ending Balance
$ 130 $ 1 0 1 $ 23 1 255 255
180 578 758 5 1 3 5 1 3
3335 1 00 3435 240 240
I I 8 8
186 186
$ 3645 $ 1 982 $ 5627
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 2014 and 2013
Note 4 - Loans (Continued)
Individually Collectively Evaluated for Evaluated for Impairment Impairment Ending Balance
Loans
Residential $ 595 $ 1 0898 $ 1 1 493 Construction and land 5298 5298 Commercial real estate 1 297 58965 60262 Commercial 38472 38472 Inventory 5576 4663 1 0239 Professional practice 45890 45890 Automobile 122 122 Consumer l 038 1038
Total $ 7468 $ 1 65346 $ 1728 1 4
Year Ended December 3 1 20 1 3 Individually Collectively
Evaluated for Evaluated for Impairment Impairment Ending Balance
Ending allowance attributable to loans
Residential $ 130 $ 146 $ 276 Construction and land 2 13 2 13 Commercial real estate 250 650 900 Commercial 269 1 08 377 Inventory 3000 250 3250 Professional practice 259 259 Automobile 12 12 Consumer 9 9 Unallocated 38 38
Total $ 3649 $ 1685 $ 5334
Individually Collectively Evaluated for Evaluated for Impairment lmpaiffilent Ending Balance
Loans
Residential $ 595 $ 1 1 09 1 $ 1 1 686 Construction and land 1303 1303 Commercial real estate 1 298 47272 48570 Commercial 1587 6257 7844 Inventory 5215 4434 9649 Professional practice 48224 48224 Life insurance contraets 1933 1 933 Automobile 789 789 Consumer 1 083 l 083
Total $ 8695 $ 122386 $ 1 3 1 08 1
20
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 201 4 and 2013
Note 4 - Loans (Continued)
Credit Risk Grading
The Company util izes a loan rating system as a means of identifying problem and potential problem loans The Company assigned the fo llowing loan ratings to loans disaggregated by segment and class as of December 3 1 20 1 4 and 20 1 3 (in thousands)
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile
Consumer
Total
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Life insurance contracts Automobile
Consumer
Total
December 3 1 20 14 Loans rated Loans rated Loans rated
1-5
$ 1 0898 $ 5298
58965 38472
4663 45890
1 22 1 038
$ 1 65346 $
6
===
$
$
7 Total
595 $ 1 1 493 5298
1 297 60262 38472
5576 I 0239 45890
1 22 1 038
7468 $ 1 728 1 4 ====
December 3 1 20 1 3 Loans rated Loans rated Loans rated
1-5 6 7 Total
$ 1 0626 $ 465 $ 595 $ 1 1 686 1 303 1 303
47272 1 298 48570 6257 J 587 7844 4434 52 1 5 9649
48224 48224 I 933 I 933
789 789 1 083 1 083
$ 1 2 1 921 $ 465 $ 8695 $ 1 3 1 08 1
The Company categorized each loan into credit risk categori es based on current fi nancial information overall debt service coverage comparison against industry averages col lateral coverage historical payment experience and current economic trends The Company uses the following definitions for credit risk ratings
2 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Consolidated Balance Sheet
December 3 I 20 I 4 Assets
Cash and due from banks $ 22274125
Federal funds sold 6478902
Total cash and cash equivalents 28753027
Investment securities - Available for sale (Note 3) 22745730 Investment securities - Held to maturity ( Note 3) 4 127891 Federal Home Loan Bank stock I 000000 Loans - Net of allowance for loan losses of $5626979 and $5333892 at
December 3 I 2014 and 2013 respectively (Note 4) I 67 I 26085 Other real estate owned 5486 I 6 I Premises and equipment (Note 5) 6 I 58323 Goodwill 2748077 Accrued interest receivable 623819 Deferred tax asset - Net (Note 8) 655324 I Bank-owned life insurance 4266529 Investment in Chicago Shore Capital Trusts (Note 7) 342000
Other assets 393737
Total assets $ 250324620
Liabilities and Stockholders Equity
Liabilities Deposits
Noninterest-bearing
Interest-bearing
Total deposits ( Note 6)
junior subordinated notes (Note 7) Accrued interest payable Repurchase agreements
Accrued and other liabilities
Total liabilities
Stockholders Equity Preferred shares - Series A net of discount - $I 0 par value
Issued and outstanding -7000 shares at December 3 I 20 I 4 and 20 I 3 Liquidation value - $ I 000 per share ( Note I 2)
Preferred shares - Series B - $I 0 par value Issued and outstanding - 350 shares at December 3 I 20 I 4 and 20 I 3 Liquidation value - $ I 000 per share (Note 12)
Common shares - $ I par value Authorized - 2000000 shares Issued and outstanding - I 206720 and I I 97665 shares at December 3 I 20 I 4 and 20 I 3 respectively
Additional paid-in capital Share subscriptions - 38000 shares subscribed at December 3I 2014 and
2013 (Note I I) Accumulated deficit
Accumulated other comprehensive loss
Total stockholders equity
Total liabilities and stockholders equity
See Notes to Consolidated Financial Statements 3
$ 62956469 I 5323 I 305
2 I 6 I 87774
I 1212335 80063
627959 240490 I
2305 I 3032
7000000
350000
I 206720 12913080
(475000) (526078) (657 134)
I 9811588
$ 250324620
December 3 I 20 I 3
$ 59464227 9595876
69060 I 03
29415214 3303774 1000000
I 25644342 5723065 6335768 2748077
535004 6436242 4 1338 Io
342000 326847
$ 255004246
$ 56029979 I 64628276
220658255
I 1205687 79362
I 33 I 274 I 966690
23524 I 268
69 I 9272
398749
I I 97665 12530480
(475000) (I 2505)
(795683)
I 9762978
$ 255004246
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Operations
Interest and Dividend Income
Loans - Including fees $ Investment securities
Taxable Tax-exempt
Dividend income Federal funds sold
Total interest and dividend income
Interest Expense
Deposits Repurchase agreements
Junior subordinated notes
Total interest expense
Net Interest and Dividend Income
Provision for Loan Losses (Note 4)
Net Interest and Dividend Income After Provision for Loan Losses
Noninterest Income
Service charges and fees on deposits Net gain on investment securities Bank-owned life insurance income
Other
Total noninterest income
Noninterest Expense Salaries and employee benefits (Note 9) Occupancy and equipment Data processing Loss on sale of other real estate owned Loan collection and other real estate owned costs Professional and marketing fees
Other
Total noninterest expenses
Loss - Before income taxes
Income Tax Benefit (Note 8)
Net Loss
Preferred Stock Dividends declared Discount accretionpremium amortization
Net Loss Applicable to Common Shares $
See Notes to Consolidated Financial Statements 4
Year Ended
December 3 I 2014
6800 I 87
I 26536 265 I 89 189837 I 39750
7521 499
719548 526
358400
I 078474
6443025
143004
6300021
332707
132719 369 I 73
834599
3788299 738 I 72 36 I 606
869257 714590 864 154
7336078
(20 I 458)
(171364)
(30094)
(45 I 500) (3 I 979)
(5 I 3573)
December 3 I
$
$
2013
7492261
I 28587 152974 I 88253 161624
8 123699
943671 1034
364645
I 309350
6814349
5 I 06979
I 707370
35 I 304 18026
133810 463 I 20
966260
3810184 740222 346406 749901 64439 I 67 I 354 767652
7730 I JO
(5056480)
( I 978282)
(3078 I 98)
(38 I 500) (8 I 075)
(3540773)
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Comprehensive Income (loss)
Net Loss
Other Comprehensive Income (Loss) Unrealized gain (loss) on investment securities - Available for sale
net of tax Less reclassification adjustment for gains included in net income
net of tax
Total other comprehensive income (loss)
Comprehensive Income (Loss)
See Notes to Consolidated Financial Statements 5
Year Ended
December 3 I December 3 I
$
$
20 1 4 20 1 3
(30094) $ (3078 1 98)
1 38549
1 38549
(285394)
(1 1 358)
(274036)
I 08455 $ (3352234)
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Changes in Stockholders Equity
Retained Accumulated Series A Series B Earnings Other
Preferred Preferred Common Additional Share Accumulated Comprehensive Shares Shares Shares Paid-in Cnital Subscritions Deficit) Loss Total Eguil
Balance - January [ 20 1 3 $ 6838 I 97 $ 398749 $ 1 1 9 1 415 $ 1 2486792 $ (475000) $ 3528268 $ (52 1 647) $ 23446774
Comprehensive loss Net loss (3078 I 98) (3078 I 98) Net unrealized loss on investment securities -
Available for sale - Net of tax (274036) (274036)
Total comprehensive loss (3352234)
Dividends declared on preferred shares (381 500) (381 500)
Discount accretion on preferred shares Bl 075 (BI 075)
Common shares issued 6250 43688 49938
Balance - December 3 1 2 0 1 3 69 1 9272 398749 I 1 97665 1 2530480 (475000) ( 1 2 505) (795683) 1 9762978
Comprehensive income Net loss (30094) (30094) Net unrealized gains on lnvestment securities -
138549 Available for sale - Net of tax 1 38549
Total comprehensive income I 08455
Dividends declared on preferred shares (451 500) (451 500)
Discount accretion (premium amortization) on preferred shares 80728 (48749) (3 1 979)
Common shares issued 9055 40928 49983
Stock-based compensation expense 34 1 672 34 1 672
Balance - December 3 1 20 1 4 $ 7000000 $ 350000 $ 1206720 $ 12913080 $ (475000) $ (526078) $ (657 134) $ 19811588
See Notes to Consolidated Financial Statements 6
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Cash Flows
Cash Flows from Operating Activities Net loss Adjustments to reconcile net loss to net cash provided by
operating activities Depreciation Provision for loan losses Accretion and amortization of securities Gctln on sale of investment securities net Amortization of deferred loan fees Loss on sale of other real estate owned Increase in cash surrender value of bank-owned life insurance Restricted stock unit expense Deferred tax benefit Net change in
Accrued interest receivable and other assets
Accrued interest payable and other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities Activity in available-for-sale securities
Sales Maturities prepayments and calls Purchases
Purchase of investment securities - held to maturity Purchases
Net (increase) decrease in loans Proceeds from sales of other real estate owned Redemption of Federal Home Loan Bank stock Purchase of bank owned life insurance
Purchases of premises and equipment
Net cash ( used in) provided by investing activities
Cash Flows from Financing Activities Net increase in deposits Dividends on preferred shares Decrease in repurchase agreements Change in accrued debt issuance costs
Proceeds from issuance of common shares
Net cash ( used in) provided by financing activities
Net (Decrease) Increase in Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning of year
Cash and Cash Equivalents - End of year
Supplemental Cash Flow Information Cash paid for
Interest Income taxes
Loans transferred to other real estate owned
See Notes to Consolidated Financial Statements 7
$
$
$
Year Ended December 3 I
2014
(30094) $
326383 143004 351601
(42451)
(132719) 121877 ( I 85304)
(I 55705) 658707
I 055299
I 8863923 (I 230354 I)
(859762) (42042639)
697247
(148938)
(35793710)
(4470481) (45 I 500) (7033 I 5)
6648 49983
(5568665)
(40307076)
69060 I 03
28753027 $
1077774 $
460343
2013
(3078 I 98)
317863 5 I 06979
348058 (I 8026) (39044)
749901 (I 338 I 0) 121877
(2021 608)
4 I 8900 904576
2677468
18026 37635
(33 I 0630) 7210658 I I 35496
148657 (4000000)
(335068)
904774
7744446 (381500)
(I 364851) 6648
49938
6054681
9636923
59423180
69060 I 03
1320945 27837
594490
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies
Basis of Presentation and Consolidation - The consolidated fi nancial statements include the accounts of Chicago Shore Corporation (the Company) and its wholly owned subsidiary Delaware Place B ank (the Bank) All significant intercompany balances and transactions have been eliminated in consolidation
Nature of Operations - The Company provides a variety of f inancial services to individuals and businesses in the Chicago metropol itan area through their primary location in Chicago I l l inois Their primary deposit products are demand deposits savings money market and term certif icate accounts and their primary lending products are commercial and commercial mortgage loans
Use of Estimates - In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting period Actual results could d iffer from those estimates Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses the valuation of investment securities other real estate owned deferred tax assets goodwill and the fair value of financial instruments
Cash and Cash Equivalents - For the purpose of the consolidated statement of cash flows cash and cash equivalents include cash and balances due fr om banks and federal funds sold which mature within 90 days
Investment Securities - Debt securities that management has the positive intent and ability to hold to maturity are classified as held to maturity and recorded at amort ized cost Securities not classified as held to maturity including equity securities with readily determinable fair values are classif ied as available for sale and are recorded at fair value with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss)
Purchase premiums and discounts are recognized in interest income using the effective interest method through the maturity or expected repayment period of the securities Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses In estimating other-than-temporary impairment losses management considers ( I ) the length of time and the extent to which the fair value has been less than cost (2) the financia l condition and near-term prospects of the issuer and (3) the i nten t an d ability of the Company to retain its investment in the issuer for a period of time suff icient to allow for any anticipated recovery in fair value Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method
8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Federal Home Loan Bank Stock - The Company is a member of the Federal Home Loan Bank of Chicago (the FHLB ) and is required to maintain a minimu m investment in stock of the FHLB that varies with th e level of advances outstanding with the FHLB Th e stock does not have a readily determinable fair value and is carried at cost and is periodically evaluated for impairment
Loans - Th e Company grants mortgage commercial and consu mer loans to customers A substantial portion of the loan portfolio is represented by commercial loans in the Ch icago metropolitan area Th e abil ity of the B ank s debtors to honor their contracts is dependent upon th e real estate and general economic conditions in this area
Loans that management has th e intent and abil ity to h old for the foreseeable future or u ntil maturity or pay-off are reported at their outstanding unpaid principal balances adjusted for charge-offs the allowance for loan losses and any deferred fees or costs on originated loans Interest income is accrued on the unpaid principal balance Loan origination fees net of certain direct origination costs are deferred and recognized as an adjustment of the related loan yield u sing the interest meth od
The accrual of interest on loans is discontinued at th e time th e loan is 90 days del inquent unless the credit is well-secu red and in process of collection In all cases loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered dou btfu l
Al l interest accru ed but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income The interest on th ese loans is accounted for on the cash basis or cost-recovery meth od u ntil qualifying for return to accru al Loans are returned to accrual status wh en all the principal and interest amounts contractually due are brought current and futu re payments are reasonably assured
Loans are considered delinqu ent when customers fail to make their payments in accordance with the contractual loan agreement If a loan matures and principal remains outstanding the loan is considered delinquent u ntil the loan is paid off or renewed
Gross l oans are reported at th e Companys recorded investment The recorded investment is th e borrowers principal balance less partial charge-offs if any
Allowance for Loan Losses - Th e allowance for loan losses (the allowance) is established as losses are estimated to have occurred through a provision fo r loan losses charged to earnings Loan losses are charged against the allowance when management believes the u ncollectibi lity of a loan balance is confirmed Subsequ ent recoveries if any are credited to the allowance
9
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
The allowance for loan losses is evaluated on a r egu lar basis by management and is based upon managements per iodic r eview of the collectibility of the loans in light of h istor ical exper ience the nature and volu me of the loan portfolio adverse situations that may affect the borrowers abil ity to repay estimated value of any u nder lying col lateral and prevailing economic conditions This evaluation is inher ently subjective as it r equ ires estimates that are susceptible to significant r evision as mor e infor mation becomes available
The allowance consists of specific general and unallocated components The specific component r elates to loans that are classified as impaired For such loans an al lowance is established when the discounted cash flows (or collateral value or observable mar ket pr ice) of the impair ed loan is lower than the car rying value of that loan The general component covers nonimpaired loans and is based on histor ical loss exper ience adju sted for qualitative factor s An unallocated component is maintained to cover u ncer tainties that cou ld affect managements estimate of probable losses The unallocated component of the al lowance reflects the margin of imprecision inher ent in the u nder lying assumptions u sed in the methodologies for estimating specific and general losses in the portfolio
A loan is considered impaired when based on current information and events it is probable that the Company will be u nable to collect the schedu led payments of pr incipal or interest when due according to the contractual ter ms of the loan agr eement Factors consider ed by management in deter mining impair ment include payment status collateral value and the probability of collecting scheduled pr incipal and interest payments when du e Loans that exper ience insignificant payment delays and payment shortfal ls gener ally ar e not classified as impair ed Management deter mines the significance of payment delays and payment shortfalls on a case- by-case basis taking into consideration all of the cir cumstances surrounding the loan and the borrower including length of the delay the r easons for the delay the borrowers pr ior payment recor d and the amou nt of the shortfal l in relation to the pr incipal and interest owed Impairment is measured on a loan-by-loan basis for loans by either the present value of expected future cash flows discou nted at the loans effect ive inter est rate the J oans obtainabl e mar ket pr ice or t he fair value of the collateral if the loan is collateral dependent
Large groups of homogeneous loans are collectively evaluated for impair ment Accor dingly the Company does not separ ately identify individual consumer loans for impairment disclosures
1 0
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Troubled debt rest ruct uring (TDR) of loans is undertaken t o improve the l ikelihood t hat t he loan will be repaid in f ull under t he modif ied t erms in accordance wit h a reasonable repayment schedule All modif ied loans are evaluat ed to det ermine whet her t he loans should be report ed as a TDR A loan is a TDR when t he Company for economic or legal reasons relat ed t o t he borrowers f inancial d ifficult ies grants a concession t o t he borrower by modifying or renewing a loan that t he Company would not otherwise consider To make t his det erminat ion t he Company must det ermine whet her (a) t h e borrower is experiencing financial diff icult ies and (b) t h e Company grant ed t he borrower a concession This det erminat ion requires considerat ion of all t he fact s and circumstances surrounding t he modificat ion An overall general decline in the economy or some det eriorat ion in a borrowers f inancial condit ion does not automat ically mean t he borrower is experiencing f inancial difficult ies Loans t hat are considered TDR are considered impaired and a specif ic reserve is est ablished in the allowance consist ent ly wit h ot her impaired loans
Other Real Estate Owned - Asset s acquired through or in lieu of loan f oreclosure are held f or sale and are initially recorded at fair value less costs t o sell at t he dat e of t he foreclosure est ablishing a new cost basis Subsequent t o f oreclosure valuat ions are periodically perf ormed by management and t he assets are carried at the lower of carrying amount or fair value less cost t o sel l Revenue and expenses f rom operat ions and changes in the valuat ion allowance are included in loan collect ion and other real est at e owned expenses
Premises and Equipment - Land is carried at cost Bu ildings and equipment are carried at cost less accumulat ed depreciat ion comput ed on t he st raight -line met hod over t he est imat ed usef ul l ives of the assets ranging from I to 39 years
Bank Owned Life Insurance - The B ank has purchased life insurance pol icies on certain key offi cers B ank owned life insurance (BOLi) is recorded at it s cash surrender value or t he amount t hat can be realized upon immediate liquidat ion
Goodwill - Goodwill result s f rom prior business acquisit ions and represent s t h e excess of t he purchase price over the fair value of acquired tangible asset s and liabilit ies and ident ifiable intangible assets Goodwill is assessed at least annually f or impairment and any such impairment will be recognized in the period identified There has been no impairment ident if ied during t he years ended December 3 1 20 1 4 and 20 1 3
Income Taxes - Def erred income tax asset s and liabilit ies are det ermined using t h e liabil ity (or balance sheet) met hod Under t his met hod t he net def erred t ax asset or liability is det ermined based on t he t ax effect s of t he various t emporary d iff erences between t he book and tax basis of t he various consolidat ed balance sheet asset s and liabilities and gives current recognit ion t o changes in t ax rat es and laws
1 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
At December 3 1 20 1 4 and 20 1 3 the Company evaluated tax positions taken for filing with the Internal Revenue Service and the State of I l l inois The Company believes that income tax filing positions will be sustained under examination and does not anticipate any adjustments that would result in a material adverse eff ect on the Companys consolidated financial condition results of operations or cash flows Accordingly the Company has not recorded any reserves or related accr uals for interest and penalties for uncertai n tax positions at December 3 1 20 1 4 and 20 1 3 The Company believes it is no longer subject to tax examinati ons for years pri or to 20 I I
Comprehensive Income - Accounting principles generally require that recognized revenue expenses gains and losses be included in net income (loss) Although certain changes in assets and liabilities such as unrealized gains and losses on investment securities - available for sal e are reported as a separate component of the equity section of the consolidated balance sheet such items along with net income (loss) are components of comprehensive income
Stock-based Compensation - The Company applies the recogniti on and measurement provisions of the Compensation - Stock Compensation topi c of the Accounting Standards Codification (ASC) to account for employee stock option costs which is referred to as the calculated value method Compensation costs are measured based on the fair value of the instrument at the date of grant Those compensation costs are expensed on a straight-line basis over the vesting period of the specific instrument There were no stock-based awards granted in 20 1 4 and 20 1 3
Off-balance-sheet Instruments - In the ordinary course of business the Company has entered into commitments under commercial letters of credit and standby letters of credit Such financial instruments are recorded when they are funded
Reclassification - Certain amounts appearing in the prior years consolidated financial statements have been reclassified to conform to the current years consolidated financial statements
12
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Comprehensive Income (Topic 220) -
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income - The Financial Accounting Standards B oard (FASB) issued Accou nting Standards Update (ASU) No 20 1 3-02 Comprehensive Income (Topic 220) - Reporting of Amounts Recossified Out of Accumulated Other Comprehensive Income The ASU requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is requ ired under US generally accepted accounting principles (US GAAP) to be reclassified in its entirety to net income For other amounts that are not requ ired u nder US GAAP to be reclassified in their entirety to net income in the same reporting period an entity is requ ired to cross-reference other disclosures required under US GAAP that provide additional detail about those amounts For nonpu blic entities the ASU is effective prospectively for reporting periods beginning after December 1 5 20 1 3 (therefore for the year ended December 3 I 20 1 4 fo r the Company) and early adoption was allowed Adoption of this update did not have a material effect on the consolidated financial statements
New Accounting Pronouncement - Receivables - Troubled Debt Restructurings by
Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateral
Consumer Mortgage Loans upon Foreclosure - The FASB issued ASU No 20 1 4-04 Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure The amendments in this u pdate clarify that when an in-substance repossession or foreclosu re occu rs and a creditor is considered to have received physical possession of residential property col lateral izing a consu mer mortgage loan u pon either ( I ) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy the loan through completion of a deed in l ieu of foreclosure or through a similar legal agreement Additionally the amendment requ ires disclosure of both ( I ) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans col lateralized by residential real estate property that are in the process of foreclosure according to local requ irements of the applicable jurisdiction The amendments in this u pdate are effective for annual periods beginning after December I 5 20 1 4 (therefore December 3 I 20 I 5 for the Company) Management does not expect the update to have a material effect on the Companys consol idated financial statements
1 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Revenue from Contracts with Customers
(Topic 606) - In May 20 1 4 the Financial Accounting Standards Board issued Accounting Standards Update No 20 1 4-09 Revenue from Contracts with Customers (Topic 606) which will supersede the current revenue recognition requirements in Topic 605 Revenue Recognition The ASU is based o n the princip le that revenue is recognized to depict the transfer of goods or services to customers in an amount that refl ects the consideration to wh ich the entity expects to be entitled in exchange for those goods or services Th e ASU also requ ires additional disclosure about the nature amount timing and uncertainty of revenue and cash fl ows arising from customer contracts including significant judgments and changes in judgments and assets recognized from costs incu rred to obtain or fulfill a contract The new gu idance will be effective for periods beginning af ter December 1 5 201 7 (th erefo re for the year ending December 3 I 20 1 8 for th e Company) Th e ASU permits the new revenue recognition gu idance to be appl ied u sing one of two retrospective application methods The Company h as not yet determined wh ich application method it will use or th e potential eff ects of th e new standard on th e financial statements i f any
Subsequent Events - Th e financial statements and related disclosures include evaluation of events up through and including April 1 3 20 15 wh ich is the date the consolidated financial statements were available to be issued
Note 2 - Restrictions on Cash and Amounts Due from Banks
Th e B ank is required to maintain average cash balances on hand or on deposit with the Federal Reserve B ank At December 3 1 20 1 4 and 20 1 3 th ese reserve balances amounted to $ 1 5 67000 and $ 1 45 2000 respectively
1 4
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities
The amortized cost and estimated fair value of secu rities with gross unreal ized gains and losses are as fol lows
December 3 1 20 1 4 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $ 6988 1 44 $ 86 1 05 $ (2793) $ 707 1 456 M unicipal securities 6363935 438 1 4 6407749 Mortgage-backed securities 5 29975 1 9020 (2264) 5 306507 Other 5 1 50000 ( 1 1 89982) 3 9600 1 8
Total available-for-sale securities $2380 1 830 $ 1 38939 $ ( I I 95039) $ 22745730
Held-to-maturity securities -Mun icipal securities $ 4 I 2789 I $ 305 1 32 $ $ 4433 023
December 3 I 20 I 3 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $187 1 5 1 05 $ 93349 $ $ I 8808454 State and municipal 6 8 I 3 063 77408 (SO I 48) 6 840323 Other 5 I 50000 ( I 383563) 3 766437
Total available-for-sale securities $30678 I 68 $ I 70757 $ ( 1 433 7 1 I ) $ 29 4 1 5 2 1 4
Held-to-maturity secu rities -Municipal securities $ 3 303 774 $ $ (22364) $ 3 28 I 4 I 0
At December 3 I 20 1 4 and 20 1 3 securities with a carrying value of $503498 1 and $8595033 respectively were pledged to secure publ ic deposits repu rchase agreements and for other purposes requ ired or permitted by law
15
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
The amort ized cost and estimated fair value of debt securities by contractual maturity at December 3 1 20 1 4 are as fo llows
Available for Sale Held to Maturity Amort ized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
Due in one year or less $ 5 1 42415 $ 5 1 70 1 88 $ $ Due in one through five
years 32805 35 3 293 783 Due after five years through
ten years 4929 1 29 5 0 1 5 234 Due after ten years 5 000000 3824400 4 1 27891 4433 023
Total 1 8352079 1 7303605 4 1 2789 1 4433 023
Mortgage-backed securities 5 29975 1 5 306507 No stated maturity 1 5 0000 1 35 6 1 8
Total $2380 1 830 $22745 730 $ 4 1 2789 I $ 4433 023
There were no sales of investments during the year ended December 3 I 20 I 4 During the year ended December 3 1 20 I 3 the Company sold securities availabl e for sale with a book value of $0 resulting in realized gains of $ I 8026 There were no gross realized losses on sales of securities available for sale for the year ended December 3 I 20 1 3
1 6
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Information pertain ing to securi ti es with gross un realized losses at December 31 20 1 4 an d 20 1 3 aggregated by investment category an d length of time that in dividual securities have been in a continuous loss position is as follows
December 3 1 20 1 4 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Unrealized Estimated
Losses Fair Value Losses Fair Val ue Available-for-sale securities
US government agen cies $ (2793) $ 2056 222 $ $ Mortgage-backed securities (2264) 25247 1 0 Other ( 1 1 89982) 3 960018
Total available-for-sale secu rities $ (5 05 7) $ 45 80932 $ ( 1 1 89982) $ 3 9600 1 8
December 3 I 20 1 3 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Un realized Estimated
Losses Fair Value Losses Fair Valu e Available-for-sale securities
Mun icipal securities $ (50 1 48) $ 677262 $ $ Other ( 1 383 5 63) 3 766437
Total available-for-sale securities $ (SO 1 48) $ 677262 $ ( 1 3835 63) $ 3 766437
Un realized l osses on securities have n ot been recogn ized into in come because the issu ers bonds are of high credit quality we have the inten t and ability to hold the secu rities for the foreseeable futu re and the declin e in fair value is primarily due to increased market interest rates The fair values a re generally expected to recover as the bonds approach their maturity dates
1 7
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Within other secu rities there is $ 1 1 75 600 of u nrealized losses related to two perpetual preferred secu rities to two large international bank holding companies The u nrealized losses on the perpetual preferred secu rities is attributable to the cu rrent variable dividend rates compared to similar fixed-rate instru ments at each institution The fair value of the Companys perpetual preferred secu rities is expected to increase as the variable dividend rate increases which is contingent u pon the three-month LIB O R rate The Company has the ability and intent to hold the secu rities u ntil their estimated fair values increase
Note 4 - Loans
A summary of the balances of loans follows (in thousands)
20 1 4 20 1 3
Residential $ 1 1 493 $ 1 1 686 Construction and land 5 298 1 303 Commercial real estate 60262 48570 Commercial 38472 7844 I nventory 1 0239 9 649 Professional practice 45890 48224 Life insurance contracts 1 933 Automobile 1 22 789 Consu mer 1 038 1 083
Total gross loans 1 728 1 4 1 3 1 08 1
Less Allowance for loan losses (5 627) (5 334) Net deferred loan fees (6 1 ) ( I 03)
Net loans $ 1 67 1 26 $ 1 25 644
1 8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Loans and the all owance for loan losses ar e disaggregated by segment as foll ows (i n thousands)
Allowance for loan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Allowance for Joan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Ending allowance attributable to loans
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Beginning
Balance
$ 276 $ 2 1 3 900 377
3250 259
12 9
38
$ 5334 $
Beginning
Balance
$ 392 $ 72
849 338 626 587 106
5 54
$ 3029 $
1 9
Year Ended December 3 1 2014
Charge-offs Recoveries Provision Ending Balance
$ $ (45) $ 23 1 42 255
( 142) 758 144 (8) 5 1 3
1 85 3435 ( 1 9) 240
(4) 1 0 ( 1 7) I ( I ) 8
148 1 86
(4) $ 1 54 $ 143 $ 5627
Year Ended December 3 1 2013
Charge-offs Recoveries Provision Ending Balance
$ $ ( 1 1 6) $ 276 ( I 33) 274 2 1 3
5 1 900 9 30 377
(2658) 5282 3250 (328) 259
(36) 1 6 (74) 1 2 4 9
( 1 6) 38
(2827) $ 25 $ 5 107 $ 5334
Year Ended December 3 I bull 2014 Individually Collectively
Evaluated for Evaluated for
Impairment Impairment Ending Balance
$ 130 $ 1 0 1 $ 23 1 255 255
180 578 758 5 1 3 5 1 3
3335 1 00 3435 240 240
I I 8 8
186 186
$ 3645 $ 1 982 $ 5627
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 2014 and 2013
Note 4 - Loans (Continued)
Individually Collectively Evaluated for Evaluated for Impairment Impairment Ending Balance
Loans
Residential $ 595 $ 1 0898 $ 1 1 493 Construction and land 5298 5298 Commercial real estate 1 297 58965 60262 Commercial 38472 38472 Inventory 5576 4663 1 0239 Professional practice 45890 45890 Automobile 122 122 Consumer l 038 1038
Total $ 7468 $ 1 65346 $ 1728 1 4
Year Ended December 3 1 20 1 3 Individually Collectively
Evaluated for Evaluated for Impairment Impairment Ending Balance
Ending allowance attributable to loans
Residential $ 130 $ 146 $ 276 Construction and land 2 13 2 13 Commercial real estate 250 650 900 Commercial 269 1 08 377 Inventory 3000 250 3250 Professional practice 259 259 Automobile 12 12 Consumer 9 9 Unallocated 38 38
Total $ 3649 $ 1685 $ 5334
Individually Collectively Evaluated for Evaluated for Impairment lmpaiffilent Ending Balance
Loans
Residential $ 595 $ 1 1 09 1 $ 1 1 686 Construction and land 1303 1303 Commercial real estate 1 298 47272 48570 Commercial 1587 6257 7844 Inventory 5215 4434 9649 Professional practice 48224 48224 Life insurance contraets 1933 1 933 Automobile 789 789 Consumer 1 083 l 083
Total $ 8695 $ 122386 $ 1 3 1 08 1
20
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 201 4 and 2013
Note 4 - Loans (Continued)
Credit Risk Grading
The Company util izes a loan rating system as a means of identifying problem and potential problem loans The Company assigned the fo llowing loan ratings to loans disaggregated by segment and class as of December 3 1 20 1 4 and 20 1 3 (in thousands)
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile
Consumer
Total
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Life insurance contracts Automobile
Consumer
Total
December 3 1 20 14 Loans rated Loans rated Loans rated
1-5
$ 1 0898 $ 5298
58965 38472
4663 45890
1 22 1 038
$ 1 65346 $
6
===
$
$
7 Total
595 $ 1 1 493 5298
1 297 60262 38472
5576 I 0239 45890
1 22 1 038
7468 $ 1 728 1 4 ====
December 3 1 20 1 3 Loans rated Loans rated Loans rated
1-5 6 7 Total
$ 1 0626 $ 465 $ 595 $ 1 1 686 1 303 1 303
47272 1 298 48570 6257 J 587 7844 4434 52 1 5 9649
48224 48224 I 933 I 933
789 789 1 083 1 083
$ 1 2 1 921 $ 465 $ 8695 $ 1 3 1 08 1
The Company categorized each loan into credit risk categori es based on current fi nancial information overall debt service coverage comparison against industry averages col lateral coverage historical payment experience and current economic trends The Company uses the following definitions for credit risk ratings
2 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Operations
Interest and Dividend Income
Loans - Including fees $ Investment securities
Taxable Tax-exempt
Dividend income Federal funds sold
Total interest and dividend income
Interest Expense
Deposits Repurchase agreements
Junior subordinated notes
Total interest expense
Net Interest and Dividend Income
Provision for Loan Losses (Note 4)
Net Interest and Dividend Income After Provision for Loan Losses
Noninterest Income
Service charges and fees on deposits Net gain on investment securities Bank-owned life insurance income
Other
Total noninterest income
Noninterest Expense Salaries and employee benefits (Note 9) Occupancy and equipment Data processing Loss on sale of other real estate owned Loan collection and other real estate owned costs Professional and marketing fees
Other
Total noninterest expenses
Loss - Before income taxes
Income Tax Benefit (Note 8)
Net Loss
Preferred Stock Dividends declared Discount accretionpremium amortization
Net Loss Applicable to Common Shares $
See Notes to Consolidated Financial Statements 4
Year Ended
December 3 I 2014
6800 I 87
I 26536 265 I 89 189837 I 39750
7521 499
719548 526
358400
I 078474
6443025
143004
6300021
332707
132719 369 I 73
834599
3788299 738 I 72 36 I 606
869257 714590 864 154
7336078
(20 I 458)
(171364)
(30094)
(45 I 500) (3 I 979)
(5 I 3573)
December 3 I
$
$
2013
7492261
I 28587 152974 I 88253 161624
8 123699
943671 1034
364645
I 309350
6814349
5 I 06979
I 707370
35 I 304 18026
133810 463 I 20
966260
3810184 740222 346406 749901 64439 I 67 I 354 767652
7730 I JO
(5056480)
( I 978282)
(3078 I 98)
(38 I 500) (8 I 075)
(3540773)
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Comprehensive Income (loss)
Net Loss
Other Comprehensive Income (Loss) Unrealized gain (loss) on investment securities - Available for sale
net of tax Less reclassification adjustment for gains included in net income
net of tax
Total other comprehensive income (loss)
Comprehensive Income (Loss)
See Notes to Consolidated Financial Statements 5
Year Ended
December 3 I December 3 I
$
$
20 1 4 20 1 3
(30094) $ (3078 1 98)
1 38549
1 38549
(285394)
(1 1 358)
(274036)
I 08455 $ (3352234)
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Changes in Stockholders Equity
Retained Accumulated Series A Series B Earnings Other
Preferred Preferred Common Additional Share Accumulated Comprehensive Shares Shares Shares Paid-in Cnital Subscritions Deficit) Loss Total Eguil
Balance - January [ 20 1 3 $ 6838 I 97 $ 398749 $ 1 1 9 1 415 $ 1 2486792 $ (475000) $ 3528268 $ (52 1 647) $ 23446774
Comprehensive loss Net loss (3078 I 98) (3078 I 98) Net unrealized loss on investment securities -
Available for sale - Net of tax (274036) (274036)
Total comprehensive loss (3352234)
Dividends declared on preferred shares (381 500) (381 500)
Discount accretion on preferred shares Bl 075 (BI 075)
Common shares issued 6250 43688 49938
Balance - December 3 1 2 0 1 3 69 1 9272 398749 I 1 97665 1 2530480 (475000) ( 1 2 505) (795683) 1 9762978
Comprehensive income Net loss (30094) (30094) Net unrealized gains on lnvestment securities -
138549 Available for sale - Net of tax 1 38549
Total comprehensive income I 08455
Dividends declared on preferred shares (451 500) (451 500)
Discount accretion (premium amortization) on preferred shares 80728 (48749) (3 1 979)
Common shares issued 9055 40928 49983
Stock-based compensation expense 34 1 672 34 1 672
Balance - December 3 1 20 1 4 $ 7000000 $ 350000 $ 1206720 $ 12913080 $ (475000) $ (526078) $ (657 134) $ 19811588
See Notes to Consolidated Financial Statements 6
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Cash Flows
Cash Flows from Operating Activities Net loss Adjustments to reconcile net loss to net cash provided by
operating activities Depreciation Provision for loan losses Accretion and amortization of securities Gctln on sale of investment securities net Amortization of deferred loan fees Loss on sale of other real estate owned Increase in cash surrender value of bank-owned life insurance Restricted stock unit expense Deferred tax benefit Net change in
Accrued interest receivable and other assets
Accrued interest payable and other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities Activity in available-for-sale securities
Sales Maturities prepayments and calls Purchases
Purchase of investment securities - held to maturity Purchases
Net (increase) decrease in loans Proceeds from sales of other real estate owned Redemption of Federal Home Loan Bank stock Purchase of bank owned life insurance
Purchases of premises and equipment
Net cash ( used in) provided by investing activities
Cash Flows from Financing Activities Net increase in deposits Dividends on preferred shares Decrease in repurchase agreements Change in accrued debt issuance costs
Proceeds from issuance of common shares
Net cash ( used in) provided by financing activities
Net (Decrease) Increase in Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning of year
Cash and Cash Equivalents - End of year
Supplemental Cash Flow Information Cash paid for
Interest Income taxes
Loans transferred to other real estate owned
See Notes to Consolidated Financial Statements 7
$
$
$
Year Ended December 3 I
2014
(30094) $
326383 143004 351601
(42451)
(132719) 121877 ( I 85304)
(I 55705) 658707
I 055299
I 8863923 (I 230354 I)
(859762) (42042639)
697247
(148938)
(35793710)
(4470481) (45 I 500) (7033 I 5)
6648 49983
(5568665)
(40307076)
69060 I 03
28753027 $
1077774 $
460343
2013
(3078 I 98)
317863 5 I 06979
348058 (I 8026) (39044)
749901 (I 338 I 0) 121877
(2021 608)
4 I 8900 904576
2677468
18026 37635
(33 I 0630) 7210658 I I 35496
148657 (4000000)
(335068)
904774
7744446 (381500)
(I 364851) 6648
49938
6054681
9636923
59423180
69060 I 03
1320945 27837
594490
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies
Basis of Presentation and Consolidation - The consolidated fi nancial statements include the accounts of Chicago Shore Corporation (the Company) and its wholly owned subsidiary Delaware Place B ank (the Bank) All significant intercompany balances and transactions have been eliminated in consolidation
Nature of Operations - The Company provides a variety of f inancial services to individuals and businesses in the Chicago metropol itan area through their primary location in Chicago I l l inois Their primary deposit products are demand deposits savings money market and term certif icate accounts and their primary lending products are commercial and commercial mortgage loans
Use of Estimates - In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting period Actual results could d iffer from those estimates Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses the valuation of investment securities other real estate owned deferred tax assets goodwill and the fair value of financial instruments
Cash and Cash Equivalents - For the purpose of the consolidated statement of cash flows cash and cash equivalents include cash and balances due fr om banks and federal funds sold which mature within 90 days
Investment Securities - Debt securities that management has the positive intent and ability to hold to maturity are classified as held to maturity and recorded at amort ized cost Securities not classified as held to maturity including equity securities with readily determinable fair values are classif ied as available for sale and are recorded at fair value with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss)
Purchase premiums and discounts are recognized in interest income using the effective interest method through the maturity or expected repayment period of the securities Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses In estimating other-than-temporary impairment losses management considers ( I ) the length of time and the extent to which the fair value has been less than cost (2) the financia l condition and near-term prospects of the issuer and (3) the i nten t an d ability of the Company to retain its investment in the issuer for a period of time suff icient to allow for any anticipated recovery in fair value Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method
8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Federal Home Loan Bank Stock - The Company is a member of the Federal Home Loan Bank of Chicago (the FHLB ) and is required to maintain a minimu m investment in stock of the FHLB that varies with th e level of advances outstanding with the FHLB Th e stock does not have a readily determinable fair value and is carried at cost and is periodically evaluated for impairment
Loans - Th e Company grants mortgage commercial and consu mer loans to customers A substantial portion of the loan portfolio is represented by commercial loans in the Ch icago metropolitan area Th e abil ity of the B ank s debtors to honor their contracts is dependent upon th e real estate and general economic conditions in this area
Loans that management has th e intent and abil ity to h old for the foreseeable future or u ntil maturity or pay-off are reported at their outstanding unpaid principal balances adjusted for charge-offs the allowance for loan losses and any deferred fees or costs on originated loans Interest income is accrued on the unpaid principal balance Loan origination fees net of certain direct origination costs are deferred and recognized as an adjustment of the related loan yield u sing the interest meth od
The accrual of interest on loans is discontinued at th e time th e loan is 90 days del inquent unless the credit is well-secu red and in process of collection In all cases loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered dou btfu l
Al l interest accru ed but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income The interest on th ese loans is accounted for on the cash basis or cost-recovery meth od u ntil qualifying for return to accru al Loans are returned to accrual status wh en all the principal and interest amounts contractually due are brought current and futu re payments are reasonably assured
Loans are considered delinqu ent when customers fail to make their payments in accordance with the contractual loan agreement If a loan matures and principal remains outstanding the loan is considered delinquent u ntil the loan is paid off or renewed
Gross l oans are reported at th e Companys recorded investment The recorded investment is th e borrowers principal balance less partial charge-offs if any
Allowance for Loan Losses - Th e allowance for loan losses (the allowance) is established as losses are estimated to have occurred through a provision fo r loan losses charged to earnings Loan losses are charged against the allowance when management believes the u ncollectibi lity of a loan balance is confirmed Subsequ ent recoveries if any are credited to the allowance
9
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
The allowance for loan losses is evaluated on a r egu lar basis by management and is based upon managements per iodic r eview of the collectibility of the loans in light of h istor ical exper ience the nature and volu me of the loan portfolio adverse situations that may affect the borrowers abil ity to repay estimated value of any u nder lying col lateral and prevailing economic conditions This evaluation is inher ently subjective as it r equ ires estimates that are susceptible to significant r evision as mor e infor mation becomes available
The allowance consists of specific general and unallocated components The specific component r elates to loans that are classified as impaired For such loans an al lowance is established when the discounted cash flows (or collateral value or observable mar ket pr ice) of the impair ed loan is lower than the car rying value of that loan The general component covers nonimpaired loans and is based on histor ical loss exper ience adju sted for qualitative factor s An unallocated component is maintained to cover u ncer tainties that cou ld affect managements estimate of probable losses The unallocated component of the al lowance reflects the margin of imprecision inher ent in the u nder lying assumptions u sed in the methodologies for estimating specific and general losses in the portfolio
A loan is considered impaired when based on current information and events it is probable that the Company will be u nable to collect the schedu led payments of pr incipal or interest when due according to the contractual ter ms of the loan agr eement Factors consider ed by management in deter mining impair ment include payment status collateral value and the probability of collecting scheduled pr incipal and interest payments when du e Loans that exper ience insignificant payment delays and payment shortfal ls gener ally ar e not classified as impair ed Management deter mines the significance of payment delays and payment shortfalls on a case- by-case basis taking into consideration all of the cir cumstances surrounding the loan and the borrower including length of the delay the r easons for the delay the borrowers pr ior payment recor d and the amou nt of the shortfal l in relation to the pr incipal and interest owed Impairment is measured on a loan-by-loan basis for loans by either the present value of expected future cash flows discou nted at the loans effect ive inter est rate the J oans obtainabl e mar ket pr ice or t he fair value of the collateral if the loan is collateral dependent
Large groups of homogeneous loans are collectively evaluated for impair ment Accor dingly the Company does not separ ately identify individual consumer loans for impairment disclosures
1 0
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Troubled debt rest ruct uring (TDR) of loans is undertaken t o improve the l ikelihood t hat t he loan will be repaid in f ull under t he modif ied t erms in accordance wit h a reasonable repayment schedule All modif ied loans are evaluat ed to det ermine whet her t he loans should be report ed as a TDR A loan is a TDR when t he Company for economic or legal reasons relat ed t o t he borrowers f inancial d ifficult ies grants a concession t o t he borrower by modifying or renewing a loan that t he Company would not otherwise consider To make t his det erminat ion t he Company must det ermine whet her (a) t h e borrower is experiencing financial diff icult ies and (b) t h e Company grant ed t he borrower a concession This det erminat ion requires considerat ion of all t he fact s and circumstances surrounding t he modificat ion An overall general decline in the economy or some det eriorat ion in a borrowers f inancial condit ion does not automat ically mean t he borrower is experiencing f inancial difficult ies Loans t hat are considered TDR are considered impaired and a specif ic reserve is est ablished in the allowance consist ent ly wit h ot her impaired loans
Other Real Estate Owned - Asset s acquired through or in lieu of loan f oreclosure are held f or sale and are initially recorded at fair value less costs t o sell at t he dat e of t he foreclosure est ablishing a new cost basis Subsequent t o f oreclosure valuat ions are periodically perf ormed by management and t he assets are carried at the lower of carrying amount or fair value less cost t o sel l Revenue and expenses f rom operat ions and changes in the valuat ion allowance are included in loan collect ion and other real est at e owned expenses
Premises and Equipment - Land is carried at cost Bu ildings and equipment are carried at cost less accumulat ed depreciat ion comput ed on t he st raight -line met hod over t he est imat ed usef ul l ives of the assets ranging from I to 39 years
Bank Owned Life Insurance - The B ank has purchased life insurance pol icies on certain key offi cers B ank owned life insurance (BOLi) is recorded at it s cash surrender value or t he amount t hat can be realized upon immediate liquidat ion
Goodwill - Goodwill result s f rom prior business acquisit ions and represent s t h e excess of t he purchase price over the fair value of acquired tangible asset s and liabilit ies and ident ifiable intangible assets Goodwill is assessed at least annually f or impairment and any such impairment will be recognized in the period identified There has been no impairment ident if ied during t he years ended December 3 1 20 1 4 and 20 1 3
Income Taxes - Def erred income tax asset s and liabilit ies are det ermined using t h e liabil ity (or balance sheet) met hod Under t his met hod t he net def erred t ax asset or liability is det ermined based on t he t ax effect s of t he various t emporary d iff erences between t he book and tax basis of t he various consolidat ed balance sheet asset s and liabilities and gives current recognit ion t o changes in t ax rat es and laws
1 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
At December 3 1 20 1 4 and 20 1 3 the Company evaluated tax positions taken for filing with the Internal Revenue Service and the State of I l l inois The Company believes that income tax filing positions will be sustained under examination and does not anticipate any adjustments that would result in a material adverse eff ect on the Companys consolidated financial condition results of operations or cash flows Accordingly the Company has not recorded any reserves or related accr uals for interest and penalties for uncertai n tax positions at December 3 1 20 1 4 and 20 1 3 The Company believes it is no longer subject to tax examinati ons for years pri or to 20 I I
Comprehensive Income - Accounting principles generally require that recognized revenue expenses gains and losses be included in net income (loss) Although certain changes in assets and liabilities such as unrealized gains and losses on investment securities - available for sal e are reported as a separate component of the equity section of the consolidated balance sheet such items along with net income (loss) are components of comprehensive income
Stock-based Compensation - The Company applies the recogniti on and measurement provisions of the Compensation - Stock Compensation topi c of the Accounting Standards Codification (ASC) to account for employee stock option costs which is referred to as the calculated value method Compensation costs are measured based on the fair value of the instrument at the date of grant Those compensation costs are expensed on a straight-line basis over the vesting period of the specific instrument There were no stock-based awards granted in 20 1 4 and 20 1 3
Off-balance-sheet Instruments - In the ordinary course of business the Company has entered into commitments under commercial letters of credit and standby letters of credit Such financial instruments are recorded when they are funded
Reclassification - Certain amounts appearing in the prior years consolidated financial statements have been reclassified to conform to the current years consolidated financial statements
12
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Comprehensive Income (Topic 220) -
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income - The Financial Accounting Standards B oard (FASB) issued Accou nting Standards Update (ASU) No 20 1 3-02 Comprehensive Income (Topic 220) - Reporting of Amounts Recossified Out of Accumulated Other Comprehensive Income The ASU requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is requ ired under US generally accepted accounting principles (US GAAP) to be reclassified in its entirety to net income For other amounts that are not requ ired u nder US GAAP to be reclassified in their entirety to net income in the same reporting period an entity is requ ired to cross-reference other disclosures required under US GAAP that provide additional detail about those amounts For nonpu blic entities the ASU is effective prospectively for reporting periods beginning after December 1 5 20 1 3 (therefore for the year ended December 3 I 20 1 4 fo r the Company) and early adoption was allowed Adoption of this update did not have a material effect on the consolidated financial statements
New Accounting Pronouncement - Receivables - Troubled Debt Restructurings by
Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateral
Consumer Mortgage Loans upon Foreclosure - The FASB issued ASU No 20 1 4-04 Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure The amendments in this u pdate clarify that when an in-substance repossession or foreclosu re occu rs and a creditor is considered to have received physical possession of residential property col lateral izing a consu mer mortgage loan u pon either ( I ) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy the loan through completion of a deed in l ieu of foreclosure or through a similar legal agreement Additionally the amendment requ ires disclosure of both ( I ) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans col lateralized by residential real estate property that are in the process of foreclosure according to local requ irements of the applicable jurisdiction The amendments in this u pdate are effective for annual periods beginning after December I 5 20 1 4 (therefore December 3 I 20 I 5 for the Company) Management does not expect the update to have a material effect on the Companys consol idated financial statements
1 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Revenue from Contracts with Customers
(Topic 606) - In May 20 1 4 the Financial Accounting Standards Board issued Accounting Standards Update No 20 1 4-09 Revenue from Contracts with Customers (Topic 606) which will supersede the current revenue recognition requirements in Topic 605 Revenue Recognition The ASU is based o n the princip le that revenue is recognized to depict the transfer of goods or services to customers in an amount that refl ects the consideration to wh ich the entity expects to be entitled in exchange for those goods or services Th e ASU also requ ires additional disclosure about the nature amount timing and uncertainty of revenue and cash fl ows arising from customer contracts including significant judgments and changes in judgments and assets recognized from costs incu rred to obtain or fulfill a contract The new gu idance will be effective for periods beginning af ter December 1 5 201 7 (th erefo re for the year ending December 3 I 20 1 8 for th e Company) Th e ASU permits the new revenue recognition gu idance to be appl ied u sing one of two retrospective application methods The Company h as not yet determined wh ich application method it will use or th e potential eff ects of th e new standard on th e financial statements i f any
Subsequent Events - Th e financial statements and related disclosures include evaluation of events up through and including April 1 3 20 15 wh ich is the date the consolidated financial statements were available to be issued
Note 2 - Restrictions on Cash and Amounts Due from Banks
Th e B ank is required to maintain average cash balances on hand or on deposit with the Federal Reserve B ank At December 3 1 20 1 4 and 20 1 3 th ese reserve balances amounted to $ 1 5 67000 and $ 1 45 2000 respectively
1 4
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities
The amortized cost and estimated fair value of secu rities with gross unreal ized gains and losses are as fol lows
December 3 1 20 1 4 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $ 6988 1 44 $ 86 1 05 $ (2793) $ 707 1 456 M unicipal securities 6363935 438 1 4 6407749 Mortgage-backed securities 5 29975 1 9020 (2264) 5 306507 Other 5 1 50000 ( 1 1 89982) 3 9600 1 8
Total available-for-sale securities $2380 1 830 $ 1 38939 $ ( I I 95039) $ 22745730
Held-to-maturity securities -Mun icipal securities $ 4 I 2789 I $ 305 1 32 $ $ 4433 023
December 3 I 20 I 3 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $187 1 5 1 05 $ 93349 $ $ I 8808454 State and municipal 6 8 I 3 063 77408 (SO I 48) 6 840323 Other 5 I 50000 ( I 383563) 3 766437
Total available-for-sale securities $30678 I 68 $ I 70757 $ ( 1 433 7 1 I ) $ 29 4 1 5 2 1 4
Held-to-maturity secu rities -Municipal securities $ 3 303 774 $ $ (22364) $ 3 28 I 4 I 0
At December 3 I 20 1 4 and 20 1 3 securities with a carrying value of $503498 1 and $8595033 respectively were pledged to secure publ ic deposits repu rchase agreements and for other purposes requ ired or permitted by law
15
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
The amort ized cost and estimated fair value of debt securities by contractual maturity at December 3 1 20 1 4 are as fo llows
Available for Sale Held to Maturity Amort ized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
Due in one year or less $ 5 1 42415 $ 5 1 70 1 88 $ $ Due in one through five
years 32805 35 3 293 783 Due after five years through
ten years 4929 1 29 5 0 1 5 234 Due after ten years 5 000000 3824400 4 1 27891 4433 023
Total 1 8352079 1 7303605 4 1 2789 1 4433 023
Mortgage-backed securities 5 29975 1 5 306507 No stated maturity 1 5 0000 1 35 6 1 8
Total $2380 1 830 $22745 730 $ 4 1 2789 I $ 4433 023
There were no sales of investments during the year ended December 3 I 20 I 4 During the year ended December 3 1 20 I 3 the Company sold securities availabl e for sale with a book value of $0 resulting in realized gains of $ I 8026 There were no gross realized losses on sales of securities available for sale for the year ended December 3 I 20 1 3
1 6
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Information pertain ing to securi ti es with gross un realized losses at December 31 20 1 4 an d 20 1 3 aggregated by investment category an d length of time that in dividual securities have been in a continuous loss position is as follows
December 3 1 20 1 4 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Unrealized Estimated
Losses Fair Value Losses Fair Val ue Available-for-sale securities
US government agen cies $ (2793) $ 2056 222 $ $ Mortgage-backed securities (2264) 25247 1 0 Other ( 1 1 89982) 3 960018
Total available-for-sale secu rities $ (5 05 7) $ 45 80932 $ ( 1 1 89982) $ 3 9600 1 8
December 3 I 20 1 3 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Un realized Estimated
Losses Fair Value Losses Fair Valu e Available-for-sale securities
Mun icipal securities $ (50 1 48) $ 677262 $ $ Other ( 1 383 5 63) 3 766437
Total available-for-sale securities $ (SO 1 48) $ 677262 $ ( 1 3835 63) $ 3 766437
Un realized l osses on securities have n ot been recogn ized into in come because the issu ers bonds are of high credit quality we have the inten t and ability to hold the secu rities for the foreseeable futu re and the declin e in fair value is primarily due to increased market interest rates The fair values a re generally expected to recover as the bonds approach their maturity dates
1 7
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Within other secu rities there is $ 1 1 75 600 of u nrealized losses related to two perpetual preferred secu rities to two large international bank holding companies The u nrealized losses on the perpetual preferred secu rities is attributable to the cu rrent variable dividend rates compared to similar fixed-rate instru ments at each institution The fair value of the Companys perpetual preferred secu rities is expected to increase as the variable dividend rate increases which is contingent u pon the three-month LIB O R rate The Company has the ability and intent to hold the secu rities u ntil their estimated fair values increase
Note 4 - Loans
A summary of the balances of loans follows (in thousands)
20 1 4 20 1 3
Residential $ 1 1 493 $ 1 1 686 Construction and land 5 298 1 303 Commercial real estate 60262 48570 Commercial 38472 7844 I nventory 1 0239 9 649 Professional practice 45890 48224 Life insurance contracts 1 933 Automobile 1 22 789 Consu mer 1 038 1 083
Total gross loans 1 728 1 4 1 3 1 08 1
Less Allowance for loan losses (5 627) (5 334) Net deferred loan fees (6 1 ) ( I 03)
Net loans $ 1 67 1 26 $ 1 25 644
1 8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Loans and the all owance for loan losses ar e disaggregated by segment as foll ows (i n thousands)
Allowance for loan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Allowance for Joan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Ending allowance attributable to loans
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Beginning
Balance
$ 276 $ 2 1 3 900 377
3250 259
12 9
38
$ 5334 $
Beginning
Balance
$ 392 $ 72
849 338 626 587 106
5 54
$ 3029 $
1 9
Year Ended December 3 1 2014
Charge-offs Recoveries Provision Ending Balance
$ $ (45) $ 23 1 42 255
( 142) 758 144 (8) 5 1 3
1 85 3435 ( 1 9) 240
(4) 1 0 ( 1 7) I ( I ) 8
148 1 86
(4) $ 1 54 $ 143 $ 5627
Year Ended December 3 1 2013
Charge-offs Recoveries Provision Ending Balance
$ $ ( 1 1 6) $ 276 ( I 33) 274 2 1 3
5 1 900 9 30 377
(2658) 5282 3250 (328) 259
(36) 1 6 (74) 1 2 4 9
( 1 6) 38
(2827) $ 25 $ 5 107 $ 5334
Year Ended December 3 I bull 2014 Individually Collectively
Evaluated for Evaluated for
Impairment Impairment Ending Balance
$ 130 $ 1 0 1 $ 23 1 255 255
180 578 758 5 1 3 5 1 3
3335 1 00 3435 240 240
I I 8 8
186 186
$ 3645 $ 1 982 $ 5627
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 2014 and 2013
Note 4 - Loans (Continued)
Individually Collectively Evaluated for Evaluated for Impairment Impairment Ending Balance
Loans
Residential $ 595 $ 1 0898 $ 1 1 493 Construction and land 5298 5298 Commercial real estate 1 297 58965 60262 Commercial 38472 38472 Inventory 5576 4663 1 0239 Professional practice 45890 45890 Automobile 122 122 Consumer l 038 1038
Total $ 7468 $ 1 65346 $ 1728 1 4
Year Ended December 3 1 20 1 3 Individually Collectively
Evaluated for Evaluated for Impairment Impairment Ending Balance
Ending allowance attributable to loans
Residential $ 130 $ 146 $ 276 Construction and land 2 13 2 13 Commercial real estate 250 650 900 Commercial 269 1 08 377 Inventory 3000 250 3250 Professional practice 259 259 Automobile 12 12 Consumer 9 9 Unallocated 38 38
Total $ 3649 $ 1685 $ 5334
Individually Collectively Evaluated for Evaluated for Impairment lmpaiffilent Ending Balance
Loans
Residential $ 595 $ 1 1 09 1 $ 1 1 686 Construction and land 1303 1303 Commercial real estate 1 298 47272 48570 Commercial 1587 6257 7844 Inventory 5215 4434 9649 Professional practice 48224 48224 Life insurance contraets 1933 1 933 Automobile 789 789 Consumer 1 083 l 083
Total $ 8695 $ 122386 $ 1 3 1 08 1
20
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 201 4 and 2013
Note 4 - Loans (Continued)
Credit Risk Grading
The Company util izes a loan rating system as a means of identifying problem and potential problem loans The Company assigned the fo llowing loan ratings to loans disaggregated by segment and class as of December 3 1 20 1 4 and 20 1 3 (in thousands)
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile
Consumer
Total
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Life insurance contracts Automobile
Consumer
Total
December 3 1 20 14 Loans rated Loans rated Loans rated
1-5
$ 1 0898 $ 5298
58965 38472
4663 45890
1 22 1 038
$ 1 65346 $
6
===
$
$
7 Total
595 $ 1 1 493 5298
1 297 60262 38472
5576 I 0239 45890
1 22 1 038
7468 $ 1 728 1 4 ====
December 3 1 20 1 3 Loans rated Loans rated Loans rated
1-5 6 7 Total
$ 1 0626 $ 465 $ 595 $ 1 1 686 1 303 1 303
47272 1 298 48570 6257 J 587 7844 4434 52 1 5 9649
48224 48224 I 933 I 933
789 789 1 083 1 083
$ 1 2 1 921 $ 465 $ 8695 $ 1 3 1 08 1
The Company categorized each loan into credit risk categori es based on current fi nancial information overall debt service coverage comparison against industry averages col lateral coverage historical payment experience and current economic trends The Company uses the following definitions for credit risk ratings
2 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Comprehensive Income (loss)
Net Loss
Other Comprehensive Income (Loss) Unrealized gain (loss) on investment securities - Available for sale
net of tax Less reclassification adjustment for gains included in net income
net of tax
Total other comprehensive income (loss)
Comprehensive Income (Loss)
See Notes to Consolidated Financial Statements 5
Year Ended
December 3 I December 3 I
$
$
20 1 4 20 1 3
(30094) $ (3078 1 98)
1 38549
1 38549
(285394)
(1 1 358)
(274036)
I 08455 $ (3352234)
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Changes in Stockholders Equity
Retained Accumulated Series A Series B Earnings Other
Preferred Preferred Common Additional Share Accumulated Comprehensive Shares Shares Shares Paid-in Cnital Subscritions Deficit) Loss Total Eguil
Balance - January [ 20 1 3 $ 6838 I 97 $ 398749 $ 1 1 9 1 415 $ 1 2486792 $ (475000) $ 3528268 $ (52 1 647) $ 23446774
Comprehensive loss Net loss (3078 I 98) (3078 I 98) Net unrealized loss on investment securities -
Available for sale - Net of tax (274036) (274036)
Total comprehensive loss (3352234)
Dividends declared on preferred shares (381 500) (381 500)
Discount accretion on preferred shares Bl 075 (BI 075)
Common shares issued 6250 43688 49938
Balance - December 3 1 2 0 1 3 69 1 9272 398749 I 1 97665 1 2530480 (475000) ( 1 2 505) (795683) 1 9762978
Comprehensive income Net loss (30094) (30094) Net unrealized gains on lnvestment securities -
138549 Available for sale - Net of tax 1 38549
Total comprehensive income I 08455
Dividends declared on preferred shares (451 500) (451 500)
Discount accretion (premium amortization) on preferred shares 80728 (48749) (3 1 979)
Common shares issued 9055 40928 49983
Stock-based compensation expense 34 1 672 34 1 672
Balance - December 3 1 20 1 4 $ 7000000 $ 350000 $ 1206720 $ 12913080 $ (475000) $ (526078) $ (657 134) $ 19811588
See Notes to Consolidated Financial Statements 6
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Cash Flows
Cash Flows from Operating Activities Net loss Adjustments to reconcile net loss to net cash provided by
operating activities Depreciation Provision for loan losses Accretion and amortization of securities Gctln on sale of investment securities net Amortization of deferred loan fees Loss on sale of other real estate owned Increase in cash surrender value of bank-owned life insurance Restricted stock unit expense Deferred tax benefit Net change in
Accrued interest receivable and other assets
Accrued interest payable and other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities Activity in available-for-sale securities
Sales Maturities prepayments and calls Purchases
Purchase of investment securities - held to maturity Purchases
Net (increase) decrease in loans Proceeds from sales of other real estate owned Redemption of Federal Home Loan Bank stock Purchase of bank owned life insurance
Purchases of premises and equipment
Net cash ( used in) provided by investing activities
Cash Flows from Financing Activities Net increase in deposits Dividends on preferred shares Decrease in repurchase agreements Change in accrued debt issuance costs
Proceeds from issuance of common shares
Net cash ( used in) provided by financing activities
Net (Decrease) Increase in Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning of year
Cash and Cash Equivalents - End of year
Supplemental Cash Flow Information Cash paid for
Interest Income taxes
Loans transferred to other real estate owned
See Notes to Consolidated Financial Statements 7
$
$
$
Year Ended December 3 I
2014
(30094) $
326383 143004 351601
(42451)
(132719) 121877 ( I 85304)
(I 55705) 658707
I 055299
I 8863923 (I 230354 I)
(859762) (42042639)
697247
(148938)
(35793710)
(4470481) (45 I 500) (7033 I 5)
6648 49983
(5568665)
(40307076)
69060 I 03
28753027 $
1077774 $
460343
2013
(3078 I 98)
317863 5 I 06979
348058 (I 8026) (39044)
749901 (I 338 I 0) 121877
(2021 608)
4 I 8900 904576
2677468
18026 37635
(33 I 0630) 7210658 I I 35496
148657 (4000000)
(335068)
904774
7744446 (381500)
(I 364851) 6648
49938
6054681
9636923
59423180
69060 I 03
1320945 27837
594490
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies
Basis of Presentation and Consolidation - The consolidated fi nancial statements include the accounts of Chicago Shore Corporation (the Company) and its wholly owned subsidiary Delaware Place B ank (the Bank) All significant intercompany balances and transactions have been eliminated in consolidation
Nature of Operations - The Company provides a variety of f inancial services to individuals and businesses in the Chicago metropol itan area through their primary location in Chicago I l l inois Their primary deposit products are demand deposits savings money market and term certif icate accounts and their primary lending products are commercial and commercial mortgage loans
Use of Estimates - In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting period Actual results could d iffer from those estimates Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses the valuation of investment securities other real estate owned deferred tax assets goodwill and the fair value of financial instruments
Cash and Cash Equivalents - For the purpose of the consolidated statement of cash flows cash and cash equivalents include cash and balances due fr om banks and federal funds sold which mature within 90 days
Investment Securities - Debt securities that management has the positive intent and ability to hold to maturity are classified as held to maturity and recorded at amort ized cost Securities not classified as held to maturity including equity securities with readily determinable fair values are classif ied as available for sale and are recorded at fair value with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss)
Purchase premiums and discounts are recognized in interest income using the effective interest method through the maturity or expected repayment period of the securities Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses In estimating other-than-temporary impairment losses management considers ( I ) the length of time and the extent to which the fair value has been less than cost (2) the financia l condition and near-term prospects of the issuer and (3) the i nten t an d ability of the Company to retain its investment in the issuer for a period of time suff icient to allow for any anticipated recovery in fair value Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method
8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Federal Home Loan Bank Stock - The Company is a member of the Federal Home Loan Bank of Chicago (the FHLB ) and is required to maintain a minimu m investment in stock of the FHLB that varies with th e level of advances outstanding with the FHLB Th e stock does not have a readily determinable fair value and is carried at cost and is periodically evaluated for impairment
Loans - Th e Company grants mortgage commercial and consu mer loans to customers A substantial portion of the loan portfolio is represented by commercial loans in the Ch icago metropolitan area Th e abil ity of the B ank s debtors to honor their contracts is dependent upon th e real estate and general economic conditions in this area
Loans that management has th e intent and abil ity to h old for the foreseeable future or u ntil maturity or pay-off are reported at their outstanding unpaid principal balances adjusted for charge-offs the allowance for loan losses and any deferred fees or costs on originated loans Interest income is accrued on the unpaid principal balance Loan origination fees net of certain direct origination costs are deferred and recognized as an adjustment of the related loan yield u sing the interest meth od
The accrual of interest on loans is discontinued at th e time th e loan is 90 days del inquent unless the credit is well-secu red and in process of collection In all cases loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered dou btfu l
Al l interest accru ed but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income The interest on th ese loans is accounted for on the cash basis or cost-recovery meth od u ntil qualifying for return to accru al Loans are returned to accrual status wh en all the principal and interest amounts contractually due are brought current and futu re payments are reasonably assured
Loans are considered delinqu ent when customers fail to make their payments in accordance with the contractual loan agreement If a loan matures and principal remains outstanding the loan is considered delinquent u ntil the loan is paid off or renewed
Gross l oans are reported at th e Companys recorded investment The recorded investment is th e borrowers principal balance less partial charge-offs if any
Allowance for Loan Losses - Th e allowance for loan losses (the allowance) is established as losses are estimated to have occurred through a provision fo r loan losses charged to earnings Loan losses are charged against the allowance when management believes the u ncollectibi lity of a loan balance is confirmed Subsequ ent recoveries if any are credited to the allowance
9
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
The allowance for loan losses is evaluated on a r egu lar basis by management and is based upon managements per iodic r eview of the collectibility of the loans in light of h istor ical exper ience the nature and volu me of the loan portfolio adverse situations that may affect the borrowers abil ity to repay estimated value of any u nder lying col lateral and prevailing economic conditions This evaluation is inher ently subjective as it r equ ires estimates that are susceptible to significant r evision as mor e infor mation becomes available
The allowance consists of specific general and unallocated components The specific component r elates to loans that are classified as impaired For such loans an al lowance is established when the discounted cash flows (or collateral value or observable mar ket pr ice) of the impair ed loan is lower than the car rying value of that loan The general component covers nonimpaired loans and is based on histor ical loss exper ience adju sted for qualitative factor s An unallocated component is maintained to cover u ncer tainties that cou ld affect managements estimate of probable losses The unallocated component of the al lowance reflects the margin of imprecision inher ent in the u nder lying assumptions u sed in the methodologies for estimating specific and general losses in the portfolio
A loan is considered impaired when based on current information and events it is probable that the Company will be u nable to collect the schedu led payments of pr incipal or interest when due according to the contractual ter ms of the loan agr eement Factors consider ed by management in deter mining impair ment include payment status collateral value and the probability of collecting scheduled pr incipal and interest payments when du e Loans that exper ience insignificant payment delays and payment shortfal ls gener ally ar e not classified as impair ed Management deter mines the significance of payment delays and payment shortfalls on a case- by-case basis taking into consideration all of the cir cumstances surrounding the loan and the borrower including length of the delay the r easons for the delay the borrowers pr ior payment recor d and the amou nt of the shortfal l in relation to the pr incipal and interest owed Impairment is measured on a loan-by-loan basis for loans by either the present value of expected future cash flows discou nted at the loans effect ive inter est rate the J oans obtainabl e mar ket pr ice or t he fair value of the collateral if the loan is collateral dependent
Large groups of homogeneous loans are collectively evaluated for impair ment Accor dingly the Company does not separ ately identify individual consumer loans for impairment disclosures
1 0
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Troubled debt rest ruct uring (TDR) of loans is undertaken t o improve the l ikelihood t hat t he loan will be repaid in f ull under t he modif ied t erms in accordance wit h a reasonable repayment schedule All modif ied loans are evaluat ed to det ermine whet her t he loans should be report ed as a TDR A loan is a TDR when t he Company for economic or legal reasons relat ed t o t he borrowers f inancial d ifficult ies grants a concession t o t he borrower by modifying or renewing a loan that t he Company would not otherwise consider To make t his det erminat ion t he Company must det ermine whet her (a) t h e borrower is experiencing financial diff icult ies and (b) t h e Company grant ed t he borrower a concession This det erminat ion requires considerat ion of all t he fact s and circumstances surrounding t he modificat ion An overall general decline in the economy or some det eriorat ion in a borrowers f inancial condit ion does not automat ically mean t he borrower is experiencing f inancial difficult ies Loans t hat are considered TDR are considered impaired and a specif ic reserve is est ablished in the allowance consist ent ly wit h ot her impaired loans
Other Real Estate Owned - Asset s acquired through or in lieu of loan f oreclosure are held f or sale and are initially recorded at fair value less costs t o sell at t he dat e of t he foreclosure est ablishing a new cost basis Subsequent t o f oreclosure valuat ions are periodically perf ormed by management and t he assets are carried at the lower of carrying amount or fair value less cost t o sel l Revenue and expenses f rom operat ions and changes in the valuat ion allowance are included in loan collect ion and other real est at e owned expenses
Premises and Equipment - Land is carried at cost Bu ildings and equipment are carried at cost less accumulat ed depreciat ion comput ed on t he st raight -line met hod over t he est imat ed usef ul l ives of the assets ranging from I to 39 years
Bank Owned Life Insurance - The B ank has purchased life insurance pol icies on certain key offi cers B ank owned life insurance (BOLi) is recorded at it s cash surrender value or t he amount t hat can be realized upon immediate liquidat ion
Goodwill - Goodwill result s f rom prior business acquisit ions and represent s t h e excess of t he purchase price over the fair value of acquired tangible asset s and liabilit ies and ident ifiable intangible assets Goodwill is assessed at least annually f or impairment and any such impairment will be recognized in the period identified There has been no impairment ident if ied during t he years ended December 3 1 20 1 4 and 20 1 3
Income Taxes - Def erred income tax asset s and liabilit ies are det ermined using t h e liabil ity (or balance sheet) met hod Under t his met hod t he net def erred t ax asset or liability is det ermined based on t he t ax effect s of t he various t emporary d iff erences between t he book and tax basis of t he various consolidat ed balance sheet asset s and liabilities and gives current recognit ion t o changes in t ax rat es and laws
1 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
At December 3 1 20 1 4 and 20 1 3 the Company evaluated tax positions taken for filing with the Internal Revenue Service and the State of I l l inois The Company believes that income tax filing positions will be sustained under examination and does not anticipate any adjustments that would result in a material adverse eff ect on the Companys consolidated financial condition results of operations or cash flows Accordingly the Company has not recorded any reserves or related accr uals for interest and penalties for uncertai n tax positions at December 3 1 20 1 4 and 20 1 3 The Company believes it is no longer subject to tax examinati ons for years pri or to 20 I I
Comprehensive Income - Accounting principles generally require that recognized revenue expenses gains and losses be included in net income (loss) Although certain changes in assets and liabilities such as unrealized gains and losses on investment securities - available for sal e are reported as a separate component of the equity section of the consolidated balance sheet such items along with net income (loss) are components of comprehensive income
Stock-based Compensation - The Company applies the recogniti on and measurement provisions of the Compensation - Stock Compensation topi c of the Accounting Standards Codification (ASC) to account for employee stock option costs which is referred to as the calculated value method Compensation costs are measured based on the fair value of the instrument at the date of grant Those compensation costs are expensed on a straight-line basis over the vesting period of the specific instrument There were no stock-based awards granted in 20 1 4 and 20 1 3
Off-balance-sheet Instruments - In the ordinary course of business the Company has entered into commitments under commercial letters of credit and standby letters of credit Such financial instruments are recorded when they are funded
Reclassification - Certain amounts appearing in the prior years consolidated financial statements have been reclassified to conform to the current years consolidated financial statements
12
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Comprehensive Income (Topic 220) -
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income - The Financial Accounting Standards B oard (FASB) issued Accou nting Standards Update (ASU) No 20 1 3-02 Comprehensive Income (Topic 220) - Reporting of Amounts Recossified Out of Accumulated Other Comprehensive Income The ASU requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is requ ired under US generally accepted accounting principles (US GAAP) to be reclassified in its entirety to net income For other amounts that are not requ ired u nder US GAAP to be reclassified in their entirety to net income in the same reporting period an entity is requ ired to cross-reference other disclosures required under US GAAP that provide additional detail about those amounts For nonpu blic entities the ASU is effective prospectively for reporting periods beginning after December 1 5 20 1 3 (therefore for the year ended December 3 I 20 1 4 fo r the Company) and early adoption was allowed Adoption of this update did not have a material effect on the consolidated financial statements
New Accounting Pronouncement - Receivables - Troubled Debt Restructurings by
Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateral
Consumer Mortgage Loans upon Foreclosure - The FASB issued ASU No 20 1 4-04 Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure The amendments in this u pdate clarify that when an in-substance repossession or foreclosu re occu rs and a creditor is considered to have received physical possession of residential property col lateral izing a consu mer mortgage loan u pon either ( I ) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy the loan through completion of a deed in l ieu of foreclosure or through a similar legal agreement Additionally the amendment requ ires disclosure of both ( I ) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans col lateralized by residential real estate property that are in the process of foreclosure according to local requ irements of the applicable jurisdiction The amendments in this u pdate are effective for annual periods beginning after December I 5 20 1 4 (therefore December 3 I 20 I 5 for the Company) Management does not expect the update to have a material effect on the Companys consol idated financial statements
1 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Revenue from Contracts with Customers
(Topic 606) - In May 20 1 4 the Financial Accounting Standards Board issued Accounting Standards Update No 20 1 4-09 Revenue from Contracts with Customers (Topic 606) which will supersede the current revenue recognition requirements in Topic 605 Revenue Recognition The ASU is based o n the princip le that revenue is recognized to depict the transfer of goods or services to customers in an amount that refl ects the consideration to wh ich the entity expects to be entitled in exchange for those goods or services Th e ASU also requ ires additional disclosure about the nature amount timing and uncertainty of revenue and cash fl ows arising from customer contracts including significant judgments and changes in judgments and assets recognized from costs incu rred to obtain or fulfill a contract The new gu idance will be effective for periods beginning af ter December 1 5 201 7 (th erefo re for the year ending December 3 I 20 1 8 for th e Company) Th e ASU permits the new revenue recognition gu idance to be appl ied u sing one of two retrospective application methods The Company h as not yet determined wh ich application method it will use or th e potential eff ects of th e new standard on th e financial statements i f any
Subsequent Events - Th e financial statements and related disclosures include evaluation of events up through and including April 1 3 20 15 wh ich is the date the consolidated financial statements were available to be issued
Note 2 - Restrictions on Cash and Amounts Due from Banks
Th e B ank is required to maintain average cash balances on hand or on deposit with the Federal Reserve B ank At December 3 1 20 1 4 and 20 1 3 th ese reserve balances amounted to $ 1 5 67000 and $ 1 45 2000 respectively
1 4
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities
The amortized cost and estimated fair value of secu rities with gross unreal ized gains and losses are as fol lows
December 3 1 20 1 4 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $ 6988 1 44 $ 86 1 05 $ (2793) $ 707 1 456 M unicipal securities 6363935 438 1 4 6407749 Mortgage-backed securities 5 29975 1 9020 (2264) 5 306507 Other 5 1 50000 ( 1 1 89982) 3 9600 1 8
Total available-for-sale securities $2380 1 830 $ 1 38939 $ ( I I 95039) $ 22745730
Held-to-maturity securities -Mun icipal securities $ 4 I 2789 I $ 305 1 32 $ $ 4433 023
December 3 I 20 I 3 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $187 1 5 1 05 $ 93349 $ $ I 8808454 State and municipal 6 8 I 3 063 77408 (SO I 48) 6 840323 Other 5 I 50000 ( I 383563) 3 766437
Total available-for-sale securities $30678 I 68 $ I 70757 $ ( 1 433 7 1 I ) $ 29 4 1 5 2 1 4
Held-to-maturity secu rities -Municipal securities $ 3 303 774 $ $ (22364) $ 3 28 I 4 I 0
At December 3 I 20 1 4 and 20 1 3 securities with a carrying value of $503498 1 and $8595033 respectively were pledged to secure publ ic deposits repu rchase agreements and for other purposes requ ired or permitted by law
15
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
The amort ized cost and estimated fair value of debt securities by contractual maturity at December 3 1 20 1 4 are as fo llows
Available for Sale Held to Maturity Amort ized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
Due in one year or less $ 5 1 42415 $ 5 1 70 1 88 $ $ Due in one through five
years 32805 35 3 293 783 Due after five years through
ten years 4929 1 29 5 0 1 5 234 Due after ten years 5 000000 3824400 4 1 27891 4433 023
Total 1 8352079 1 7303605 4 1 2789 1 4433 023
Mortgage-backed securities 5 29975 1 5 306507 No stated maturity 1 5 0000 1 35 6 1 8
Total $2380 1 830 $22745 730 $ 4 1 2789 I $ 4433 023
There were no sales of investments during the year ended December 3 I 20 I 4 During the year ended December 3 1 20 I 3 the Company sold securities availabl e for sale with a book value of $0 resulting in realized gains of $ I 8026 There were no gross realized losses on sales of securities available for sale for the year ended December 3 I 20 1 3
1 6
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Information pertain ing to securi ti es with gross un realized losses at December 31 20 1 4 an d 20 1 3 aggregated by investment category an d length of time that in dividual securities have been in a continuous loss position is as follows
December 3 1 20 1 4 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Unrealized Estimated
Losses Fair Value Losses Fair Val ue Available-for-sale securities
US government agen cies $ (2793) $ 2056 222 $ $ Mortgage-backed securities (2264) 25247 1 0 Other ( 1 1 89982) 3 960018
Total available-for-sale secu rities $ (5 05 7) $ 45 80932 $ ( 1 1 89982) $ 3 9600 1 8
December 3 I 20 1 3 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Un realized Estimated
Losses Fair Value Losses Fair Valu e Available-for-sale securities
Mun icipal securities $ (50 1 48) $ 677262 $ $ Other ( 1 383 5 63) 3 766437
Total available-for-sale securities $ (SO 1 48) $ 677262 $ ( 1 3835 63) $ 3 766437
Un realized l osses on securities have n ot been recogn ized into in come because the issu ers bonds are of high credit quality we have the inten t and ability to hold the secu rities for the foreseeable futu re and the declin e in fair value is primarily due to increased market interest rates The fair values a re generally expected to recover as the bonds approach their maturity dates
1 7
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Within other secu rities there is $ 1 1 75 600 of u nrealized losses related to two perpetual preferred secu rities to two large international bank holding companies The u nrealized losses on the perpetual preferred secu rities is attributable to the cu rrent variable dividend rates compared to similar fixed-rate instru ments at each institution The fair value of the Companys perpetual preferred secu rities is expected to increase as the variable dividend rate increases which is contingent u pon the three-month LIB O R rate The Company has the ability and intent to hold the secu rities u ntil their estimated fair values increase
Note 4 - Loans
A summary of the balances of loans follows (in thousands)
20 1 4 20 1 3
Residential $ 1 1 493 $ 1 1 686 Construction and land 5 298 1 303 Commercial real estate 60262 48570 Commercial 38472 7844 I nventory 1 0239 9 649 Professional practice 45890 48224 Life insurance contracts 1 933 Automobile 1 22 789 Consu mer 1 038 1 083
Total gross loans 1 728 1 4 1 3 1 08 1
Less Allowance for loan losses (5 627) (5 334) Net deferred loan fees (6 1 ) ( I 03)
Net loans $ 1 67 1 26 $ 1 25 644
1 8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Loans and the all owance for loan losses ar e disaggregated by segment as foll ows (i n thousands)
Allowance for loan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Allowance for Joan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Ending allowance attributable to loans
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Beginning
Balance
$ 276 $ 2 1 3 900 377
3250 259
12 9
38
$ 5334 $
Beginning
Balance
$ 392 $ 72
849 338 626 587 106
5 54
$ 3029 $
1 9
Year Ended December 3 1 2014
Charge-offs Recoveries Provision Ending Balance
$ $ (45) $ 23 1 42 255
( 142) 758 144 (8) 5 1 3
1 85 3435 ( 1 9) 240
(4) 1 0 ( 1 7) I ( I ) 8
148 1 86
(4) $ 1 54 $ 143 $ 5627
Year Ended December 3 1 2013
Charge-offs Recoveries Provision Ending Balance
$ $ ( 1 1 6) $ 276 ( I 33) 274 2 1 3
5 1 900 9 30 377
(2658) 5282 3250 (328) 259
(36) 1 6 (74) 1 2 4 9
( 1 6) 38
(2827) $ 25 $ 5 107 $ 5334
Year Ended December 3 I bull 2014 Individually Collectively
Evaluated for Evaluated for
Impairment Impairment Ending Balance
$ 130 $ 1 0 1 $ 23 1 255 255
180 578 758 5 1 3 5 1 3
3335 1 00 3435 240 240
I I 8 8
186 186
$ 3645 $ 1 982 $ 5627
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 2014 and 2013
Note 4 - Loans (Continued)
Individually Collectively Evaluated for Evaluated for Impairment Impairment Ending Balance
Loans
Residential $ 595 $ 1 0898 $ 1 1 493 Construction and land 5298 5298 Commercial real estate 1 297 58965 60262 Commercial 38472 38472 Inventory 5576 4663 1 0239 Professional practice 45890 45890 Automobile 122 122 Consumer l 038 1038
Total $ 7468 $ 1 65346 $ 1728 1 4
Year Ended December 3 1 20 1 3 Individually Collectively
Evaluated for Evaluated for Impairment Impairment Ending Balance
Ending allowance attributable to loans
Residential $ 130 $ 146 $ 276 Construction and land 2 13 2 13 Commercial real estate 250 650 900 Commercial 269 1 08 377 Inventory 3000 250 3250 Professional practice 259 259 Automobile 12 12 Consumer 9 9 Unallocated 38 38
Total $ 3649 $ 1685 $ 5334
Individually Collectively Evaluated for Evaluated for Impairment lmpaiffilent Ending Balance
Loans
Residential $ 595 $ 1 1 09 1 $ 1 1 686 Construction and land 1303 1303 Commercial real estate 1 298 47272 48570 Commercial 1587 6257 7844 Inventory 5215 4434 9649 Professional practice 48224 48224 Life insurance contraets 1933 1 933 Automobile 789 789 Consumer 1 083 l 083
Total $ 8695 $ 122386 $ 1 3 1 08 1
20
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 201 4 and 2013
Note 4 - Loans (Continued)
Credit Risk Grading
The Company util izes a loan rating system as a means of identifying problem and potential problem loans The Company assigned the fo llowing loan ratings to loans disaggregated by segment and class as of December 3 1 20 1 4 and 20 1 3 (in thousands)
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile
Consumer
Total
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Life insurance contracts Automobile
Consumer
Total
December 3 1 20 14 Loans rated Loans rated Loans rated
1-5
$ 1 0898 $ 5298
58965 38472
4663 45890
1 22 1 038
$ 1 65346 $
6
===
$
$
7 Total
595 $ 1 1 493 5298
1 297 60262 38472
5576 I 0239 45890
1 22 1 038
7468 $ 1 728 1 4 ====
December 3 1 20 1 3 Loans rated Loans rated Loans rated
1-5 6 7 Total
$ 1 0626 $ 465 $ 595 $ 1 1 686 1 303 1 303
47272 1 298 48570 6257 J 587 7844 4434 52 1 5 9649
48224 48224 I 933 I 933
789 789 1 083 1 083
$ 1 2 1 921 $ 465 $ 8695 $ 1 3 1 08 1
The Company categorized each loan into credit risk categori es based on current fi nancial information overall debt service coverage comparison against industry averages col lateral coverage historical payment experience and current economic trends The Company uses the following definitions for credit risk ratings
2 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
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Actions
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Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
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Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
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Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Changes in Stockholders Equity
Retained Accumulated Series A Series B Earnings Other
Preferred Preferred Common Additional Share Accumulated Comprehensive Shares Shares Shares Paid-in Cnital Subscritions Deficit) Loss Total Eguil
Balance - January [ 20 1 3 $ 6838 I 97 $ 398749 $ 1 1 9 1 415 $ 1 2486792 $ (475000) $ 3528268 $ (52 1 647) $ 23446774
Comprehensive loss Net loss (3078 I 98) (3078 I 98) Net unrealized loss on investment securities -
Available for sale - Net of tax (274036) (274036)
Total comprehensive loss (3352234)
Dividends declared on preferred shares (381 500) (381 500)
Discount accretion on preferred shares Bl 075 (BI 075)
Common shares issued 6250 43688 49938
Balance - December 3 1 2 0 1 3 69 1 9272 398749 I 1 97665 1 2530480 (475000) ( 1 2 505) (795683) 1 9762978
Comprehensive income Net loss (30094) (30094) Net unrealized gains on lnvestment securities -
138549 Available for sale - Net of tax 1 38549
Total comprehensive income I 08455
Dividends declared on preferred shares (451 500) (451 500)
Discount accretion (premium amortization) on preferred shares 80728 (48749) (3 1 979)
Common shares issued 9055 40928 49983
Stock-based compensation expense 34 1 672 34 1 672
Balance - December 3 1 20 1 4 $ 7000000 $ 350000 $ 1206720 $ 12913080 $ (475000) $ (526078) $ (657 134) $ 19811588
See Notes to Consolidated Financial Statements 6
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Cash Flows
Cash Flows from Operating Activities Net loss Adjustments to reconcile net loss to net cash provided by
operating activities Depreciation Provision for loan losses Accretion and amortization of securities Gctln on sale of investment securities net Amortization of deferred loan fees Loss on sale of other real estate owned Increase in cash surrender value of bank-owned life insurance Restricted stock unit expense Deferred tax benefit Net change in
Accrued interest receivable and other assets
Accrued interest payable and other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities Activity in available-for-sale securities
Sales Maturities prepayments and calls Purchases
Purchase of investment securities - held to maturity Purchases
Net (increase) decrease in loans Proceeds from sales of other real estate owned Redemption of Federal Home Loan Bank stock Purchase of bank owned life insurance
Purchases of premises and equipment
Net cash ( used in) provided by investing activities
Cash Flows from Financing Activities Net increase in deposits Dividends on preferred shares Decrease in repurchase agreements Change in accrued debt issuance costs
Proceeds from issuance of common shares
Net cash ( used in) provided by financing activities
Net (Decrease) Increase in Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning of year
Cash and Cash Equivalents - End of year
Supplemental Cash Flow Information Cash paid for
Interest Income taxes
Loans transferred to other real estate owned
See Notes to Consolidated Financial Statements 7
$
$
$
Year Ended December 3 I
2014
(30094) $
326383 143004 351601
(42451)
(132719) 121877 ( I 85304)
(I 55705) 658707
I 055299
I 8863923 (I 230354 I)
(859762) (42042639)
697247
(148938)
(35793710)
(4470481) (45 I 500) (7033 I 5)
6648 49983
(5568665)
(40307076)
69060 I 03
28753027 $
1077774 $
460343
2013
(3078 I 98)
317863 5 I 06979
348058 (I 8026) (39044)
749901 (I 338 I 0) 121877
(2021 608)
4 I 8900 904576
2677468
18026 37635
(33 I 0630) 7210658 I I 35496
148657 (4000000)
(335068)
904774
7744446 (381500)
(I 364851) 6648
49938
6054681
9636923
59423180
69060 I 03
1320945 27837
594490
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies
Basis of Presentation and Consolidation - The consolidated fi nancial statements include the accounts of Chicago Shore Corporation (the Company) and its wholly owned subsidiary Delaware Place B ank (the Bank) All significant intercompany balances and transactions have been eliminated in consolidation
Nature of Operations - The Company provides a variety of f inancial services to individuals and businesses in the Chicago metropol itan area through their primary location in Chicago I l l inois Their primary deposit products are demand deposits savings money market and term certif icate accounts and their primary lending products are commercial and commercial mortgage loans
Use of Estimates - In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting period Actual results could d iffer from those estimates Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses the valuation of investment securities other real estate owned deferred tax assets goodwill and the fair value of financial instruments
Cash and Cash Equivalents - For the purpose of the consolidated statement of cash flows cash and cash equivalents include cash and balances due fr om banks and federal funds sold which mature within 90 days
Investment Securities - Debt securities that management has the positive intent and ability to hold to maturity are classified as held to maturity and recorded at amort ized cost Securities not classified as held to maturity including equity securities with readily determinable fair values are classif ied as available for sale and are recorded at fair value with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss)
Purchase premiums and discounts are recognized in interest income using the effective interest method through the maturity or expected repayment period of the securities Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses In estimating other-than-temporary impairment losses management considers ( I ) the length of time and the extent to which the fair value has been less than cost (2) the financia l condition and near-term prospects of the issuer and (3) the i nten t an d ability of the Company to retain its investment in the issuer for a period of time suff icient to allow for any anticipated recovery in fair value Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method
8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Federal Home Loan Bank Stock - The Company is a member of the Federal Home Loan Bank of Chicago (the FHLB ) and is required to maintain a minimu m investment in stock of the FHLB that varies with th e level of advances outstanding with the FHLB Th e stock does not have a readily determinable fair value and is carried at cost and is periodically evaluated for impairment
Loans - Th e Company grants mortgage commercial and consu mer loans to customers A substantial portion of the loan portfolio is represented by commercial loans in the Ch icago metropolitan area Th e abil ity of the B ank s debtors to honor their contracts is dependent upon th e real estate and general economic conditions in this area
Loans that management has th e intent and abil ity to h old for the foreseeable future or u ntil maturity or pay-off are reported at their outstanding unpaid principal balances adjusted for charge-offs the allowance for loan losses and any deferred fees or costs on originated loans Interest income is accrued on the unpaid principal balance Loan origination fees net of certain direct origination costs are deferred and recognized as an adjustment of the related loan yield u sing the interest meth od
The accrual of interest on loans is discontinued at th e time th e loan is 90 days del inquent unless the credit is well-secu red and in process of collection In all cases loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered dou btfu l
Al l interest accru ed but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income The interest on th ese loans is accounted for on the cash basis or cost-recovery meth od u ntil qualifying for return to accru al Loans are returned to accrual status wh en all the principal and interest amounts contractually due are brought current and futu re payments are reasonably assured
Loans are considered delinqu ent when customers fail to make their payments in accordance with the contractual loan agreement If a loan matures and principal remains outstanding the loan is considered delinquent u ntil the loan is paid off or renewed
Gross l oans are reported at th e Companys recorded investment The recorded investment is th e borrowers principal balance less partial charge-offs if any
Allowance for Loan Losses - Th e allowance for loan losses (the allowance) is established as losses are estimated to have occurred through a provision fo r loan losses charged to earnings Loan losses are charged against the allowance when management believes the u ncollectibi lity of a loan balance is confirmed Subsequ ent recoveries if any are credited to the allowance
9
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
The allowance for loan losses is evaluated on a r egu lar basis by management and is based upon managements per iodic r eview of the collectibility of the loans in light of h istor ical exper ience the nature and volu me of the loan portfolio adverse situations that may affect the borrowers abil ity to repay estimated value of any u nder lying col lateral and prevailing economic conditions This evaluation is inher ently subjective as it r equ ires estimates that are susceptible to significant r evision as mor e infor mation becomes available
The allowance consists of specific general and unallocated components The specific component r elates to loans that are classified as impaired For such loans an al lowance is established when the discounted cash flows (or collateral value or observable mar ket pr ice) of the impair ed loan is lower than the car rying value of that loan The general component covers nonimpaired loans and is based on histor ical loss exper ience adju sted for qualitative factor s An unallocated component is maintained to cover u ncer tainties that cou ld affect managements estimate of probable losses The unallocated component of the al lowance reflects the margin of imprecision inher ent in the u nder lying assumptions u sed in the methodologies for estimating specific and general losses in the portfolio
A loan is considered impaired when based on current information and events it is probable that the Company will be u nable to collect the schedu led payments of pr incipal or interest when due according to the contractual ter ms of the loan agr eement Factors consider ed by management in deter mining impair ment include payment status collateral value and the probability of collecting scheduled pr incipal and interest payments when du e Loans that exper ience insignificant payment delays and payment shortfal ls gener ally ar e not classified as impair ed Management deter mines the significance of payment delays and payment shortfalls on a case- by-case basis taking into consideration all of the cir cumstances surrounding the loan and the borrower including length of the delay the r easons for the delay the borrowers pr ior payment recor d and the amou nt of the shortfal l in relation to the pr incipal and interest owed Impairment is measured on a loan-by-loan basis for loans by either the present value of expected future cash flows discou nted at the loans effect ive inter est rate the J oans obtainabl e mar ket pr ice or t he fair value of the collateral if the loan is collateral dependent
Large groups of homogeneous loans are collectively evaluated for impair ment Accor dingly the Company does not separ ately identify individual consumer loans for impairment disclosures
1 0
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Troubled debt rest ruct uring (TDR) of loans is undertaken t o improve the l ikelihood t hat t he loan will be repaid in f ull under t he modif ied t erms in accordance wit h a reasonable repayment schedule All modif ied loans are evaluat ed to det ermine whet her t he loans should be report ed as a TDR A loan is a TDR when t he Company for economic or legal reasons relat ed t o t he borrowers f inancial d ifficult ies grants a concession t o t he borrower by modifying or renewing a loan that t he Company would not otherwise consider To make t his det erminat ion t he Company must det ermine whet her (a) t h e borrower is experiencing financial diff icult ies and (b) t h e Company grant ed t he borrower a concession This det erminat ion requires considerat ion of all t he fact s and circumstances surrounding t he modificat ion An overall general decline in the economy or some det eriorat ion in a borrowers f inancial condit ion does not automat ically mean t he borrower is experiencing f inancial difficult ies Loans t hat are considered TDR are considered impaired and a specif ic reserve is est ablished in the allowance consist ent ly wit h ot her impaired loans
Other Real Estate Owned - Asset s acquired through or in lieu of loan f oreclosure are held f or sale and are initially recorded at fair value less costs t o sell at t he dat e of t he foreclosure est ablishing a new cost basis Subsequent t o f oreclosure valuat ions are periodically perf ormed by management and t he assets are carried at the lower of carrying amount or fair value less cost t o sel l Revenue and expenses f rom operat ions and changes in the valuat ion allowance are included in loan collect ion and other real est at e owned expenses
Premises and Equipment - Land is carried at cost Bu ildings and equipment are carried at cost less accumulat ed depreciat ion comput ed on t he st raight -line met hod over t he est imat ed usef ul l ives of the assets ranging from I to 39 years
Bank Owned Life Insurance - The B ank has purchased life insurance pol icies on certain key offi cers B ank owned life insurance (BOLi) is recorded at it s cash surrender value or t he amount t hat can be realized upon immediate liquidat ion
Goodwill - Goodwill result s f rom prior business acquisit ions and represent s t h e excess of t he purchase price over the fair value of acquired tangible asset s and liabilit ies and ident ifiable intangible assets Goodwill is assessed at least annually f or impairment and any such impairment will be recognized in the period identified There has been no impairment ident if ied during t he years ended December 3 1 20 1 4 and 20 1 3
Income Taxes - Def erred income tax asset s and liabilit ies are det ermined using t h e liabil ity (or balance sheet) met hod Under t his met hod t he net def erred t ax asset or liability is det ermined based on t he t ax effect s of t he various t emporary d iff erences between t he book and tax basis of t he various consolidat ed balance sheet asset s and liabilities and gives current recognit ion t o changes in t ax rat es and laws
1 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
At December 3 1 20 1 4 and 20 1 3 the Company evaluated tax positions taken for filing with the Internal Revenue Service and the State of I l l inois The Company believes that income tax filing positions will be sustained under examination and does not anticipate any adjustments that would result in a material adverse eff ect on the Companys consolidated financial condition results of operations or cash flows Accordingly the Company has not recorded any reserves or related accr uals for interest and penalties for uncertai n tax positions at December 3 1 20 1 4 and 20 1 3 The Company believes it is no longer subject to tax examinati ons for years pri or to 20 I I
Comprehensive Income - Accounting principles generally require that recognized revenue expenses gains and losses be included in net income (loss) Although certain changes in assets and liabilities such as unrealized gains and losses on investment securities - available for sal e are reported as a separate component of the equity section of the consolidated balance sheet such items along with net income (loss) are components of comprehensive income
Stock-based Compensation - The Company applies the recogniti on and measurement provisions of the Compensation - Stock Compensation topi c of the Accounting Standards Codification (ASC) to account for employee stock option costs which is referred to as the calculated value method Compensation costs are measured based on the fair value of the instrument at the date of grant Those compensation costs are expensed on a straight-line basis over the vesting period of the specific instrument There were no stock-based awards granted in 20 1 4 and 20 1 3
Off-balance-sheet Instruments - In the ordinary course of business the Company has entered into commitments under commercial letters of credit and standby letters of credit Such financial instruments are recorded when they are funded
Reclassification - Certain amounts appearing in the prior years consolidated financial statements have been reclassified to conform to the current years consolidated financial statements
12
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Comprehensive Income (Topic 220) -
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income - The Financial Accounting Standards B oard (FASB) issued Accou nting Standards Update (ASU) No 20 1 3-02 Comprehensive Income (Topic 220) - Reporting of Amounts Recossified Out of Accumulated Other Comprehensive Income The ASU requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is requ ired under US generally accepted accounting principles (US GAAP) to be reclassified in its entirety to net income For other amounts that are not requ ired u nder US GAAP to be reclassified in their entirety to net income in the same reporting period an entity is requ ired to cross-reference other disclosures required under US GAAP that provide additional detail about those amounts For nonpu blic entities the ASU is effective prospectively for reporting periods beginning after December 1 5 20 1 3 (therefore for the year ended December 3 I 20 1 4 fo r the Company) and early adoption was allowed Adoption of this update did not have a material effect on the consolidated financial statements
New Accounting Pronouncement - Receivables - Troubled Debt Restructurings by
Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateral
Consumer Mortgage Loans upon Foreclosure - The FASB issued ASU No 20 1 4-04 Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure The amendments in this u pdate clarify that when an in-substance repossession or foreclosu re occu rs and a creditor is considered to have received physical possession of residential property col lateral izing a consu mer mortgage loan u pon either ( I ) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy the loan through completion of a deed in l ieu of foreclosure or through a similar legal agreement Additionally the amendment requ ires disclosure of both ( I ) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans col lateralized by residential real estate property that are in the process of foreclosure according to local requ irements of the applicable jurisdiction The amendments in this u pdate are effective for annual periods beginning after December I 5 20 1 4 (therefore December 3 I 20 I 5 for the Company) Management does not expect the update to have a material effect on the Companys consol idated financial statements
1 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Revenue from Contracts with Customers
(Topic 606) - In May 20 1 4 the Financial Accounting Standards Board issued Accounting Standards Update No 20 1 4-09 Revenue from Contracts with Customers (Topic 606) which will supersede the current revenue recognition requirements in Topic 605 Revenue Recognition The ASU is based o n the princip le that revenue is recognized to depict the transfer of goods or services to customers in an amount that refl ects the consideration to wh ich the entity expects to be entitled in exchange for those goods or services Th e ASU also requ ires additional disclosure about the nature amount timing and uncertainty of revenue and cash fl ows arising from customer contracts including significant judgments and changes in judgments and assets recognized from costs incu rred to obtain or fulfill a contract The new gu idance will be effective for periods beginning af ter December 1 5 201 7 (th erefo re for the year ending December 3 I 20 1 8 for th e Company) Th e ASU permits the new revenue recognition gu idance to be appl ied u sing one of two retrospective application methods The Company h as not yet determined wh ich application method it will use or th e potential eff ects of th e new standard on th e financial statements i f any
Subsequent Events - Th e financial statements and related disclosures include evaluation of events up through and including April 1 3 20 15 wh ich is the date the consolidated financial statements were available to be issued
Note 2 - Restrictions on Cash and Amounts Due from Banks
Th e B ank is required to maintain average cash balances on hand or on deposit with the Federal Reserve B ank At December 3 1 20 1 4 and 20 1 3 th ese reserve balances amounted to $ 1 5 67000 and $ 1 45 2000 respectively
1 4
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities
The amortized cost and estimated fair value of secu rities with gross unreal ized gains and losses are as fol lows
December 3 1 20 1 4 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $ 6988 1 44 $ 86 1 05 $ (2793) $ 707 1 456 M unicipal securities 6363935 438 1 4 6407749 Mortgage-backed securities 5 29975 1 9020 (2264) 5 306507 Other 5 1 50000 ( 1 1 89982) 3 9600 1 8
Total available-for-sale securities $2380 1 830 $ 1 38939 $ ( I I 95039) $ 22745730
Held-to-maturity securities -Mun icipal securities $ 4 I 2789 I $ 305 1 32 $ $ 4433 023
December 3 I 20 I 3 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $187 1 5 1 05 $ 93349 $ $ I 8808454 State and municipal 6 8 I 3 063 77408 (SO I 48) 6 840323 Other 5 I 50000 ( I 383563) 3 766437
Total available-for-sale securities $30678 I 68 $ I 70757 $ ( 1 433 7 1 I ) $ 29 4 1 5 2 1 4
Held-to-maturity secu rities -Municipal securities $ 3 303 774 $ $ (22364) $ 3 28 I 4 I 0
At December 3 I 20 1 4 and 20 1 3 securities with a carrying value of $503498 1 and $8595033 respectively were pledged to secure publ ic deposits repu rchase agreements and for other purposes requ ired or permitted by law
15
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
The amort ized cost and estimated fair value of debt securities by contractual maturity at December 3 1 20 1 4 are as fo llows
Available for Sale Held to Maturity Amort ized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
Due in one year or less $ 5 1 42415 $ 5 1 70 1 88 $ $ Due in one through five
years 32805 35 3 293 783 Due after five years through
ten years 4929 1 29 5 0 1 5 234 Due after ten years 5 000000 3824400 4 1 27891 4433 023
Total 1 8352079 1 7303605 4 1 2789 1 4433 023
Mortgage-backed securities 5 29975 1 5 306507 No stated maturity 1 5 0000 1 35 6 1 8
Total $2380 1 830 $22745 730 $ 4 1 2789 I $ 4433 023
There were no sales of investments during the year ended December 3 I 20 I 4 During the year ended December 3 1 20 I 3 the Company sold securities availabl e for sale with a book value of $0 resulting in realized gains of $ I 8026 There were no gross realized losses on sales of securities available for sale for the year ended December 3 I 20 1 3
1 6
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Information pertain ing to securi ti es with gross un realized losses at December 31 20 1 4 an d 20 1 3 aggregated by investment category an d length of time that in dividual securities have been in a continuous loss position is as follows
December 3 1 20 1 4 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Unrealized Estimated
Losses Fair Value Losses Fair Val ue Available-for-sale securities
US government agen cies $ (2793) $ 2056 222 $ $ Mortgage-backed securities (2264) 25247 1 0 Other ( 1 1 89982) 3 960018
Total available-for-sale secu rities $ (5 05 7) $ 45 80932 $ ( 1 1 89982) $ 3 9600 1 8
December 3 I 20 1 3 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Un realized Estimated
Losses Fair Value Losses Fair Valu e Available-for-sale securities
Mun icipal securities $ (50 1 48) $ 677262 $ $ Other ( 1 383 5 63) 3 766437
Total available-for-sale securities $ (SO 1 48) $ 677262 $ ( 1 3835 63) $ 3 766437
Un realized l osses on securities have n ot been recogn ized into in come because the issu ers bonds are of high credit quality we have the inten t and ability to hold the secu rities for the foreseeable futu re and the declin e in fair value is primarily due to increased market interest rates The fair values a re generally expected to recover as the bonds approach their maturity dates
1 7
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Within other secu rities there is $ 1 1 75 600 of u nrealized losses related to two perpetual preferred secu rities to two large international bank holding companies The u nrealized losses on the perpetual preferred secu rities is attributable to the cu rrent variable dividend rates compared to similar fixed-rate instru ments at each institution The fair value of the Companys perpetual preferred secu rities is expected to increase as the variable dividend rate increases which is contingent u pon the three-month LIB O R rate The Company has the ability and intent to hold the secu rities u ntil their estimated fair values increase
Note 4 - Loans
A summary of the balances of loans follows (in thousands)
20 1 4 20 1 3
Residential $ 1 1 493 $ 1 1 686 Construction and land 5 298 1 303 Commercial real estate 60262 48570 Commercial 38472 7844 I nventory 1 0239 9 649 Professional practice 45890 48224 Life insurance contracts 1 933 Automobile 1 22 789 Consu mer 1 038 1 083
Total gross loans 1 728 1 4 1 3 1 08 1
Less Allowance for loan losses (5 627) (5 334) Net deferred loan fees (6 1 ) ( I 03)
Net loans $ 1 67 1 26 $ 1 25 644
1 8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Loans and the all owance for loan losses ar e disaggregated by segment as foll ows (i n thousands)
Allowance for loan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Allowance for Joan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Ending allowance attributable to loans
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Beginning
Balance
$ 276 $ 2 1 3 900 377
3250 259
12 9
38
$ 5334 $
Beginning
Balance
$ 392 $ 72
849 338 626 587 106
5 54
$ 3029 $
1 9
Year Ended December 3 1 2014
Charge-offs Recoveries Provision Ending Balance
$ $ (45) $ 23 1 42 255
( 142) 758 144 (8) 5 1 3
1 85 3435 ( 1 9) 240
(4) 1 0 ( 1 7) I ( I ) 8
148 1 86
(4) $ 1 54 $ 143 $ 5627
Year Ended December 3 1 2013
Charge-offs Recoveries Provision Ending Balance
$ $ ( 1 1 6) $ 276 ( I 33) 274 2 1 3
5 1 900 9 30 377
(2658) 5282 3250 (328) 259
(36) 1 6 (74) 1 2 4 9
( 1 6) 38
(2827) $ 25 $ 5 107 $ 5334
Year Ended December 3 I bull 2014 Individually Collectively
Evaluated for Evaluated for
Impairment Impairment Ending Balance
$ 130 $ 1 0 1 $ 23 1 255 255
180 578 758 5 1 3 5 1 3
3335 1 00 3435 240 240
I I 8 8
186 186
$ 3645 $ 1 982 $ 5627
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 2014 and 2013
Note 4 - Loans (Continued)
Individually Collectively Evaluated for Evaluated for Impairment Impairment Ending Balance
Loans
Residential $ 595 $ 1 0898 $ 1 1 493 Construction and land 5298 5298 Commercial real estate 1 297 58965 60262 Commercial 38472 38472 Inventory 5576 4663 1 0239 Professional practice 45890 45890 Automobile 122 122 Consumer l 038 1038
Total $ 7468 $ 1 65346 $ 1728 1 4
Year Ended December 3 1 20 1 3 Individually Collectively
Evaluated for Evaluated for Impairment Impairment Ending Balance
Ending allowance attributable to loans
Residential $ 130 $ 146 $ 276 Construction and land 2 13 2 13 Commercial real estate 250 650 900 Commercial 269 1 08 377 Inventory 3000 250 3250 Professional practice 259 259 Automobile 12 12 Consumer 9 9 Unallocated 38 38
Total $ 3649 $ 1685 $ 5334
Individually Collectively Evaluated for Evaluated for Impairment lmpaiffilent Ending Balance
Loans
Residential $ 595 $ 1 1 09 1 $ 1 1 686 Construction and land 1303 1303 Commercial real estate 1 298 47272 48570 Commercial 1587 6257 7844 Inventory 5215 4434 9649 Professional practice 48224 48224 Life insurance contraets 1933 1 933 Automobile 789 789 Consumer 1 083 l 083
Total $ 8695 $ 122386 $ 1 3 1 08 1
20
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 201 4 and 2013
Note 4 - Loans (Continued)
Credit Risk Grading
The Company util izes a loan rating system as a means of identifying problem and potential problem loans The Company assigned the fo llowing loan ratings to loans disaggregated by segment and class as of December 3 1 20 1 4 and 20 1 3 (in thousands)
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile
Consumer
Total
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Life insurance contracts Automobile
Consumer
Total
December 3 1 20 14 Loans rated Loans rated Loans rated
1-5
$ 1 0898 $ 5298
58965 38472
4663 45890
1 22 1 038
$ 1 65346 $
6
===
$
$
7 Total
595 $ 1 1 493 5298
1 297 60262 38472
5576 I 0239 45890
1 22 1 038
7468 $ 1 728 1 4 ====
December 3 1 20 1 3 Loans rated Loans rated Loans rated
1-5 6 7 Total
$ 1 0626 $ 465 $ 595 $ 1 1 686 1 303 1 303
47272 1 298 48570 6257 J 587 7844 4434 52 1 5 9649
48224 48224 I 933 I 933
789 789 1 083 1 083
$ 1 2 1 921 $ 465 $ 8695 $ 1 3 1 08 1
The Company categorized each loan into credit risk categori es based on current fi nancial information overall debt service coverage comparison against industry averages col lateral coverage historical payment experience and current economic trends The Company uses the following definitions for credit risk ratings
2 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Consolidated Statement of Cash Flows
Cash Flows from Operating Activities Net loss Adjustments to reconcile net loss to net cash provided by
operating activities Depreciation Provision for loan losses Accretion and amortization of securities Gctln on sale of investment securities net Amortization of deferred loan fees Loss on sale of other real estate owned Increase in cash surrender value of bank-owned life insurance Restricted stock unit expense Deferred tax benefit Net change in
Accrued interest receivable and other assets
Accrued interest payable and other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities Activity in available-for-sale securities
Sales Maturities prepayments and calls Purchases
Purchase of investment securities - held to maturity Purchases
Net (increase) decrease in loans Proceeds from sales of other real estate owned Redemption of Federal Home Loan Bank stock Purchase of bank owned life insurance
Purchases of premises and equipment
Net cash ( used in) provided by investing activities
Cash Flows from Financing Activities Net increase in deposits Dividends on preferred shares Decrease in repurchase agreements Change in accrued debt issuance costs
Proceeds from issuance of common shares
Net cash ( used in) provided by financing activities
Net (Decrease) Increase in Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning of year
Cash and Cash Equivalents - End of year
Supplemental Cash Flow Information Cash paid for
Interest Income taxes
Loans transferred to other real estate owned
See Notes to Consolidated Financial Statements 7
$
$
$
Year Ended December 3 I
2014
(30094) $
326383 143004 351601
(42451)
(132719) 121877 ( I 85304)
(I 55705) 658707
I 055299
I 8863923 (I 230354 I)
(859762) (42042639)
697247
(148938)
(35793710)
(4470481) (45 I 500) (7033 I 5)
6648 49983
(5568665)
(40307076)
69060 I 03
28753027 $
1077774 $
460343
2013
(3078 I 98)
317863 5 I 06979
348058 (I 8026) (39044)
749901 (I 338 I 0) 121877
(2021 608)
4 I 8900 904576
2677468
18026 37635
(33 I 0630) 7210658 I I 35496
148657 (4000000)
(335068)
904774
7744446 (381500)
(I 364851) 6648
49938
6054681
9636923
59423180
69060 I 03
1320945 27837
594490
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies
Basis of Presentation and Consolidation - The consolidated fi nancial statements include the accounts of Chicago Shore Corporation (the Company) and its wholly owned subsidiary Delaware Place B ank (the Bank) All significant intercompany balances and transactions have been eliminated in consolidation
Nature of Operations - The Company provides a variety of f inancial services to individuals and businesses in the Chicago metropol itan area through their primary location in Chicago I l l inois Their primary deposit products are demand deposits savings money market and term certif icate accounts and their primary lending products are commercial and commercial mortgage loans
Use of Estimates - In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting period Actual results could d iffer from those estimates Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses the valuation of investment securities other real estate owned deferred tax assets goodwill and the fair value of financial instruments
Cash and Cash Equivalents - For the purpose of the consolidated statement of cash flows cash and cash equivalents include cash and balances due fr om banks and federal funds sold which mature within 90 days
Investment Securities - Debt securities that management has the positive intent and ability to hold to maturity are classified as held to maturity and recorded at amort ized cost Securities not classified as held to maturity including equity securities with readily determinable fair values are classif ied as available for sale and are recorded at fair value with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss)
Purchase premiums and discounts are recognized in interest income using the effective interest method through the maturity or expected repayment period of the securities Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses In estimating other-than-temporary impairment losses management considers ( I ) the length of time and the extent to which the fair value has been less than cost (2) the financia l condition and near-term prospects of the issuer and (3) the i nten t an d ability of the Company to retain its investment in the issuer for a period of time suff icient to allow for any anticipated recovery in fair value Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method
8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Federal Home Loan Bank Stock - The Company is a member of the Federal Home Loan Bank of Chicago (the FHLB ) and is required to maintain a minimu m investment in stock of the FHLB that varies with th e level of advances outstanding with the FHLB Th e stock does not have a readily determinable fair value and is carried at cost and is periodically evaluated for impairment
Loans - Th e Company grants mortgage commercial and consu mer loans to customers A substantial portion of the loan portfolio is represented by commercial loans in the Ch icago metropolitan area Th e abil ity of the B ank s debtors to honor their contracts is dependent upon th e real estate and general economic conditions in this area
Loans that management has th e intent and abil ity to h old for the foreseeable future or u ntil maturity or pay-off are reported at their outstanding unpaid principal balances adjusted for charge-offs the allowance for loan losses and any deferred fees or costs on originated loans Interest income is accrued on the unpaid principal balance Loan origination fees net of certain direct origination costs are deferred and recognized as an adjustment of the related loan yield u sing the interest meth od
The accrual of interest on loans is discontinued at th e time th e loan is 90 days del inquent unless the credit is well-secu red and in process of collection In all cases loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered dou btfu l
Al l interest accru ed but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income The interest on th ese loans is accounted for on the cash basis or cost-recovery meth od u ntil qualifying for return to accru al Loans are returned to accrual status wh en all the principal and interest amounts contractually due are brought current and futu re payments are reasonably assured
Loans are considered delinqu ent when customers fail to make their payments in accordance with the contractual loan agreement If a loan matures and principal remains outstanding the loan is considered delinquent u ntil the loan is paid off or renewed
Gross l oans are reported at th e Companys recorded investment The recorded investment is th e borrowers principal balance less partial charge-offs if any
Allowance for Loan Losses - Th e allowance for loan losses (the allowance) is established as losses are estimated to have occurred through a provision fo r loan losses charged to earnings Loan losses are charged against the allowance when management believes the u ncollectibi lity of a loan balance is confirmed Subsequ ent recoveries if any are credited to the allowance
9
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
The allowance for loan losses is evaluated on a r egu lar basis by management and is based upon managements per iodic r eview of the collectibility of the loans in light of h istor ical exper ience the nature and volu me of the loan portfolio adverse situations that may affect the borrowers abil ity to repay estimated value of any u nder lying col lateral and prevailing economic conditions This evaluation is inher ently subjective as it r equ ires estimates that are susceptible to significant r evision as mor e infor mation becomes available
The allowance consists of specific general and unallocated components The specific component r elates to loans that are classified as impaired For such loans an al lowance is established when the discounted cash flows (or collateral value or observable mar ket pr ice) of the impair ed loan is lower than the car rying value of that loan The general component covers nonimpaired loans and is based on histor ical loss exper ience adju sted for qualitative factor s An unallocated component is maintained to cover u ncer tainties that cou ld affect managements estimate of probable losses The unallocated component of the al lowance reflects the margin of imprecision inher ent in the u nder lying assumptions u sed in the methodologies for estimating specific and general losses in the portfolio
A loan is considered impaired when based on current information and events it is probable that the Company will be u nable to collect the schedu led payments of pr incipal or interest when due according to the contractual ter ms of the loan agr eement Factors consider ed by management in deter mining impair ment include payment status collateral value and the probability of collecting scheduled pr incipal and interest payments when du e Loans that exper ience insignificant payment delays and payment shortfal ls gener ally ar e not classified as impair ed Management deter mines the significance of payment delays and payment shortfalls on a case- by-case basis taking into consideration all of the cir cumstances surrounding the loan and the borrower including length of the delay the r easons for the delay the borrowers pr ior payment recor d and the amou nt of the shortfal l in relation to the pr incipal and interest owed Impairment is measured on a loan-by-loan basis for loans by either the present value of expected future cash flows discou nted at the loans effect ive inter est rate the J oans obtainabl e mar ket pr ice or t he fair value of the collateral if the loan is collateral dependent
Large groups of homogeneous loans are collectively evaluated for impair ment Accor dingly the Company does not separ ately identify individual consumer loans for impairment disclosures
1 0
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Troubled debt rest ruct uring (TDR) of loans is undertaken t o improve the l ikelihood t hat t he loan will be repaid in f ull under t he modif ied t erms in accordance wit h a reasonable repayment schedule All modif ied loans are evaluat ed to det ermine whet her t he loans should be report ed as a TDR A loan is a TDR when t he Company for economic or legal reasons relat ed t o t he borrowers f inancial d ifficult ies grants a concession t o t he borrower by modifying or renewing a loan that t he Company would not otherwise consider To make t his det erminat ion t he Company must det ermine whet her (a) t h e borrower is experiencing financial diff icult ies and (b) t h e Company grant ed t he borrower a concession This det erminat ion requires considerat ion of all t he fact s and circumstances surrounding t he modificat ion An overall general decline in the economy or some det eriorat ion in a borrowers f inancial condit ion does not automat ically mean t he borrower is experiencing f inancial difficult ies Loans t hat are considered TDR are considered impaired and a specif ic reserve is est ablished in the allowance consist ent ly wit h ot her impaired loans
Other Real Estate Owned - Asset s acquired through or in lieu of loan f oreclosure are held f or sale and are initially recorded at fair value less costs t o sell at t he dat e of t he foreclosure est ablishing a new cost basis Subsequent t o f oreclosure valuat ions are periodically perf ormed by management and t he assets are carried at the lower of carrying amount or fair value less cost t o sel l Revenue and expenses f rom operat ions and changes in the valuat ion allowance are included in loan collect ion and other real est at e owned expenses
Premises and Equipment - Land is carried at cost Bu ildings and equipment are carried at cost less accumulat ed depreciat ion comput ed on t he st raight -line met hod over t he est imat ed usef ul l ives of the assets ranging from I to 39 years
Bank Owned Life Insurance - The B ank has purchased life insurance pol icies on certain key offi cers B ank owned life insurance (BOLi) is recorded at it s cash surrender value or t he amount t hat can be realized upon immediate liquidat ion
Goodwill - Goodwill result s f rom prior business acquisit ions and represent s t h e excess of t he purchase price over the fair value of acquired tangible asset s and liabilit ies and ident ifiable intangible assets Goodwill is assessed at least annually f or impairment and any such impairment will be recognized in the period identified There has been no impairment ident if ied during t he years ended December 3 1 20 1 4 and 20 1 3
Income Taxes - Def erred income tax asset s and liabilit ies are det ermined using t h e liabil ity (or balance sheet) met hod Under t his met hod t he net def erred t ax asset or liability is det ermined based on t he t ax effect s of t he various t emporary d iff erences between t he book and tax basis of t he various consolidat ed balance sheet asset s and liabilities and gives current recognit ion t o changes in t ax rat es and laws
1 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
At December 3 1 20 1 4 and 20 1 3 the Company evaluated tax positions taken for filing with the Internal Revenue Service and the State of I l l inois The Company believes that income tax filing positions will be sustained under examination and does not anticipate any adjustments that would result in a material adverse eff ect on the Companys consolidated financial condition results of operations or cash flows Accordingly the Company has not recorded any reserves or related accr uals for interest and penalties for uncertai n tax positions at December 3 1 20 1 4 and 20 1 3 The Company believes it is no longer subject to tax examinati ons for years pri or to 20 I I
Comprehensive Income - Accounting principles generally require that recognized revenue expenses gains and losses be included in net income (loss) Although certain changes in assets and liabilities such as unrealized gains and losses on investment securities - available for sal e are reported as a separate component of the equity section of the consolidated balance sheet such items along with net income (loss) are components of comprehensive income
Stock-based Compensation - The Company applies the recogniti on and measurement provisions of the Compensation - Stock Compensation topi c of the Accounting Standards Codification (ASC) to account for employee stock option costs which is referred to as the calculated value method Compensation costs are measured based on the fair value of the instrument at the date of grant Those compensation costs are expensed on a straight-line basis over the vesting period of the specific instrument There were no stock-based awards granted in 20 1 4 and 20 1 3
Off-balance-sheet Instruments - In the ordinary course of business the Company has entered into commitments under commercial letters of credit and standby letters of credit Such financial instruments are recorded when they are funded
Reclassification - Certain amounts appearing in the prior years consolidated financial statements have been reclassified to conform to the current years consolidated financial statements
12
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Comprehensive Income (Topic 220) -
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income - The Financial Accounting Standards B oard (FASB) issued Accou nting Standards Update (ASU) No 20 1 3-02 Comprehensive Income (Topic 220) - Reporting of Amounts Recossified Out of Accumulated Other Comprehensive Income The ASU requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is requ ired under US generally accepted accounting principles (US GAAP) to be reclassified in its entirety to net income For other amounts that are not requ ired u nder US GAAP to be reclassified in their entirety to net income in the same reporting period an entity is requ ired to cross-reference other disclosures required under US GAAP that provide additional detail about those amounts For nonpu blic entities the ASU is effective prospectively for reporting periods beginning after December 1 5 20 1 3 (therefore for the year ended December 3 I 20 1 4 fo r the Company) and early adoption was allowed Adoption of this update did not have a material effect on the consolidated financial statements
New Accounting Pronouncement - Receivables - Troubled Debt Restructurings by
Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateral
Consumer Mortgage Loans upon Foreclosure - The FASB issued ASU No 20 1 4-04 Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure The amendments in this u pdate clarify that when an in-substance repossession or foreclosu re occu rs and a creditor is considered to have received physical possession of residential property col lateral izing a consu mer mortgage loan u pon either ( I ) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy the loan through completion of a deed in l ieu of foreclosure or through a similar legal agreement Additionally the amendment requ ires disclosure of both ( I ) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans col lateralized by residential real estate property that are in the process of foreclosure according to local requ irements of the applicable jurisdiction The amendments in this u pdate are effective for annual periods beginning after December I 5 20 1 4 (therefore December 3 I 20 I 5 for the Company) Management does not expect the update to have a material effect on the Companys consol idated financial statements
1 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Revenue from Contracts with Customers
(Topic 606) - In May 20 1 4 the Financial Accounting Standards Board issued Accounting Standards Update No 20 1 4-09 Revenue from Contracts with Customers (Topic 606) which will supersede the current revenue recognition requirements in Topic 605 Revenue Recognition The ASU is based o n the princip le that revenue is recognized to depict the transfer of goods or services to customers in an amount that refl ects the consideration to wh ich the entity expects to be entitled in exchange for those goods or services Th e ASU also requ ires additional disclosure about the nature amount timing and uncertainty of revenue and cash fl ows arising from customer contracts including significant judgments and changes in judgments and assets recognized from costs incu rred to obtain or fulfill a contract The new gu idance will be effective for periods beginning af ter December 1 5 201 7 (th erefo re for the year ending December 3 I 20 1 8 for th e Company) Th e ASU permits the new revenue recognition gu idance to be appl ied u sing one of two retrospective application methods The Company h as not yet determined wh ich application method it will use or th e potential eff ects of th e new standard on th e financial statements i f any
Subsequent Events - Th e financial statements and related disclosures include evaluation of events up through and including April 1 3 20 15 wh ich is the date the consolidated financial statements were available to be issued
Note 2 - Restrictions on Cash and Amounts Due from Banks
Th e B ank is required to maintain average cash balances on hand or on deposit with the Federal Reserve B ank At December 3 1 20 1 4 and 20 1 3 th ese reserve balances amounted to $ 1 5 67000 and $ 1 45 2000 respectively
1 4
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities
The amortized cost and estimated fair value of secu rities with gross unreal ized gains and losses are as fol lows
December 3 1 20 1 4 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $ 6988 1 44 $ 86 1 05 $ (2793) $ 707 1 456 M unicipal securities 6363935 438 1 4 6407749 Mortgage-backed securities 5 29975 1 9020 (2264) 5 306507 Other 5 1 50000 ( 1 1 89982) 3 9600 1 8
Total available-for-sale securities $2380 1 830 $ 1 38939 $ ( I I 95039) $ 22745730
Held-to-maturity securities -Mun icipal securities $ 4 I 2789 I $ 305 1 32 $ $ 4433 023
December 3 I 20 I 3 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $187 1 5 1 05 $ 93349 $ $ I 8808454 State and municipal 6 8 I 3 063 77408 (SO I 48) 6 840323 Other 5 I 50000 ( I 383563) 3 766437
Total available-for-sale securities $30678 I 68 $ I 70757 $ ( 1 433 7 1 I ) $ 29 4 1 5 2 1 4
Held-to-maturity secu rities -Municipal securities $ 3 303 774 $ $ (22364) $ 3 28 I 4 I 0
At December 3 I 20 1 4 and 20 1 3 securities with a carrying value of $503498 1 and $8595033 respectively were pledged to secure publ ic deposits repu rchase agreements and for other purposes requ ired or permitted by law
15
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
The amort ized cost and estimated fair value of debt securities by contractual maturity at December 3 1 20 1 4 are as fo llows
Available for Sale Held to Maturity Amort ized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
Due in one year or less $ 5 1 42415 $ 5 1 70 1 88 $ $ Due in one through five
years 32805 35 3 293 783 Due after five years through
ten years 4929 1 29 5 0 1 5 234 Due after ten years 5 000000 3824400 4 1 27891 4433 023
Total 1 8352079 1 7303605 4 1 2789 1 4433 023
Mortgage-backed securities 5 29975 1 5 306507 No stated maturity 1 5 0000 1 35 6 1 8
Total $2380 1 830 $22745 730 $ 4 1 2789 I $ 4433 023
There were no sales of investments during the year ended December 3 I 20 I 4 During the year ended December 3 1 20 I 3 the Company sold securities availabl e for sale with a book value of $0 resulting in realized gains of $ I 8026 There were no gross realized losses on sales of securities available for sale for the year ended December 3 I 20 1 3
1 6
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Information pertain ing to securi ti es with gross un realized losses at December 31 20 1 4 an d 20 1 3 aggregated by investment category an d length of time that in dividual securities have been in a continuous loss position is as follows
December 3 1 20 1 4 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Unrealized Estimated
Losses Fair Value Losses Fair Val ue Available-for-sale securities
US government agen cies $ (2793) $ 2056 222 $ $ Mortgage-backed securities (2264) 25247 1 0 Other ( 1 1 89982) 3 960018
Total available-for-sale secu rities $ (5 05 7) $ 45 80932 $ ( 1 1 89982) $ 3 9600 1 8
December 3 I 20 1 3 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Un realized Estimated
Losses Fair Value Losses Fair Valu e Available-for-sale securities
Mun icipal securities $ (50 1 48) $ 677262 $ $ Other ( 1 383 5 63) 3 766437
Total available-for-sale securities $ (SO 1 48) $ 677262 $ ( 1 3835 63) $ 3 766437
Un realized l osses on securities have n ot been recogn ized into in come because the issu ers bonds are of high credit quality we have the inten t and ability to hold the secu rities for the foreseeable futu re and the declin e in fair value is primarily due to increased market interest rates The fair values a re generally expected to recover as the bonds approach their maturity dates
1 7
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Within other secu rities there is $ 1 1 75 600 of u nrealized losses related to two perpetual preferred secu rities to two large international bank holding companies The u nrealized losses on the perpetual preferred secu rities is attributable to the cu rrent variable dividend rates compared to similar fixed-rate instru ments at each institution The fair value of the Companys perpetual preferred secu rities is expected to increase as the variable dividend rate increases which is contingent u pon the three-month LIB O R rate The Company has the ability and intent to hold the secu rities u ntil their estimated fair values increase
Note 4 - Loans
A summary of the balances of loans follows (in thousands)
20 1 4 20 1 3
Residential $ 1 1 493 $ 1 1 686 Construction and land 5 298 1 303 Commercial real estate 60262 48570 Commercial 38472 7844 I nventory 1 0239 9 649 Professional practice 45890 48224 Life insurance contracts 1 933 Automobile 1 22 789 Consu mer 1 038 1 083
Total gross loans 1 728 1 4 1 3 1 08 1
Less Allowance for loan losses (5 627) (5 334) Net deferred loan fees (6 1 ) ( I 03)
Net loans $ 1 67 1 26 $ 1 25 644
1 8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Loans and the all owance for loan losses ar e disaggregated by segment as foll ows (i n thousands)
Allowance for loan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Allowance for Joan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Ending allowance attributable to loans
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Beginning
Balance
$ 276 $ 2 1 3 900 377
3250 259
12 9
38
$ 5334 $
Beginning
Balance
$ 392 $ 72
849 338 626 587 106
5 54
$ 3029 $
1 9
Year Ended December 3 1 2014
Charge-offs Recoveries Provision Ending Balance
$ $ (45) $ 23 1 42 255
( 142) 758 144 (8) 5 1 3
1 85 3435 ( 1 9) 240
(4) 1 0 ( 1 7) I ( I ) 8
148 1 86
(4) $ 1 54 $ 143 $ 5627
Year Ended December 3 1 2013
Charge-offs Recoveries Provision Ending Balance
$ $ ( 1 1 6) $ 276 ( I 33) 274 2 1 3
5 1 900 9 30 377
(2658) 5282 3250 (328) 259
(36) 1 6 (74) 1 2 4 9
( 1 6) 38
(2827) $ 25 $ 5 107 $ 5334
Year Ended December 3 I bull 2014 Individually Collectively
Evaluated for Evaluated for
Impairment Impairment Ending Balance
$ 130 $ 1 0 1 $ 23 1 255 255
180 578 758 5 1 3 5 1 3
3335 1 00 3435 240 240
I I 8 8
186 186
$ 3645 $ 1 982 $ 5627
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 2014 and 2013
Note 4 - Loans (Continued)
Individually Collectively Evaluated for Evaluated for Impairment Impairment Ending Balance
Loans
Residential $ 595 $ 1 0898 $ 1 1 493 Construction and land 5298 5298 Commercial real estate 1 297 58965 60262 Commercial 38472 38472 Inventory 5576 4663 1 0239 Professional practice 45890 45890 Automobile 122 122 Consumer l 038 1038
Total $ 7468 $ 1 65346 $ 1728 1 4
Year Ended December 3 1 20 1 3 Individually Collectively
Evaluated for Evaluated for Impairment Impairment Ending Balance
Ending allowance attributable to loans
Residential $ 130 $ 146 $ 276 Construction and land 2 13 2 13 Commercial real estate 250 650 900 Commercial 269 1 08 377 Inventory 3000 250 3250 Professional practice 259 259 Automobile 12 12 Consumer 9 9 Unallocated 38 38
Total $ 3649 $ 1685 $ 5334
Individually Collectively Evaluated for Evaluated for Impairment lmpaiffilent Ending Balance
Loans
Residential $ 595 $ 1 1 09 1 $ 1 1 686 Construction and land 1303 1303 Commercial real estate 1 298 47272 48570 Commercial 1587 6257 7844 Inventory 5215 4434 9649 Professional practice 48224 48224 Life insurance contraets 1933 1 933 Automobile 789 789 Consumer 1 083 l 083
Total $ 8695 $ 122386 $ 1 3 1 08 1
20
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 201 4 and 2013
Note 4 - Loans (Continued)
Credit Risk Grading
The Company util izes a loan rating system as a means of identifying problem and potential problem loans The Company assigned the fo llowing loan ratings to loans disaggregated by segment and class as of December 3 1 20 1 4 and 20 1 3 (in thousands)
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile
Consumer
Total
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Life insurance contracts Automobile
Consumer
Total
December 3 1 20 14 Loans rated Loans rated Loans rated
1-5
$ 1 0898 $ 5298
58965 38472
4663 45890
1 22 1 038
$ 1 65346 $
6
===
$
$
7 Total
595 $ 1 1 493 5298
1 297 60262 38472
5576 I 0239 45890
1 22 1 038
7468 $ 1 728 1 4 ====
December 3 1 20 1 3 Loans rated Loans rated Loans rated
1-5 6 7 Total
$ 1 0626 $ 465 $ 595 $ 1 1 686 1 303 1 303
47272 1 298 48570 6257 J 587 7844 4434 52 1 5 9649
48224 48224 I 933 I 933
789 789 1 083 1 083
$ 1 2 1 921 $ 465 $ 8695 $ 1 3 1 08 1
The Company categorized each loan into credit risk categori es based on current fi nancial information overall debt service coverage comparison against industry averages col lateral coverage historical payment experience and current economic trends The Company uses the following definitions for credit risk ratings
2 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies
Basis of Presentation and Consolidation - The consolidated fi nancial statements include the accounts of Chicago Shore Corporation (the Company) and its wholly owned subsidiary Delaware Place B ank (the Bank) All significant intercompany balances and transactions have been eliminated in consolidation
Nature of Operations - The Company provides a variety of f inancial services to individuals and businesses in the Chicago metropol itan area through their primary location in Chicago I l l inois Their primary deposit products are demand deposits savings money market and term certif icate accounts and their primary lending products are commercial and commercial mortgage loans
Use of Estimates - In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting period Actual results could d iffer from those estimates Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses the valuation of investment securities other real estate owned deferred tax assets goodwill and the fair value of financial instruments
Cash and Cash Equivalents - For the purpose of the consolidated statement of cash flows cash and cash equivalents include cash and balances due fr om banks and federal funds sold which mature within 90 days
Investment Securities - Debt securities that management has the positive intent and ability to hold to maturity are classified as held to maturity and recorded at amort ized cost Securities not classified as held to maturity including equity securities with readily determinable fair values are classif ied as available for sale and are recorded at fair value with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss)
Purchase premiums and discounts are recognized in interest income using the effective interest method through the maturity or expected repayment period of the securities Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses In estimating other-than-temporary impairment losses management considers ( I ) the length of time and the extent to which the fair value has been less than cost (2) the financia l condition and near-term prospects of the issuer and (3) the i nten t an d ability of the Company to retain its investment in the issuer for a period of time suff icient to allow for any anticipated recovery in fair value Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method
8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Federal Home Loan Bank Stock - The Company is a member of the Federal Home Loan Bank of Chicago (the FHLB ) and is required to maintain a minimu m investment in stock of the FHLB that varies with th e level of advances outstanding with the FHLB Th e stock does not have a readily determinable fair value and is carried at cost and is periodically evaluated for impairment
Loans - Th e Company grants mortgage commercial and consu mer loans to customers A substantial portion of the loan portfolio is represented by commercial loans in the Ch icago metropolitan area Th e abil ity of the B ank s debtors to honor their contracts is dependent upon th e real estate and general economic conditions in this area
Loans that management has th e intent and abil ity to h old for the foreseeable future or u ntil maturity or pay-off are reported at their outstanding unpaid principal balances adjusted for charge-offs the allowance for loan losses and any deferred fees or costs on originated loans Interest income is accrued on the unpaid principal balance Loan origination fees net of certain direct origination costs are deferred and recognized as an adjustment of the related loan yield u sing the interest meth od
The accrual of interest on loans is discontinued at th e time th e loan is 90 days del inquent unless the credit is well-secu red and in process of collection In all cases loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered dou btfu l
Al l interest accru ed but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income The interest on th ese loans is accounted for on the cash basis or cost-recovery meth od u ntil qualifying for return to accru al Loans are returned to accrual status wh en all the principal and interest amounts contractually due are brought current and futu re payments are reasonably assured
Loans are considered delinqu ent when customers fail to make their payments in accordance with the contractual loan agreement If a loan matures and principal remains outstanding the loan is considered delinquent u ntil the loan is paid off or renewed
Gross l oans are reported at th e Companys recorded investment The recorded investment is th e borrowers principal balance less partial charge-offs if any
Allowance for Loan Losses - Th e allowance for loan losses (the allowance) is established as losses are estimated to have occurred through a provision fo r loan losses charged to earnings Loan losses are charged against the allowance when management believes the u ncollectibi lity of a loan balance is confirmed Subsequ ent recoveries if any are credited to the allowance
9
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
The allowance for loan losses is evaluated on a r egu lar basis by management and is based upon managements per iodic r eview of the collectibility of the loans in light of h istor ical exper ience the nature and volu me of the loan portfolio adverse situations that may affect the borrowers abil ity to repay estimated value of any u nder lying col lateral and prevailing economic conditions This evaluation is inher ently subjective as it r equ ires estimates that are susceptible to significant r evision as mor e infor mation becomes available
The allowance consists of specific general and unallocated components The specific component r elates to loans that are classified as impaired For such loans an al lowance is established when the discounted cash flows (or collateral value or observable mar ket pr ice) of the impair ed loan is lower than the car rying value of that loan The general component covers nonimpaired loans and is based on histor ical loss exper ience adju sted for qualitative factor s An unallocated component is maintained to cover u ncer tainties that cou ld affect managements estimate of probable losses The unallocated component of the al lowance reflects the margin of imprecision inher ent in the u nder lying assumptions u sed in the methodologies for estimating specific and general losses in the portfolio
A loan is considered impaired when based on current information and events it is probable that the Company will be u nable to collect the schedu led payments of pr incipal or interest when due according to the contractual ter ms of the loan agr eement Factors consider ed by management in deter mining impair ment include payment status collateral value and the probability of collecting scheduled pr incipal and interest payments when du e Loans that exper ience insignificant payment delays and payment shortfal ls gener ally ar e not classified as impair ed Management deter mines the significance of payment delays and payment shortfalls on a case- by-case basis taking into consideration all of the cir cumstances surrounding the loan and the borrower including length of the delay the r easons for the delay the borrowers pr ior payment recor d and the amou nt of the shortfal l in relation to the pr incipal and interest owed Impairment is measured on a loan-by-loan basis for loans by either the present value of expected future cash flows discou nted at the loans effect ive inter est rate the J oans obtainabl e mar ket pr ice or t he fair value of the collateral if the loan is collateral dependent
Large groups of homogeneous loans are collectively evaluated for impair ment Accor dingly the Company does not separ ately identify individual consumer loans for impairment disclosures
1 0
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Troubled debt rest ruct uring (TDR) of loans is undertaken t o improve the l ikelihood t hat t he loan will be repaid in f ull under t he modif ied t erms in accordance wit h a reasonable repayment schedule All modif ied loans are evaluat ed to det ermine whet her t he loans should be report ed as a TDR A loan is a TDR when t he Company for economic or legal reasons relat ed t o t he borrowers f inancial d ifficult ies grants a concession t o t he borrower by modifying or renewing a loan that t he Company would not otherwise consider To make t his det erminat ion t he Company must det ermine whet her (a) t h e borrower is experiencing financial diff icult ies and (b) t h e Company grant ed t he borrower a concession This det erminat ion requires considerat ion of all t he fact s and circumstances surrounding t he modificat ion An overall general decline in the economy or some det eriorat ion in a borrowers f inancial condit ion does not automat ically mean t he borrower is experiencing f inancial difficult ies Loans t hat are considered TDR are considered impaired and a specif ic reserve is est ablished in the allowance consist ent ly wit h ot her impaired loans
Other Real Estate Owned - Asset s acquired through or in lieu of loan f oreclosure are held f or sale and are initially recorded at fair value less costs t o sell at t he dat e of t he foreclosure est ablishing a new cost basis Subsequent t o f oreclosure valuat ions are periodically perf ormed by management and t he assets are carried at the lower of carrying amount or fair value less cost t o sel l Revenue and expenses f rom operat ions and changes in the valuat ion allowance are included in loan collect ion and other real est at e owned expenses
Premises and Equipment - Land is carried at cost Bu ildings and equipment are carried at cost less accumulat ed depreciat ion comput ed on t he st raight -line met hod over t he est imat ed usef ul l ives of the assets ranging from I to 39 years
Bank Owned Life Insurance - The B ank has purchased life insurance pol icies on certain key offi cers B ank owned life insurance (BOLi) is recorded at it s cash surrender value or t he amount t hat can be realized upon immediate liquidat ion
Goodwill - Goodwill result s f rom prior business acquisit ions and represent s t h e excess of t he purchase price over the fair value of acquired tangible asset s and liabilit ies and ident ifiable intangible assets Goodwill is assessed at least annually f or impairment and any such impairment will be recognized in the period identified There has been no impairment ident if ied during t he years ended December 3 1 20 1 4 and 20 1 3
Income Taxes - Def erred income tax asset s and liabilit ies are det ermined using t h e liabil ity (or balance sheet) met hod Under t his met hod t he net def erred t ax asset or liability is det ermined based on t he t ax effect s of t he various t emporary d iff erences between t he book and tax basis of t he various consolidat ed balance sheet asset s and liabilities and gives current recognit ion t o changes in t ax rat es and laws
1 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
At December 3 1 20 1 4 and 20 1 3 the Company evaluated tax positions taken for filing with the Internal Revenue Service and the State of I l l inois The Company believes that income tax filing positions will be sustained under examination and does not anticipate any adjustments that would result in a material adverse eff ect on the Companys consolidated financial condition results of operations or cash flows Accordingly the Company has not recorded any reserves or related accr uals for interest and penalties for uncertai n tax positions at December 3 1 20 1 4 and 20 1 3 The Company believes it is no longer subject to tax examinati ons for years pri or to 20 I I
Comprehensive Income - Accounting principles generally require that recognized revenue expenses gains and losses be included in net income (loss) Although certain changes in assets and liabilities such as unrealized gains and losses on investment securities - available for sal e are reported as a separate component of the equity section of the consolidated balance sheet such items along with net income (loss) are components of comprehensive income
Stock-based Compensation - The Company applies the recogniti on and measurement provisions of the Compensation - Stock Compensation topi c of the Accounting Standards Codification (ASC) to account for employee stock option costs which is referred to as the calculated value method Compensation costs are measured based on the fair value of the instrument at the date of grant Those compensation costs are expensed on a straight-line basis over the vesting period of the specific instrument There were no stock-based awards granted in 20 1 4 and 20 1 3
Off-balance-sheet Instruments - In the ordinary course of business the Company has entered into commitments under commercial letters of credit and standby letters of credit Such financial instruments are recorded when they are funded
Reclassification - Certain amounts appearing in the prior years consolidated financial statements have been reclassified to conform to the current years consolidated financial statements
12
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Comprehensive Income (Topic 220) -
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income - The Financial Accounting Standards B oard (FASB) issued Accou nting Standards Update (ASU) No 20 1 3-02 Comprehensive Income (Topic 220) - Reporting of Amounts Recossified Out of Accumulated Other Comprehensive Income The ASU requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is requ ired under US generally accepted accounting principles (US GAAP) to be reclassified in its entirety to net income For other amounts that are not requ ired u nder US GAAP to be reclassified in their entirety to net income in the same reporting period an entity is requ ired to cross-reference other disclosures required under US GAAP that provide additional detail about those amounts For nonpu blic entities the ASU is effective prospectively for reporting periods beginning after December 1 5 20 1 3 (therefore for the year ended December 3 I 20 1 4 fo r the Company) and early adoption was allowed Adoption of this update did not have a material effect on the consolidated financial statements
New Accounting Pronouncement - Receivables - Troubled Debt Restructurings by
Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateral
Consumer Mortgage Loans upon Foreclosure - The FASB issued ASU No 20 1 4-04 Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure The amendments in this u pdate clarify that when an in-substance repossession or foreclosu re occu rs and a creditor is considered to have received physical possession of residential property col lateral izing a consu mer mortgage loan u pon either ( I ) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy the loan through completion of a deed in l ieu of foreclosure or through a similar legal agreement Additionally the amendment requ ires disclosure of both ( I ) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans col lateralized by residential real estate property that are in the process of foreclosure according to local requ irements of the applicable jurisdiction The amendments in this u pdate are effective for annual periods beginning after December I 5 20 1 4 (therefore December 3 I 20 I 5 for the Company) Management does not expect the update to have a material effect on the Companys consol idated financial statements
1 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Revenue from Contracts with Customers
(Topic 606) - In May 20 1 4 the Financial Accounting Standards Board issued Accounting Standards Update No 20 1 4-09 Revenue from Contracts with Customers (Topic 606) which will supersede the current revenue recognition requirements in Topic 605 Revenue Recognition The ASU is based o n the princip le that revenue is recognized to depict the transfer of goods or services to customers in an amount that refl ects the consideration to wh ich the entity expects to be entitled in exchange for those goods or services Th e ASU also requ ires additional disclosure about the nature amount timing and uncertainty of revenue and cash fl ows arising from customer contracts including significant judgments and changes in judgments and assets recognized from costs incu rred to obtain or fulfill a contract The new gu idance will be effective for periods beginning af ter December 1 5 201 7 (th erefo re for the year ending December 3 I 20 1 8 for th e Company) Th e ASU permits the new revenue recognition gu idance to be appl ied u sing one of two retrospective application methods The Company h as not yet determined wh ich application method it will use or th e potential eff ects of th e new standard on th e financial statements i f any
Subsequent Events - Th e financial statements and related disclosures include evaluation of events up through and including April 1 3 20 15 wh ich is the date the consolidated financial statements were available to be issued
Note 2 - Restrictions on Cash and Amounts Due from Banks
Th e B ank is required to maintain average cash balances on hand or on deposit with the Federal Reserve B ank At December 3 1 20 1 4 and 20 1 3 th ese reserve balances amounted to $ 1 5 67000 and $ 1 45 2000 respectively
1 4
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities
The amortized cost and estimated fair value of secu rities with gross unreal ized gains and losses are as fol lows
December 3 1 20 1 4 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $ 6988 1 44 $ 86 1 05 $ (2793) $ 707 1 456 M unicipal securities 6363935 438 1 4 6407749 Mortgage-backed securities 5 29975 1 9020 (2264) 5 306507 Other 5 1 50000 ( 1 1 89982) 3 9600 1 8
Total available-for-sale securities $2380 1 830 $ 1 38939 $ ( I I 95039) $ 22745730
Held-to-maturity securities -Mun icipal securities $ 4 I 2789 I $ 305 1 32 $ $ 4433 023
December 3 I 20 I 3 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $187 1 5 1 05 $ 93349 $ $ I 8808454 State and municipal 6 8 I 3 063 77408 (SO I 48) 6 840323 Other 5 I 50000 ( I 383563) 3 766437
Total available-for-sale securities $30678 I 68 $ I 70757 $ ( 1 433 7 1 I ) $ 29 4 1 5 2 1 4
Held-to-maturity secu rities -Municipal securities $ 3 303 774 $ $ (22364) $ 3 28 I 4 I 0
At December 3 I 20 1 4 and 20 1 3 securities with a carrying value of $503498 1 and $8595033 respectively were pledged to secure publ ic deposits repu rchase agreements and for other purposes requ ired or permitted by law
15
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
The amort ized cost and estimated fair value of debt securities by contractual maturity at December 3 1 20 1 4 are as fo llows
Available for Sale Held to Maturity Amort ized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
Due in one year or less $ 5 1 42415 $ 5 1 70 1 88 $ $ Due in one through five
years 32805 35 3 293 783 Due after five years through
ten years 4929 1 29 5 0 1 5 234 Due after ten years 5 000000 3824400 4 1 27891 4433 023
Total 1 8352079 1 7303605 4 1 2789 1 4433 023
Mortgage-backed securities 5 29975 1 5 306507 No stated maturity 1 5 0000 1 35 6 1 8
Total $2380 1 830 $22745 730 $ 4 1 2789 I $ 4433 023
There were no sales of investments during the year ended December 3 I 20 I 4 During the year ended December 3 1 20 I 3 the Company sold securities availabl e for sale with a book value of $0 resulting in realized gains of $ I 8026 There were no gross realized losses on sales of securities available for sale for the year ended December 3 I 20 1 3
1 6
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Information pertain ing to securi ti es with gross un realized losses at December 31 20 1 4 an d 20 1 3 aggregated by investment category an d length of time that in dividual securities have been in a continuous loss position is as follows
December 3 1 20 1 4 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Unrealized Estimated
Losses Fair Value Losses Fair Val ue Available-for-sale securities
US government agen cies $ (2793) $ 2056 222 $ $ Mortgage-backed securities (2264) 25247 1 0 Other ( 1 1 89982) 3 960018
Total available-for-sale secu rities $ (5 05 7) $ 45 80932 $ ( 1 1 89982) $ 3 9600 1 8
December 3 I 20 1 3 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Un realized Estimated
Losses Fair Value Losses Fair Valu e Available-for-sale securities
Mun icipal securities $ (50 1 48) $ 677262 $ $ Other ( 1 383 5 63) 3 766437
Total available-for-sale securities $ (SO 1 48) $ 677262 $ ( 1 3835 63) $ 3 766437
Un realized l osses on securities have n ot been recogn ized into in come because the issu ers bonds are of high credit quality we have the inten t and ability to hold the secu rities for the foreseeable futu re and the declin e in fair value is primarily due to increased market interest rates The fair values a re generally expected to recover as the bonds approach their maturity dates
1 7
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Within other secu rities there is $ 1 1 75 600 of u nrealized losses related to two perpetual preferred secu rities to two large international bank holding companies The u nrealized losses on the perpetual preferred secu rities is attributable to the cu rrent variable dividend rates compared to similar fixed-rate instru ments at each institution The fair value of the Companys perpetual preferred secu rities is expected to increase as the variable dividend rate increases which is contingent u pon the three-month LIB O R rate The Company has the ability and intent to hold the secu rities u ntil their estimated fair values increase
Note 4 - Loans
A summary of the balances of loans follows (in thousands)
20 1 4 20 1 3
Residential $ 1 1 493 $ 1 1 686 Construction and land 5 298 1 303 Commercial real estate 60262 48570 Commercial 38472 7844 I nventory 1 0239 9 649 Professional practice 45890 48224 Life insurance contracts 1 933 Automobile 1 22 789 Consu mer 1 038 1 083
Total gross loans 1 728 1 4 1 3 1 08 1
Less Allowance for loan losses (5 627) (5 334) Net deferred loan fees (6 1 ) ( I 03)
Net loans $ 1 67 1 26 $ 1 25 644
1 8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Loans and the all owance for loan losses ar e disaggregated by segment as foll ows (i n thousands)
Allowance for loan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Allowance for Joan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Ending allowance attributable to loans
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Beginning
Balance
$ 276 $ 2 1 3 900 377
3250 259
12 9
38
$ 5334 $
Beginning
Balance
$ 392 $ 72
849 338 626 587 106
5 54
$ 3029 $
1 9
Year Ended December 3 1 2014
Charge-offs Recoveries Provision Ending Balance
$ $ (45) $ 23 1 42 255
( 142) 758 144 (8) 5 1 3
1 85 3435 ( 1 9) 240
(4) 1 0 ( 1 7) I ( I ) 8
148 1 86
(4) $ 1 54 $ 143 $ 5627
Year Ended December 3 1 2013
Charge-offs Recoveries Provision Ending Balance
$ $ ( 1 1 6) $ 276 ( I 33) 274 2 1 3
5 1 900 9 30 377
(2658) 5282 3250 (328) 259
(36) 1 6 (74) 1 2 4 9
( 1 6) 38
(2827) $ 25 $ 5 107 $ 5334
Year Ended December 3 I bull 2014 Individually Collectively
Evaluated for Evaluated for
Impairment Impairment Ending Balance
$ 130 $ 1 0 1 $ 23 1 255 255
180 578 758 5 1 3 5 1 3
3335 1 00 3435 240 240
I I 8 8
186 186
$ 3645 $ 1 982 $ 5627
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 2014 and 2013
Note 4 - Loans (Continued)
Individually Collectively Evaluated for Evaluated for Impairment Impairment Ending Balance
Loans
Residential $ 595 $ 1 0898 $ 1 1 493 Construction and land 5298 5298 Commercial real estate 1 297 58965 60262 Commercial 38472 38472 Inventory 5576 4663 1 0239 Professional practice 45890 45890 Automobile 122 122 Consumer l 038 1038
Total $ 7468 $ 1 65346 $ 1728 1 4
Year Ended December 3 1 20 1 3 Individually Collectively
Evaluated for Evaluated for Impairment Impairment Ending Balance
Ending allowance attributable to loans
Residential $ 130 $ 146 $ 276 Construction and land 2 13 2 13 Commercial real estate 250 650 900 Commercial 269 1 08 377 Inventory 3000 250 3250 Professional practice 259 259 Automobile 12 12 Consumer 9 9 Unallocated 38 38
Total $ 3649 $ 1685 $ 5334
Individually Collectively Evaluated for Evaluated for Impairment lmpaiffilent Ending Balance
Loans
Residential $ 595 $ 1 1 09 1 $ 1 1 686 Construction and land 1303 1303 Commercial real estate 1 298 47272 48570 Commercial 1587 6257 7844 Inventory 5215 4434 9649 Professional practice 48224 48224 Life insurance contraets 1933 1 933 Automobile 789 789 Consumer 1 083 l 083
Total $ 8695 $ 122386 $ 1 3 1 08 1
20
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 201 4 and 2013
Note 4 - Loans (Continued)
Credit Risk Grading
The Company util izes a loan rating system as a means of identifying problem and potential problem loans The Company assigned the fo llowing loan ratings to loans disaggregated by segment and class as of December 3 1 20 1 4 and 20 1 3 (in thousands)
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile
Consumer
Total
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Life insurance contracts Automobile
Consumer
Total
December 3 1 20 14 Loans rated Loans rated Loans rated
1-5
$ 1 0898 $ 5298
58965 38472
4663 45890
1 22 1 038
$ 1 65346 $
6
===
$
$
7 Total
595 $ 1 1 493 5298
1 297 60262 38472
5576 I 0239 45890
1 22 1 038
7468 $ 1 728 1 4 ====
December 3 1 20 1 3 Loans rated Loans rated Loans rated
1-5 6 7 Total
$ 1 0626 $ 465 $ 595 $ 1 1 686 1 303 1 303
47272 1 298 48570 6257 J 587 7844 4434 52 1 5 9649
48224 48224 I 933 I 933
789 789 1 083 1 083
$ 1 2 1 921 $ 465 $ 8695 $ 1 3 1 08 1
The Company categorized each loan into credit risk categori es based on current fi nancial information overall debt service coverage comparison against industry averages col lateral coverage historical payment experience and current economic trends The Company uses the following definitions for credit risk ratings
2 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Federal Home Loan Bank Stock - The Company is a member of the Federal Home Loan Bank of Chicago (the FHLB ) and is required to maintain a minimu m investment in stock of the FHLB that varies with th e level of advances outstanding with the FHLB Th e stock does not have a readily determinable fair value and is carried at cost and is periodically evaluated for impairment
Loans - Th e Company grants mortgage commercial and consu mer loans to customers A substantial portion of the loan portfolio is represented by commercial loans in the Ch icago metropolitan area Th e abil ity of the B ank s debtors to honor their contracts is dependent upon th e real estate and general economic conditions in this area
Loans that management has th e intent and abil ity to h old for the foreseeable future or u ntil maturity or pay-off are reported at their outstanding unpaid principal balances adjusted for charge-offs the allowance for loan losses and any deferred fees or costs on originated loans Interest income is accrued on the unpaid principal balance Loan origination fees net of certain direct origination costs are deferred and recognized as an adjustment of the related loan yield u sing the interest meth od
The accrual of interest on loans is discontinued at th e time th e loan is 90 days del inquent unless the credit is well-secu red and in process of collection In all cases loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered dou btfu l
Al l interest accru ed but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income The interest on th ese loans is accounted for on the cash basis or cost-recovery meth od u ntil qualifying for return to accru al Loans are returned to accrual status wh en all the principal and interest amounts contractually due are brought current and futu re payments are reasonably assured
Loans are considered delinqu ent when customers fail to make their payments in accordance with the contractual loan agreement If a loan matures and principal remains outstanding the loan is considered delinquent u ntil the loan is paid off or renewed
Gross l oans are reported at th e Companys recorded investment The recorded investment is th e borrowers principal balance less partial charge-offs if any
Allowance for Loan Losses - Th e allowance for loan losses (the allowance) is established as losses are estimated to have occurred through a provision fo r loan losses charged to earnings Loan losses are charged against the allowance when management believes the u ncollectibi lity of a loan balance is confirmed Subsequ ent recoveries if any are credited to the allowance
9
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
The allowance for loan losses is evaluated on a r egu lar basis by management and is based upon managements per iodic r eview of the collectibility of the loans in light of h istor ical exper ience the nature and volu me of the loan portfolio adverse situations that may affect the borrowers abil ity to repay estimated value of any u nder lying col lateral and prevailing economic conditions This evaluation is inher ently subjective as it r equ ires estimates that are susceptible to significant r evision as mor e infor mation becomes available
The allowance consists of specific general and unallocated components The specific component r elates to loans that are classified as impaired For such loans an al lowance is established when the discounted cash flows (or collateral value or observable mar ket pr ice) of the impair ed loan is lower than the car rying value of that loan The general component covers nonimpaired loans and is based on histor ical loss exper ience adju sted for qualitative factor s An unallocated component is maintained to cover u ncer tainties that cou ld affect managements estimate of probable losses The unallocated component of the al lowance reflects the margin of imprecision inher ent in the u nder lying assumptions u sed in the methodologies for estimating specific and general losses in the portfolio
A loan is considered impaired when based on current information and events it is probable that the Company will be u nable to collect the schedu led payments of pr incipal or interest when due according to the contractual ter ms of the loan agr eement Factors consider ed by management in deter mining impair ment include payment status collateral value and the probability of collecting scheduled pr incipal and interest payments when du e Loans that exper ience insignificant payment delays and payment shortfal ls gener ally ar e not classified as impair ed Management deter mines the significance of payment delays and payment shortfalls on a case- by-case basis taking into consideration all of the cir cumstances surrounding the loan and the borrower including length of the delay the r easons for the delay the borrowers pr ior payment recor d and the amou nt of the shortfal l in relation to the pr incipal and interest owed Impairment is measured on a loan-by-loan basis for loans by either the present value of expected future cash flows discou nted at the loans effect ive inter est rate the J oans obtainabl e mar ket pr ice or t he fair value of the collateral if the loan is collateral dependent
Large groups of homogeneous loans are collectively evaluated for impair ment Accor dingly the Company does not separ ately identify individual consumer loans for impairment disclosures
1 0
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Troubled debt rest ruct uring (TDR) of loans is undertaken t o improve the l ikelihood t hat t he loan will be repaid in f ull under t he modif ied t erms in accordance wit h a reasonable repayment schedule All modif ied loans are evaluat ed to det ermine whet her t he loans should be report ed as a TDR A loan is a TDR when t he Company for economic or legal reasons relat ed t o t he borrowers f inancial d ifficult ies grants a concession t o t he borrower by modifying or renewing a loan that t he Company would not otherwise consider To make t his det erminat ion t he Company must det ermine whet her (a) t h e borrower is experiencing financial diff icult ies and (b) t h e Company grant ed t he borrower a concession This det erminat ion requires considerat ion of all t he fact s and circumstances surrounding t he modificat ion An overall general decline in the economy or some det eriorat ion in a borrowers f inancial condit ion does not automat ically mean t he borrower is experiencing f inancial difficult ies Loans t hat are considered TDR are considered impaired and a specif ic reserve is est ablished in the allowance consist ent ly wit h ot her impaired loans
Other Real Estate Owned - Asset s acquired through or in lieu of loan f oreclosure are held f or sale and are initially recorded at fair value less costs t o sell at t he dat e of t he foreclosure est ablishing a new cost basis Subsequent t o f oreclosure valuat ions are periodically perf ormed by management and t he assets are carried at the lower of carrying amount or fair value less cost t o sel l Revenue and expenses f rom operat ions and changes in the valuat ion allowance are included in loan collect ion and other real est at e owned expenses
Premises and Equipment - Land is carried at cost Bu ildings and equipment are carried at cost less accumulat ed depreciat ion comput ed on t he st raight -line met hod over t he est imat ed usef ul l ives of the assets ranging from I to 39 years
Bank Owned Life Insurance - The B ank has purchased life insurance pol icies on certain key offi cers B ank owned life insurance (BOLi) is recorded at it s cash surrender value or t he amount t hat can be realized upon immediate liquidat ion
Goodwill - Goodwill result s f rom prior business acquisit ions and represent s t h e excess of t he purchase price over the fair value of acquired tangible asset s and liabilit ies and ident ifiable intangible assets Goodwill is assessed at least annually f or impairment and any such impairment will be recognized in the period identified There has been no impairment ident if ied during t he years ended December 3 1 20 1 4 and 20 1 3
Income Taxes - Def erred income tax asset s and liabilit ies are det ermined using t h e liabil ity (or balance sheet) met hod Under t his met hod t he net def erred t ax asset or liability is det ermined based on t he t ax effect s of t he various t emporary d iff erences between t he book and tax basis of t he various consolidat ed balance sheet asset s and liabilities and gives current recognit ion t o changes in t ax rat es and laws
1 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
At December 3 1 20 1 4 and 20 1 3 the Company evaluated tax positions taken for filing with the Internal Revenue Service and the State of I l l inois The Company believes that income tax filing positions will be sustained under examination and does not anticipate any adjustments that would result in a material adverse eff ect on the Companys consolidated financial condition results of operations or cash flows Accordingly the Company has not recorded any reserves or related accr uals for interest and penalties for uncertai n tax positions at December 3 1 20 1 4 and 20 1 3 The Company believes it is no longer subject to tax examinati ons for years pri or to 20 I I
Comprehensive Income - Accounting principles generally require that recognized revenue expenses gains and losses be included in net income (loss) Although certain changes in assets and liabilities such as unrealized gains and losses on investment securities - available for sal e are reported as a separate component of the equity section of the consolidated balance sheet such items along with net income (loss) are components of comprehensive income
Stock-based Compensation - The Company applies the recogniti on and measurement provisions of the Compensation - Stock Compensation topi c of the Accounting Standards Codification (ASC) to account for employee stock option costs which is referred to as the calculated value method Compensation costs are measured based on the fair value of the instrument at the date of grant Those compensation costs are expensed on a straight-line basis over the vesting period of the specific instrument There were no stock-based awards granted in 20 1 4 and 20 1 3
Off-balance-sheet Instruments - In the ordinary course of business the Company has entered into commitments under commercial letters of credit and standby letters of credit Such financial instruments are recorded when they are funded
Reclassification - Certain amounts appearing in the prior years consolidated financial statements have been reclassified to conform to the current years consolidated financial statements
12
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Comprehensive Income (Topic 220) -
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income - The Financial Accounting Standards B oard (FASB) issued Accou nting Standards Update (ASU) No 20 1 3-02 Comprehensive Income (Topic 220) - Reporting of Amounts Recossified Out of Accumulated Other Comprehensive Income The ASU requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is requ ired under US generally accepted accounting principles (US GAAP) to be reclassified in its entirety to net income For other amounts that are not requ ired u nder US GAAP to be reclassified in their entirety to net income in the same reporting period an entity is requ ired to cross-reference other disclosures required under US GAAP that provide additional detail about those amounts For nonpu blic entities the ASU is effective prospectively for reporting periods beginning after December 1 5 20 1 3 (therefore for the year ended December 3 I 20 1 4 fo r the Company) and early adoption was allowed Adoption of this update did not have a material effect on the consolidated financial statements
New Accounting Pronouncement - Receivables - Troubled Debt Restructurings by
Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateral
Consumer Mortgage Loans upon Foreclosure - The FASB issued ASU No 20 1 4-04 Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure The amendments in this u pdate clarify that when an in-substance repossession or foreclosu re occu rs and a creditor is considered to have received physical possession of residential property col lateral izing a consu mer mortgage loan u pon either ( I ) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy the loan through completion of a deed in l ieu of foreclosure or through a similar legal agreement Additionally the amendment requ ires disclosure of both ( I ) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans col lateralized by residential real estate property that are in the process of foreclosure according to local requ irements of the applicable jurisdiction The amendments in this u pdate are effective for annual periods beginning after December I 5 20 1 4 (therefore December 3 I 20 I 5 for the Company) Management does not expect the update to have a material effect on the Companys consol idated financial statements
1 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Revenue from Contracts with Customers
(Topic 606) - In May 20 1 4 the Financial Accounting Standards Board issued Accounting Standards Update No 20 1 4-09 Revenue from Contracts with Customers (Topic 606) which will supersede the current revenue recognition requirements in Topic 605 Revenue Recognition The ASU is based o n the princip le that revenue is recognized to depict the transfer of goods or services to customers in an amount that refl ects the consideration to wh ich the entity expects to be entitled in exchange for those goods or services Th e ASU also requ ires additional disclosure about the nature amount timing and uncertainty of revenue and cash fl ows arising from customer contracts including significant judgments and changes in judgments and assets recognized from costs incu rred to obtain or fulfill a contract The new gu idance will be effective for periods beginning af ter December 1 5 201 7 (th erefo re for the year ending December 3 I 20 1 8 for th e Company) Th e ASU permits the new revenue recognition gu idance to be appl ied u sing one of two retrospective application methods The Company h as not yet determined wh ich application method it will use or th e potential eff ects of th e new standard on th e financial statements i f any
Subsequent Events - Th e financial statements and related disclosures include evaluation of events up through and including April 1 3 20 15 wh ich is the date the consolidated financial statements were available to be issued
Note 2 - Restrictions on Cash and Amounts Due from Banks
Th e B ank is required to maintain average cash balances on hand or on deposit with the Federal Reserve B ank At December 3 1 20 1 4 and 20 1 3 th ese reserve balances amounted to $ 1 5 67000 and $ 1 45 2000 respectively
1 4
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities
The amortized cost and estimated fair value of secu rities with gross unreal ized gains and losses are as fol lows
December 3 1 20 1 4 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $ 6988 1 44 $ 86 1 05 $ (2793) $ 707 1 456 M unicipal securities 6363935 438 1 4 6407749 Mortgage-backed securities 5 29975 1 9020 (2264) 5 306507 Other 5 1 50000 ( 1 1 89982) 3 9600 1 8
Total available-for-sale securities $2380 1 830 $ 1 38939 $ ( I I 95039) $ 22745730
Held-to-maturity securities -Mun icipal securities $ 4 I 2789 I $ 305 1 32 $ $ 4433 023
December 3 I 20 I 3 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $187 1 5 1 05 $ 93349 $ $ I 8808454 State and municipal 6 8 I 3 063 77408 (SO I 48) 6 840323 Other 5 I 50000 ( I 383563) 3 766437
Total available-for-sale securities $30678 I 68 $ I 70757 $ ( 1 433 7 1 I ) $ 29 4 1 5 2 1 4
Held-to-maturity secu rities -Municipal securities $ 3 303 774 $ $ (22364) $ 3 28 I 4 I 0
At December 3 I 20 1 4 and 20 1 3 securities with a carrying value of $503498 1 and $8595033 respectively were pledged to secure publ ic deposits repu rchase agreements and for other purposes requ ired or permitted by law
15
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
The amort ized cost and estimated fair value of debt securities by contractual maturity at December 3 1 20 1 4 are as fo llows
Available for Sale Held to Maturity Amort ized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
Due in one year or less $ 5 1 42415 $ 5 1 70 1 88 $ $ Due in one through five
years 32805 35 3 293 783 Due after five years through
ten years 4929 1 29 5 0 1 5 234 Due after ten years 5 000000 3824400 4 1 27891 4433 023
Total 1 8352079 1 7303605 4 1 2789 1 4433 023
Mortgage-backed securities 5 29975 1 5 306507 No stated maturity 1 5 0000 1 35 6 1 8
Total $2380 1 830 $22745 730 $ 4 1 2789 I $ 4433 023
There were no sales of investments during the year ended December 3 I 20 I 4 During the year ended December 3 1 20 I 3 the Company sold securities availabl e for sale with a book value of $0 resulting in realized gains of $ I 8026 There were no gross realized losses on sales of securities available for sale for the year ended December 3 I 20 1 3
1 6
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Information pertain ing to securi ti es with gross un realized losses at December 31 20 1 4 an d 20 1 3 aggregated by investment category an d length of time that in dividual securities have been in a continuous loss position is as follows
December 3 1 20 1 4 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Unrealized Estimated
Losses Fair Value Losses Fair Val ue Available-for-sale securities
US government agen cies $ (2793) $ 2056 222 $ $ Mortgage-backed securities (2264) 25247 1 0 Other ( 1 1 89982) 3 960018
Total available-for-sale secu rities $ (5 05 7) $ 45 80932 $ ( 1 1 89982) $ 3 9600 1 8
December 3 I 20 1 3 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Un realized Estimated
Losses Fair Value Losses Fair Valu e Available-for-sale securities
Mun icipal securities $ (50 1 48) $ 677262 $ $ Other ( 1 383 5 63) 3 766437
Total available-for-sale securities $ (SO 1 48) $ 677262 $ ( 1 3835 63) $ 3 766437
Un realized l osses on securities have n ot been recogn ized into in come because the issu ers bonds are of high credit quality we have the inten t and ability to hold the secu rities for the foreseeable futu re and the declin e in fair value is primarily due to increased market interest rates The fair values a re generally expected to recover as the bonds approach their maturity dates
1 7
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Within other secu rities there is $ 1 1 75 600 of u nrealized losses related to two perpetual preferred secu rities to two large international bank holding companies The u nrealized losses on the perpetual preferred secu rities is attributable to the cu rrent variable dividend rates compared to similar fixed-rate instru ments at each institution The fair value of the Companys perpetual preferred secu rities is expected to increase as the variable dividend rate increases which is contingent u pon the three-month LIB O R rate The Company has the ability and intent to hold the secu rities u ntil their estimated fair values increase
Note 4 - Loans
A summary of the balances of loans follows (in thousands)
20 1 4 20 1 3
Residential $ 1 1 493 $ 1 1 686 Construction and land 5 298 1 303 Commercial real estate 60262 48570 Commercial 38472 7844 I nventory 1 0239 9 649 Professional practice 45890 48224 Life insurance contracts 1 933 Automobile 1 22 789 Consu mer 1 038 1 083
Total gross loans 1 728 1 4 1 3 1 08 1
Less Allowance for loan losses (5 627) (5 334) Net deferred loan fees (6 1 ) ( I 03)
Net loans $ 1 67 1 26 $ 1 25 644
1 8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Loans and the all owance for loan losses ar e disaggregated by segment as foll ows (i n thousands)
Allowance for loan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Allowance for Joan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Ending allowance attributable to loans
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Beginning
Balance
$ 276 $ 2 1 3 900 377
3250 259
12 9
38
$ 5334 $
Beginning
Balance
$ 392 $ 72
849 338 626 587 106
5 54
$ 3029 $
1 9
Year Ended December 3 1 2014
Charge-offs Recoveries Provision Ending Balance
$ $ (45) $ 23 1 42 255
( 142) 758 144 (8) 5 1 3
1 85 3435 ( 1 9) 240
(4) 1 0 ( 1 7) I ( I ) 8
148 1 86
(4) $ 1 54 $ 143 $ 5627
Year Ended December 3 1 2013
Charge-offs Recoveries Provision Ending Balance
$ $ ( 1 1 6) $ 276 ( I 33) 274 2 1 3
5 1 900 9 30 377
(2658) 5282 3250 (328) 259
(36) 1 6 (74) 1 2 4 9
( 1 6) 38
(2827) $ 25 $ 5 107 $ 5334
Year Ended December 3 I bull 2014 Individually Collectively
Evaluated for Evaluated for
Impairment Impairment Ending Balance
$ 130 $ 1 0 1 $ 23 1 255 255
180 578 758 5 1 3 5 1 3
3335 1 00 3435 240 240
I I 8 8
186 186
$ 3645 $ 1 982 $ 5627
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 2014 and 2013
Note 4 - Loans (Continued)
Individually Collectively Evaluated for Evaluated for Impairment Impairment Ending Balance
Loans
Residential $ 595 $ 1 0898 $ 1 1 493 Construction and land 5298 5298 Commercial real estate 1 297 58965 60262 Commercial 38472 38472 Inventory 5576 4663 1 0239 Professional practice 45890 45890 Automobile 122 122 Consumer l 038 1038
Total $ 7468 $ 1 65346 $ 1728 1 4
Year Ended December 3 1 20 1 3 Individually Collectively
Evaluated for Evaluated for Impairment Impairment Ending Balance
Ending allowance attributable to loans
Residential $ 130 $ 146 $ 276 Construction and land 2 13 2 13 Commercial real estate 250 650 900 Commercial 269 1 08 377 Inventory 3000 250 3250 Professional practice 259 259 Automobile 12 12 Consumer 9 9 Unallocated 38 38
Total $ 3649 $ 1685 $ 5334
Individually Collectively Evaluated for Evaluated for Impairment lmpaiffilent Ending Balance
Loans
Residential $ 595 $ 1 1 09 1 $ 1 1 686 Construction and land 1303 1303 Commercial real estate 1 298 47272 48570 Commercial 1587 6257 7844 Inventory 5215 4434 9649 Professional practice 48224 48224 Life insurance contraets 1933 1 933 Automobile 789 789 Consumer 1 083 l 083
Total $ 8695 $ 122386 $ 1 3 1 08 1
20
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 201 4 and 2013
Note 4 - Loans (Continued)
Credit Risk Grading
The Company util izes a loan rating system as a means of identifying problem and potential problem loans The Company assigned the fo llowing loan ratings to loans disaggregated by segment and class as of December 3 1 20 1 4 and 20 1 3 (in thousands)
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile
Consumer
Total
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Life insurance contracts Automobile
Consumer
Total
December 3 1 20 14 Loans rated Loans rated Loans rated
1-5
$ 1 0898 $ 5298
58965 38472
4663 45890
1 22 1 038
$ 1 65346 $
6
===
$
$
7 Total
595 $ 1 1 493 5298
1 297 60262 38472
5576 I 0239 45890
1 22 1 038
7468 $ 1 728 1 4 ====
December 3 1 20 1 3 Loans rated Loans rated Loans rated
1-5 6 7 Total
$ 1 0626 $ 465 $ 595 $ 1 1 686 1 303 1 303
47272 1 298 48570 6257 J 587 7844 4434 52 1 5 9649
48224 48224 I 933 I 933
789 789 1 083 1 083
$ 1 2 1 921 $ 465 $ 8695 $ 1 3 1 08 1
The Company categorized each loan into credit risk categori es based on current fi nancial information overall debt service coverage comparison against industry averages col lateral coverage historical payment experience and current economic trends The Company uses the following definitions for credit risk ratings
2 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
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Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
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Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
The allowance for loan losses is evaluated on a r egu lar basis by management and is based upon managements per iodic r eview of the collectibility of the loans in light of h istor ical exper ience the nature and volu me of the loan portfolio adverse situations that may affect the borrowers abil ity to repay estimated value of any u nder lying col lateral and prevailing economic conditions This evaluation is inher ently subjective as it r equ ires estimates that are susceptible to significant r evision as mor e infor mation becomes available
The allowance consists of specific general and unallocated components The specific component r elates to loans that are classified as impaired For such loans an al lowance is established when the discounted cash flows (or collateral value or observable mar ket pr ice) of the impair ed loan is lower than the car rying value of that loan The general component covers nonimpaired loans and is based on histor ical loss exper ience adju sted for qualitative factor s An unallocated component is maintained to cover u ncer tainties that cou ld affect managements estimate of probable losses The unallocated component of the al lowance reflects the margin of imprecision inher ent in the u nder lying assumptions u sed in the methodologies for estimating specific and general losses in the portfolio
A loan is considered impaired when based on current information and events it is probable that the Company will be u nable to collect the schedu led payments of pr incipal or interest when due according to the contractual ter ms of the loan agr eement Factors consider ed by management in deter mining impair ment include payment status collateral value and the probability of collecting scheduled pr incipal and interest payments when du e Loans that exper ience insignificant payment delays and payment shortfal ls gener ally ar e not classified as impair ed Management deter mines the significance of payment delays and payment shortfalls on a case- by-case basis taking into consideration all of the cir cumstances surrounding the loan and the borrower including length of the delay the r easons for the delay the borrowers pr ior payment recor d and the amou nt of the shortfal l in relation to the pr incipal and interest owed Impairment is measured on a loan-by-loan basis for loans by either the present value of expected future cash flows discou nted at the loans effect ive inter est rate the J oans obtainabl e mar ket pr ice or t he fair value of the collateral if the loan is collateral dependent
Large groups of homogeneous loans are collectively evaluated for impair ment Accor dingly the Company does not separ ately identify individual consumer loans for impairment disclosures
1 0
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Troubled debt rest ruct uring (TDR) of loans is undertaken t o improve the l ikelihood t hat t he loan will be repaid in f ull under t he modif ied t erms in accordance wit h a reasonable repayment schedule All modif ied loans are evaluat ed to det ermine whet her t he loans should be report ed as a TDR A loan is a TDR when t he Company for economic or legal reasons relat ed t o t he borrowers f inancial d ifficult ies grants a concession t o t he borrower by modifying or renewing a loan that t he Company would not otherwise consider To make t his det erminat ion t he Company must det ermine whet her (a) t h e borrower is experiencing financial diff icult ies and (b) t h e Company grant ed t he borrower a concession This det erminat ion requires considerat ion of all t he fact s and circumstances surrounding t he modificat ion An overall general decline in the economy or some det eriorat ion in a borrowers f inancial condit ion does not automat ically mean t he borrower is experiencing f inancial difficult ies Loans t hat are considered TDR are considered impaired and a specif ic reserve is est ablished in the allowance consist ent ly wit h ot her impaired loans
Other Real Estate Owned - Asset s acquired through or in lieu of loan f oreclosure are held f or sale and are initially recorded at fair value less costs t o sell at t he dat e of t he foreclosure est ablishing a new cost basis Subsequent t o f oreclosure valuat ions are periodically perf ormed by management and t he assets are carried at the lower of carrying amount or fair value less cost t o sel l Revenue and expenses f rom operat ions and changes in the valuat ion allowance are included in loan collect ion and other real est at e owned expenses
Premises and Equipment - Land is carried at cost Bu ildings and equipment are carried at cost less accumulat ed depreciat ion comput ed on t he st raight -line met hod over t he est imat ed usef ul l ives of the assets ranging from I to 39 years
Bank Owned Life Insurance - The B ank has purchased life insurance pol icies on certain key offi cers B ank owned life insurance (BOLi) is recorded at it s cash surrender value or t he amount t hat can be realized upon immediate liquidat ion
Goodwill - Goodwill result s f rom prior business acquisit ions and represent s t h e excess of t he purchase price over the fair value of acquired tangible asset s and liabilit ies and ident ifiable intangible assets Goodwill is assessed at least annually f or impairment and any such impairment will be recognized in the period identified There has been no impairment ident if ied during t he years ended December 3 1 20 1 4 and 20 1 3
Income Taxes - Def erred income tax asset s and liabilit ies are det ermined using t h e liabil ity (or balance sheet) met hod Under t his met hod t he net def erred t ax asset or liability is det ermined based on t he t ax effect s of t he various t emporary d iff erences between t he book and tax basis of t he various consolidat ed balance sheet asset s and liabilities and gives current recognit ion t o changes in t ax rat es and laws
1 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
At December 3 1 20 1 4 and 20 1 3 the Company evaluated tax positions taken for filing with the Internal Revenue Service and the State of I l l inois The Company believes that income tax filing positions will be sustained under examination and does not anticipate any adjustments that would result in a material adverse eff ect on the Companys consolidated financial condition results of operations or cash flows Accordingly the Company has not recorded any reserves or related accr uals for interest and penalties for uncertai n tax positions at December 3 1 20 1 4 and 20 1 3 The Company believes it is no longer subject to tax examinati ons for years pri or to 20 I I
Comprehensive Income - Accounting principles generally require that recognized revenue expenses gains and losses be included in net income (loss) Although certain changes in assets and liabilities such as unrealized gains and losses on investment securities - available for sal e are reported as a separate component of the equity section of the consolidated balance sheet such items along with net income (loss) are components of comprehensive income
Stock-based Compensation - The Company applies the recogniti on and measurement provisions of the Compensation - Stock Compensation topi c of the Accounting Standards Codification (ASC) to account for employee stock option costs which is referred to as the calculated value method Compensation costs are measured based on the fair value of the instrument at the date of grant Those compensation costs are expensed on a straight-line basis over the vesting period of the specific instrument There were no stock-based awards granted in 20 1 4 and 20 1 3
Off-balance-sheet Instruments - In the ordinary course of business the Company has entered into commitments under commercial letters of credit and standby letters of credit Such financial instruments are recorded when they are funded
Reclassification - Certain amounts appearing in the prior years consolidated financial statements have been reclassified to conform to the current years consolidated financial statements
12
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Comprehensive Income (Topic 220) -
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income - The Financial Accounting Standards B oard (FASB) issued Accou nting Standards Update (ASU) No 20 1 3-02 Comprehensive Income (Topic 220) - Reporting of Amounts Recossified Out of Accumulated Other Comprehensive Income The ASU requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is requ ired under US generally accepted accounting principles (US GAAP) to be reclassified in its entirety to net income For other amounts that are not requ ired u nder US GAAP to be reclassified in their entirety to net income in the same reporting period an entity is requ ired to cross-reference other disclosures required under US GAAP that provide additional detail about those amounts For nonpu blic entities the ASU is effective prospectively for reporting periods beginning after December 1 5 20 1 3 (therefore for the year ended December 3 I 20 1 4 fo r the Company) and early adoption was allowed Adoption of this update did not have a material effect on the consolidated financial statements
New Accounting Pronouncement - Receivables - Troubled Debt Restructurings by
Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateral
Consumer Mortgage Loans upon Foreclosure - The FASB issued ASU No 20 1 4-04 Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure The amendments in this u pdate clarify that when an in-substance repossession or foreclosu re occu rs and a creditor is considered to have received physical possession of residential property col lateral izing a consu mer mortgage loan u pon either ( I ) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy the loan through completion of a deed in l ieu of foreclosure or through a similar legal agreement Additionally the amendment requ ires disclosure of both ( I ) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans col lateralized by residential real estate property that are in the process of foreclosure according to local requ irements of the applicable jurisdiction The amendments in this u pdate are effective for annual periods beginning after December I 5 20 1 4 (therefore December 3 I 20 I 5 for the Company) Management does not expect the update to have a material effect on the Companys consol idated financial statements
1 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Revenue from Contracts with Customers
(Topic 606) - In May 20 1 4 the Financial Accounting Standards Board issued Accounting Standards Update No 20 1 4-09 Revenue from Contracts with Customers (Topic 606) which will supersede the current revenue recognition requirements in Topic 605 Revenue Recognition The ASU is based o n the princip le that revenue is recognized to depict the transfer of goods or services to customers in an amount that refl ects the consideration to wh ich the entity expects to be entitled in exchange for those goods or services Th e ASU also requ ires additional disclosure about the nature amount timing and uncertainty of revenue and cash fl ows arising from customer contracts including significant judgments and changes in judgments and assets recognized from costs incu rred to obtain or fulfill a contract The new gu idance will be effective for periods beginning af ter December 1 5 201 7 (th erefo re for the year ending December 3 I 20 1 8 for th e Company) Th e ASU permits the new revenue recognition gu idance to be appl ied u sing one of two retrospective application methods The Company h as not yet determined wh ich application method it will use or th e potential eff ects of th e new standard on th e financial statements i f any
Subsequent Events - Th e financial statements and related disclosures include evaluation of events up through and including April 1 3 20 15 wh ich is the date the consolidated financial statements were available to be issued
Note 2 - Restrictions on Cash and Amounts Due from Banks
Th e B ank is required to maintain average cash balances on hand or on deposit with the Federal Reserve B ank At December 3 1 20 1 4 and 20 1 3 th ese reserve balances amounted to $ 1 5 67000 and $ 1 45 2000 respectively
1 4
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities
The amortized cost and estimated fair value of secu rities with gross unreal ized gains and losses are as fol lows
December 3 1 20 1 4 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $ 6988 1 44 $ 86 1 05 $ (2793) $ 707 1 456 M unicipal securities 6363935 438 1 4 6407749 Mortgage-backed securities 5 29975 1 9020 (2264) 5 306507 Other 5 1 50000 ( 1 1 89982) 3 9600 1 8
Total available-for-sale securities $2380 1 830 $ 1 38939 $ ( I I 95039) $ 22745730
Held-to-maturity securities -Mun icipal securities $ 4 I 2789 I $ 305 1 32 $ $ 4433 023
December 3 I 20 I 3 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $187 1 5 1 05 $ 93349 $ $ I 8808454 State and municipal 6 8 I 3 063 77408 (SO I 48) 6 840323 Other 5 I 50000 ( I 383563) 3 766437
Total available-for-sale securities $30678 I 68 $ I 70757 $ ( 1 433 7 1 I ) $ 29 4 1 5 2 1 4
Held-to-maturity secu rities -Municipal securities $ 3 303 774 $ $ (22364) $ 3 28 I 4 I 0
At December 3 I 20 1 4 and 20 1 3 securities with a carrying value of $503498 1 and $8595033 respectively were pledged to secure publ ic deposits repu rchase agreements and for other purposes requ ired or permitted by law
15
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
The amort ized cost and estimated fair value of debt securities by contractual maturity at December 3 1 20 1 4 are as fo llows
Available for Sale Held to Maturity Amort ized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
Due in one year or less $ 5 1 42415 $ 5 1 70 1 88 $ $ Due in one through five
years 32805 35 3 293 783 Due after five years through
ten years 4929 1 29 5 0 1 5 234 Due after ten years 5 000000 3824400 4 1 27891 4433 023
Total 1 8352079 1 7303605 4 1 2789 1 4433 023
Mortgage-backed securities 5 29975 1 5 306507 No stated maturity 1 5 0000 1 35 6 1 8
Total $2380 1 830 $22745 730 $ 4 1 2789 I $ 4433 023
There were no sales of investments during the year ended December 3 I 20 I 4 During the year ended December 3 1 20 I 3 the Company sold securities availabl e for sale with a book value of $0 resulting in realized gains of $ I 8026 There were no gross realized losses on sales of securities available for sale for the year ended December 3 I 20 1 3
1 6
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Information pertain ing to securi ti es with gross un realized losses at December 31 20 1 4 an d 20 1 3 aggregated by investment category an d length of time that in dividual securities have been in a continuous loss position is as follows
December 3 1 20 1 4 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Unrealized Estimated
Losses Fair Value Losses Fair Val ue Available-for-sale securities
US government agen cies $ (2793) $ 2056 222 $ $ Mortgage-backed securities (2264) 25247 1 0 Other ( 1 1 89982) 3 960018
Total available-for-sale secu rities $ (5 05 7) $ 45 80932 $ ( 1 1 89982) $ 3 9600 1 8
December 3 I 20 1 3 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Un realized Estimated
Losses Fair Value Losses Fair Valu e Available-for-sale securities
Mun icipal securities $ (50 1 48) $ 677262 $ $ Other ( 1 383 5 63) 3 766437
Total available-for-sale securities $ (SO 1 48) $ 677262 $ ( 1 3835 63) $ 3 766437
Un realized l osses on securities have n ot been recogn ized into in come because the issu ers bonds are of high credit quality we have the inten t and ability to hold the secu rities for the foreseeable futu re and the declin e in fair value is primarily due to increased market interest rates The fair values a re generally expected to recover as the bonds approach their maturity dates
1 7
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Within other secu rities there is $ 1 1 75 600 of u nrealized losses related to two perpetual preferred secu rities to two large international bank holding companies The u nrealized losses on the perpetual preferred secu rities is attributable to the cu rrent variable dividend rates compared to similar fixed-rate instru ments at each institution The fair value of the Companys perpetual preferred secu rities is expected to increase as the variable dividend rate increases which is contingent u pon the three-month LIB O R rate The Company has the ability and intent to hold the secu rities u ntil their estimated fair values increase
Note 4 - Loans
A summary of the balances of loans follows (in thousands)
20 1 4 20 1 3
Residential $ 1 1 493 $ 1 1 686 Construction and land 5 298 1 303 Commercial real estate 60262 48570 Commercial 38472 7844 I nventory 1 0239 9 649 Professional practice 45890 48224 Life insurance contracts 1 933 Automobile 1 22 789 Consu mer 1 038 1 083
Total gross loans 1 728 1 4 1 3 1 08 1
Less Allowance for loan losses (5 627) (5 334) Net deferred loan fees (6 1 ) ( I 03)
Net loans $ 1 67 1 26 $ 1 25 644
1 8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Loans and the all owance for loan losses ar e disaggregated by segment as foll ows (i n thousands)
Allowance for loan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Allowance for Joan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Ending allowance attributable to loans
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Beginning
Balance
$ 276 $ 2 1 3 900 377
3250 259
12 9
38
$ 5334 $
Beginning
Balance
$ 392 $ 72
849 338 626 587 106
5 54
$ 3029 $
1 9
Year Ended December 3 1 2014
Charge-offs Recoveries Provision Ending Balance
$ $ (45) $ 23 1 42 255
( 142) 758 144 (8) 5 1 3
1 85 3435 ( 1 9) 240
(4) 1 0 ( 1 7) I ( I ) 8
148 1 86
(4) $ 1 54 $ 143 $ 5627
Year Ended December 3 1 2013
Charge-offs Recoveries Provision Ending Balance
$ $ ( 1 1 6) $ 276 ( I 33) 274 2 1 3
5 1 900 9 30 377
(2658) 5282 3250 (328) 259
(36) 1 6 (74) 1 2 4 9
( 1 6) 38
(2827) $ 25 $ 5 107 $ 5334
Year Ended December 3 I bull 2014 Individually Collectively
Evaluated for Evaluated for
Impairment Impairment Ending Balance
$ 130 $ 1 0 1 $ 23 1 255 255
180 578 758 5 1 3 5 1 3
3335 1 00 3435 240 240
I I 8 8
186 186
$ 3645 $ 1 982 $ 5627
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 2014 and 2013
Note 4 - Loans (Continued)
Individually Collectively Evaluated for Evaluated for Impairment Impairment Ending Balance
Loans
Residential $ 595 $ 1 0898 $ 1 1 493 Construction and land 5298 5298 Commercial real estate 1 297 58965 60262 Commercial 38472 38472 Inventory 5576 4663 1 0239 Professional practice 45890 45890 Automobile 122 122 Consumer l 038 1038
Total $ 7468 $ 1 65346 $ 1728 1 4
Year Ended December 3 1 20 1 3 Individually Collectively
Evaluated for Evaluated for Impairment Impairment Ending Balance
Ending allowance attributable to loans
Residential $ 130 $ 146 $ 276 Construction and land 2 13 2 13 Commercial real estate 250 650 900 Commercial 269 1 08 377 Inventory 3000 250 3250 Professional practice 259 259 Automobile 12 12 Consumer 9 9 Unallocated 38 38
Total $ 3649 $ 1685 $ 5334
Individually Collectively Evaluated for Evaluated for Impairment lmpaiffilent Ending Balance
Loans
Residential $ 595 $ 1 1 09 1 $ 1 1 686 Construction and land 1303 1303 Commercial real estate 1 298 47272 48570 Commercial 1587 6257 7844 Inventory 5215 4434 9649 Professional practice 48224 48224 Life insurance contraets 1933 1 933 Automobile 789 789 Consumer 1 083 l 083
Total $ 8695 $ 122386 $ 1 3 1 08 1
20
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 201 4 and 2013
Note 4 - Loans (Continued)
Credit Risk Grading
The Company util izes a loan rating system as a means of identifying problem and potential problem loans The Company assigned the fo llowing loan ratings to loans disaggregated by segment and class as of December 3 1 20 1 4 and 20 1 3 (in thousands)
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile
Consumer
Total
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Life insurance contracts Automobile
Consumer
Total
December 3 1 20 14 Loans rated Loans rated Loans rated
1-5
$ 1 0898 $ 5298
58965 38472
4663 45890
1 22 1 038
$ 1 65346 $
6
===
$
$
7 Total
595 $ 1 1 493 5298
1 297 60262 38472
5576 I 0239 45890
1 22 1 038
7468 $ 1 728 1 4 ====
December 3 1 20 1 3 Loans rated Loans rated Loans rated
1-5 6 7 Total
$ 1 0626 $ 465 $ 595 $ 1 1 686 1 303 1 303
47272 1 298 48570 6257 J 587 7844 4434 52 1 5 9649
48224 48224 I 933 I 933
789 789 1 083 1 083
$ 1 2 1 921 $ 465 $ 8695 $ 1 3 1 08 1
The Company categorized each loan into credit risk categori es based on current fi nancial information overall debt service coverage comparison against industry averages col lateral coverage historical payment experience and current economic trends The Company uses the following definitions for credit risk ratings
2 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
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Actions
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Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
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Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
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Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
Troubled debt rest ruct uring (TDR) of loans is undertaken t o improve the l ikelihood t hat t he loan will be repaid in f ull under t he modif ied t erms in accordance wit h a reasonable repayment schedule All modif ied loans are evaluat ed to det ermine whet her t he loans should be report ed as a TDR A loan is a TDR when t he Company for economic or legal reasons relat ed t o t he borrowers f inancial d ifficult ies grants a concession t o t he borrower by modifying or renewing a loan that t he Company would not otherwise consider To make t his det erminat ion t he Company must det ermine whet her (a) t h e borrower is experiencing financial diff icult ies and (b) t h e Company grant ed t he borrower a concession This det erminat ion requires considerat ion of all t he fact s and circumstances surrounding t he modificat ion An overall general decline in the economy or some det eriorat ion in a borrowers f inancial condit ion does not automat ically mean t he borrower is experiencing f inancial difficult ies Loans t hat are considered TDR are considered impaired and a specif ic reserve is est ablished in the allowance consist ent ly wit h ot her impaired loans
Other Real Estate Owned - Asset s acquired through or in lieu of loan f oreclosure are held f or sale and are initially recorded at fair value less costs t o sell at t he dat e of t he foreclosure est ablishing a new cost basis Subsequent t o f oreclosure valuat ions are periodically perf ormed by management and t he assets are carried at the lower of carrying amount or fair value less cost t o sel l Revenue and expenses f rom operat ions and changes in the valuat ion allowance are included in loan collect ion and other real est at e owned expenses
Premises and Equipment - Land is carried at cost Bu ildings and equipment are carried at cost less accumulat ed depreciat ion comput ed on t he st raight -line met hod over t he est imat ed usef ul l ives of the assets ranging from I to 39 years
Bank Owned Life Insurance - The B ank has purchased life insurance pol icies on certain key offi cers B ank owned life insurance (BOLi) is recorded at it s cash surrender value or t he amount t hat can be realized upon immediate liquidat ion
Goodwill - Goodwill result s f rom prior business acquisit ions and represent s t h e excess of t he purchase price over the fair value of acquired tangible asset s and liabilit ies and ident ifiable intangible assets Goodwill is assessed at least annually f or impairment and any such impairment will be recognized in the period identified There has been no impairment ident if ied during t he years ended December 3 1 20 1 4 and 20 1 3
Income Taxes - Def erred income tax asset s and liabilit ies are det ermined using t h e liabil ity (or balance sheet) met hod Under t his met hod t he net def erred t ax asset or liability is det ermined based on t he t ax effect s of t he various t emporary d iff erences between t he book and tax basis of t he various consolidat ed balance sheet asset s and liabilities and gives current recognit ion t o changes in t ax rat es and laws
1 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
At December 3 1 20 1 4 and 20 1 3 the Company evaluated tax positions taken for filing with the Internal Revenue Service and the State of I l l inois The Company believes that income tax filing positions will be sustained under examination and does not anticipate any adjustments that would result in a material adverse eff ect on the Companys consolidated financial condition results of operations or cash flows Accordingly the Company has not recorded any reserves or related accr uals for interest and penalties for uncertai n tax positions at December 3 1 20 1 4 and 20 1 3 The Company believes it is no longer subject to tax examinati ons for years pri or to 20 I I
Comprehensive Income - Accounting principles generally require that recognized revenue expenses gains and losses be included in net income (loss) Although certain changes in assets and liabilities such as unrealized gains and losses on investment securities - available for sal e are reported as a separate component of the equity section of the consolidated balance sheet such items along with net income (loss) are components of comprehensive income
Stock-based Compensation - The Company applies the recogniti on and measurement provisions of the Compensation - Stock Compensation topi c of the Accounting Standards Codification (ASC) to account for employee stock option costs which is referred to as the calculated value method Compensation costs are measured based on the fair value of the instrument at the date of grant Those compensation costs are expensed on a straight-line basis over the vesting period of the specific instrument There were no stock-based awards granted in 20 1 4 and 20 1 3
Off-balance-sheet Instruments - In the ordinary course of business the Company has entered into commitments under commercial letters of credit and standby letters of credit Such financial instruments are recorded when they are funded
Reclassification - Certain amounts appearing in the prior years consolidated financial statements have been reclassified to conform to the current years consolidated financial statements
12
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Comprehensive Income (Topic 220) -
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income - The Financial Accounting Standards B oard (FASB) issued Accou nting Standards Update (ASU) No 20 1 3-02 Comprehensive Income (Topic 220) - Reporting of Amounts Recossified Out of Accumulated Other Comprehensive Income The ASU requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is requ ired under US generally accepted accounting principles (US GAAP) to be reclassified in its entirety to net income For other amounts that are not requ ired u nder US GAAP to be reclassified in their entirety to net income in the same reporting period an entity is requ ired to cross-reference other disclosures required under US GAAP that provide additional detail about those amounts For nonpu blic entities the ASU is effective prospectively for reporting periods beginning after December 1 5 20 1 3 (therefore for the year ended December 3 I 20 1 4 fo r the Company) and early adoption was allowed Adoption of this update did not have a material effect on the consolidated financial statements
New Accounting Pronouncement - Receivables - Troubled Debt Restructurings by
Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateral
Consumer Mortgage Loans upon Foreclosure - The FASB issued ASU No 20 1 4-04 Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure The amendments in this u pdate clarify that when an in-substance repossession or foreclosu re occu rs and a creditor is considered to have received physical possession of residential property col lateral izing a consu mer mortgage loan u pon either ( I ) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy the loan through completion of a deed in l ieu of foreclosure or through a similar legal agreement Additionally the amendment requ ires disclosure of both ( I ) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans col lateralized by residential real estate property that are in the process of foreclosure according to local requ irements of the applicable jurisdiction The amendments in this u pdate are effective for annual periods beginning after December I 5 20 1 4 (therefore December 3 I 20 I 5 for the Company) Management does not expect the update to have a material effect on the Companys consol idated financial statements
1 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Revenue from Contracts with Customers
(Topic 606) - In May 20 1 4 the Financial Accounting Standards Board issued Accounting Standards Update No 20 1 4-09 Revenue from Contracts with Customers (Topic 606) which will supersede the current revenue recognition requirements in Topic 605 Revenue Recognition The ASU is based o n the princip le that revenue is recognized to depict the transfer of goods or services to customers in an amount that refl ects the consideration to wh ich the entity expects to be entitled in exchange for those goods or services Th e ASU also requ ires additional disclosure about the nature amount timing and uncertainty of revenue and cash fl ows arising from customer contracts including significant judgments and changes in judgments and assets recognized from costs incu rred to obtain or fulfill a contract The new gu idance will be effective for periods beginning af ter December 1 5 201 7 (th erefo re for the year ending December 3 I 20 1 8 for th e Company) Th e ASU permits the new revenue recognition gu idance to be appl ied u sing one of two retrospective application methods The Company h as not yet determined wh ich application method it will use or th e potential eff ects of th e new standard on th e financial statements i f any
Subsequent Events - Th e financial statements and related disclosures include evaluation of events up through and including April 1 3 20 15 wh ich is the date the consolidated financial statements were available to be issued
Note 2 - Restrictions on Cash and Amounts Due from Banks
Th e B ank is required to maintain average cash balances on hand or on deposit with the Federal Reserve B ank At December 3 1 20 1 4 and 20 1 3 th ese reserve balances amounted to $ 1 5 67000 and $ 1 45 2000 respectively
1 4
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities
The amortized cost and estimated fair value of secu rities with gross unreal ized gains and losses are as fol lows
December 3 1 20 1 4 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $ 6988 1 44 $ 86 1 05 $ (2793) $ 707 1 456 M unicipal securities 6363935 438 1 4 6407749 Mortgage-backed securities 5 29975 1 9020 (2264) 5 306507 Other 5 1 50000 ( 1 1 89982) 3 9600 1 8
Total available-for-sale securities $2380 1 830 $ 1 38939 $ ( I I 95039) $ 22745730
Held-to-maturity securities -Mun icipal securities $ 4 I 2789 I $ 305 1 32 $ $ 4433 023
December 3 I 20 I 3 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $187 1 5 1 05 $ 93349 $ $ I 8808454 State and municipal 6 8 I 3 063 77408 (SO I 48) 6 840323 Other 5 I 50000 ( I 383563) 3 766437
Total available-for-sale securities $30678 I 68 $ I 70757 $ ( 1 433 7 1 I ) $ 29 4 1 5 2 1 4
Held-to-maturity secu rities -Municipal securities $ 3 303 774 $ $ (22364) $ 3 28 I 4 I 0
At December 3 I 20 1 4 and 20 1 3 securities with a carrying value of $503498 1 and $8595033 respectively were pledged to secure publ ic deposits repu rchase agreements and for other purposes requ ired or permitted by law
15
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
The amort ized cost and estimated fair value of debt securities by contractual maturity at December 3 1 20 1 4 are as fo llows
Available for Sale Held to Maturity Amort ized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
Due in one year or less $ 5 1 42415 $ 5 1 70 1 88 $ $ Due in one through five
years 32805 35 3 293 783 Due after five years through
ten years 4929 1 29 5 0 1 5 234 Due after ten years 5 000000 3824400 4 1 27891 4433 023
Total 1 8352079 1 7303605 4 1 2789 1 4433 023
Mortgage-backed securities 5 29975 1 5 306507 No stated maturity 1 5 0000 1 35 6 1 8
Total $2380 1 830 $22745 730 $ 4 1 2789 I $ 4433 023
There were no sales of investments during the year ended December 3 I 20 I 4 During the year ended December 3 1 20 I 3 the Company sold securities availabl e for sale with a book value of $0 resulting in realized gains of $ I 8026 There were no gross realized losses on sales of securities available for sale for the year ended December 3 I 20 1 3
1 6
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Information pertain ing to securi ti es with gross un realized losses at December 31 20 1 4 an d 20 1 3 aggregated by investment category an d length of time that in dividual securities have been in a continuous loss position is as follows
December 3 1 20 1 4 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Unrealized Estimated
Losses Fair Value Losses Fair Val ue Available-for-sale securities
US government agen cies $ (2793) $ 2056 222 $ $ Mortgage-backed securities (2264) 25247 1 0 Other ( 1 1 89982) 3 960018
Total available-for-sale secu rities $ (5 05 7) $ 45 80932 $ ( 1 1 89982) $ 3 9600 1 8
December 3 I 20 1 3 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Un realized Estimated
Losses Fair Value Losses Fair Valu e Available-for-sale securities
Mun icipal securities $ (50 1 48) $ 677262 $ $ Other ( 1 383 5 63) 3 766437
Total available-for-sale securities $ (SO 1 48) $ 677262 $ ( 1 3835 63) $ 3 766437
Un realized l osses on securities have n ot been recogn ized into in come because the issu ers bonds are of high credit quality we have the inten t and ability to hold the secu rities for the foreseeable futu re and the declin e in fair value is primarily due to increased market interest rates The fair values a re generally expected to recover as the bonds approach their maturity dates
1 7
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Within other secu rities there is $ 1 1 75 600 of u nrealized losses related to two perpetual preferred secu rities to two large international bank holding companies The u nrealized losses on the perpetual preferred secu rities is attributable to the cu rrent variable dividend rates compared to similar fixed-rate instru ments at each institution The fair value of the Companys perpetual preferred secu rities is expected to increase as the variable dividend rate increases which is contingent u pon the three-month LIB O R rate The Company has the ability and intent to hold the secu rities u ntil their estimated fair values increase
Note 4 - Loans
A summary of the balances of loans follows (in thousands)
20 1 4 20 1 3
Residential $ 1 1 493 $ 1 1 686 Construction and land 5 298 1 303 Commercial real estate 60262 48570 Commercial 38472 7844 I nventory 1 0239 9 649 Professional practice 45890 48224 Life insurance contracts 1 933 Automobile 1 22 789 Consu mer 1 038 1 083
Total gross loans 1 728 1 4 1 3 1 08 1
Less Allowance for loan losses (5 627) (5 334) Net deferred loan fees (6 1 ) ( I 03)
Net loans $ 1 67 1 26 $ 1 25 644
1 8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Loans and the all owance for loan losses ar e disaggregated by segment as foll ows (i n thousands)
Allowance for loan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Allowance for Joan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Ending allowance attributable to loans
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Beginning
Balance
$ 276 $ 2 1 3 900 377
3250 259
12 9
38
$ 5334 $
Beginning
Balance
$ 392 $ 72
849 338 626 587 106
5 54
$ 3029 $
1 9
Year Ended December 3 1 2014
Charge-offs Recoveries Provision Ending Balance
$ $ (45) $ 23 1 42 255
( 142) 758 144 (8) 5 1 3
1 85 3435 ( 1 9) 240
(4) 1 0 ( 1 7) I ( I ) 8
148 1 86
(4) $ 1 54 $ 143 $ 5627
Year Ended December 3 1 2013
Charge-offs Recoveries Provision Ending Balance
$ $ ( 1 1 6) $ 276 ( I 33) 274 2 1 3
5 1 900 9 30 377
(2658) 5282 3250 (328) 259
(36) 1 6 (74) 1 2 4 9
( 1 6) 38
(2827) $ 25 $ 5 107 $ 5334
Year Ended December 3 I bull 2014 Individually Collectively
Evaluated for Evaluated for
Impairment Impairment Ending Balance
$ 130 $ 1 0 1 $ 23 1 255 255
180 578 758 5 1 3 5 1 3
3335 1 00 3435 240 240
I I 8 8
186 186
$ 3645 $ 1 982 $ 5627
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 2014 and 2013
Note 4 - Loans (Continued)
Individually Collectively Evaluated for Evaluated for Impairment Impairment Ending Balance
Loans
Residential $ 595 $ 1 0898 $ 1 1 493 Construction and land 5298 5298 Commercial real estate 1 297 58965 60262 Commercial 38472 38472 Inventory 5576 4663 1 0239 Professional practice 45890 45890 Automobile 122 122 Consumer l 038 1038
Total $ 7468 $ 1 65346 $ 1728 1 4
Year Ended December 3 1 20 1 3 Individually Collectively
Evaluated for Evaluated for Impairment Impairment Ending Balance
Ending allowance attributable to loans
Residential $ 130 $ 146 $ 276 Construction and land 2 13 2 13 Commercial real estate 250 650 900 Commercial 269 1 08 377 Inventory 3000 250 3250 Professional practice 259 259 Automobile 12 12 Consumer 9 9 Unallocated 38 38
Total $ 3649 $ 1685 $ 5334
Individually Collectively Evaluated for Evaluated for Impairment lmpaiffilent Ending Balance
Loans
Residential $ 595 $ 1 1 09 1 $ 1 1 686 Construction and land 1303 1303 Commercial real estate 1 298 47272 48570 Commercial 1587 6257 7844 Inventory 5215 4434 9649 Professional practice 48224 48224 Life insurance contraets 1933 1 933 Automobile 789 789 Consumer 1 083 l 083
Total $ 8695 $ 122386 $ 1 3 1 08 1
20
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 201 4 and 2013
Note 4 - Loans (Continued)
Credit Risk Grading
The Company util izes a loan rating system as a means of identifying problem and potential problem loans The Company assigned the fo llowing loan ratings to loans disaggregated by segment and class as of December 3 1 20 1 4 and 20 1 3 (in thousands)
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile
Consumer
Total
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Life insurance contracts Automobile
Consumer
Total
December 3 1 20 14 Loans rated Loans rated Loans rated
1-5
$ 1 0898 $ 5298
58965 38472
4663 45890
1 22 1 038
$ 1 65346 $
6
===
$
$
7 Total
595 $ 1 1 493 5298
1 297 60262 38472
5576 I 0239 45890
1 22 1 038
7468 $ 1 728 1 4 ====
December 3 1 20 1 3 Loans rated Loans rated Loans rated
1-5 6 7 Total
$ 1 0626 $ 465 $ 595 $ 1 1 686 1 303 1 303
47272 1 298 48570 6257 J 587 7844 4434 52 1 5 9649
48224 48224 I 933 I 933
789 789 1 083 1 083
$ 1 2 1 921 $ 465 $ 8695 $ 1 3 1 08 1
The Company categorized each loan into credit risk categori es based on current fi nancial information overall debt service coverage comparison against industry averages col lateral coverage historical payment experience and current economic trends The Company uses the following definitions for credit risk ratings
2 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
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Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
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Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
At December 3 1 20 1 4 and 20 1 3 the Company evaluated tax positions taken for filing with the Internal Revenue Service and the State of I l l inois The Company believes that income tax filing positions will be sustained under examination and does not anticipate any adjustments that would result in a material adverse eff ect on the Companys consolidated financial condition results of operations or cash flows Accordingly the Company has not recorded any reserves or related accr uals for interest and penalties for uncertai n tax positions at December 3 1 20 1 4 and 20 1 3 The Company believes it is no longer subject to tax examinati ons for years pri or to 20 I I
Comprehensive Income - Accounting principles generally require that recognized revenue expenses gains and losses be included in net income (loss) Although certain changes in assets and liabilities such as unrealized gains and losses on investment securities - available for sal e are reported as a separate component of the equity section of the consolidated balance sheet such items along with net income (loss) are components of comprehensive income
Stock-based Compensation - The Company applies the recogniti on and measurement provisions of the Compensation - Stock Compensation topi c of the Accounting Standards Codification (ASC) to account for employee stock option costs which is referred to as the calculated value method Compensation costs are measured based on the fair value of the instrument at the date of grant Those compensation costs are expensed on a straight-line basis over the vesting period of the specific instrument There were no stock-based awards granted in 20 1 4 and 20 1 3
Off-balance-sheet Instruments - In the ordinary course of business the Company has entered into commitments under commercial letters of credit and standby letters of credit Such financial instruments are recorded when they are funded
Reclassification - Certain amounts appearing in the prior years consolidated financial statements have been reclassified to conform to the current years consolidated financial statements
12
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Comprehensive Income (Topic 220) -
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income - The Financial Accounting Standards B oard (FASB) issued Accou nting Standards Update (ASU) No 20 1 3-02 Comprehensive Income (Topic 220) - Reporting of Amounts Recossified Out of Accumulated Other Comprehensive Income The ASU requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is requ ired under US generally accepted accounting principles (US GAAP) to be reclassified in its entirety to net income For other amounts that are not requ ired u nder US GAAP to be reclassified in their entirety to net income in the same reporting period an entity is requ ired to cross-reference other disclosures required under US GAAP that provide additional detail about those amounts For nonpu blic entities the ASU is effective prospectively for reporting periods beginning after December 1 5 20 1 3 (therefore for the year ended December 3 I 20 1 4 fo r the Company) and early adoption was allowed Adoption of this update did not have a material effect on the consolidated financial statements
New Accounting Pronouncement - Receivables - Troubled Debt Restructurings by
Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateral
Consumer Mortgage Loans upon Foreclosure - The FASB issued ASU No 20 1 4-04 Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure The amendments in this u pdate clarify that when an in-substance repossession or foreclosu re occu rs and a creditor is considered to have received physical possession of residential property col lateral izing a consu mer mortgage loan u pon either ( I ) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy the loan through completion of a deed in l ieu of foreclosure or through a similar legal agreement Additionally the amendment requ ires disclosure of both ( I ) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans col lateralized by residential real estate property that are in the process of foreclosure according to local requ irements of the applicable jurisdiction The amendments in this u pdate are effective for annual periods beginning after December I 5 20 1 4 (therefore December 3 I 20 I 5 for the Company) Management does not expect the update to have a material effect on the Companys consol idated financial statements
1 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Revenue from Contracts with Customers
(Topic 606) - In May 20 1 4 the Financial Accounting Standards Board issued Accounting Standards Update No 20 1 4-09 Revenue from Contracts with Customers (Topic 606) which will supersede the current revenue recognition requirements in Topic 605 Revenue Recognition The ASU is based o n the princip le that revenue is recognized to depict the transfer of goods or services to customers in an amount that refl ects the consideration to wh ich the entity expects to be entitled in exchange for those goods or services Th e ASU also requ ires additional disclosure about the nature amount timing and uncertainty of revenue and cash fl ows arising from customer contracts including significant judgments and changes in judgments and assets recognized from costs incu rred to obtain or fulfill a contract The new gu idance will be effective for periods beginning af ter December 1 5 201 7 (th erefo re for the year ending December 3 I 20 1 8 for th e Company) Th e ASU permits the new revenue recognition gu idance to be appl ied u sing one of two retrospective application methods The Company h as not yet determined wh ich application method it will use or th e potential eff ects of th e new standard on th e financial statements i f any
Subsequent Events - Th e financial statements and related disclosures include evaluation of events up through and including April 1 3 20 15 wh ich is the date the consolidated financial statements were available to be issued
Note 2 - Restrictions on Cash and Amounts Due from Banks
Th e B ank is required to maintain average cash balances on hand or on deposit with the Federal Reserve B ank At December 3 1 20 1 4 and 20 1 3 th ese reserve balances amounted to $ 1 5 67000 and $ 1 45 2000 respectively
1 4
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities
The amortized cost and estimated fair value of secu rities with gross unreal ized gains and losses are as fol lows
December 3 1 20 1 4 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $ 6988 1 44 $ 86 1 05 $ (2793) $ 707 1 456 M unicipal securities 6363935 438 1 4 6407749 Mortgage-backed securities 5 29975 1 9020 (2264) 5 306507 Other 5 1 50000 ( 1 1 89982) 3 9600 1 8
Total available-for-sale securities $2380 1 830 $ 1 38939 $ ( I I 95039) $ 22745730
Held-to-maturity securities -Mun icipal securities $ 4 I 2789 I $ 305 1 32 $ $ 4433 023
December 3 I 20 I 3 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $187 1 5 1 05 $ 93349 $ $ I 8808454 State and municipal 6 8 I 3 063 77408 (SO I 48) 6 840323 Other 5 I 50000 ( I 383563) 3 766437
Total available-for-sale securities $30678 I 68 $ I 70757 $ ( 1 433 7 1 I ) $ 29 4 1 5 2 1 4
Held-to-maturity secu rities -Municipal securities $ 3 303 774 $ $ (22364) $ 3 28 I 4 I 0
At December 3 I 20 1 4 and 20 1 3 securities with a carrying value of $503498 1 and $8595033 respectively were pledged to secure publ ic deposits repu rchase agreements and for other purposes requ ired or permitted by law
15
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
The amort ized cost and estimated fair value of debt securities by contractual maturity at December 3 1 20 1 4 are as fo llows
Available for Sale Held to Maturity Amort ized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
Due in one year or less $ 5 1 42415 $ 5 1 70 1 88 $ $ Due in one through five
years 32805 35 3 293 783 Due after five years through
ten years 4929 1 29 5 0 1 5 234 Due after ten years 5 000000 3824400 4 1 27891 4433 023
Total 1 8352079 1 7303605 4 1 2789 1 4433 023
Mortgage-backed securities 5 29975 1 5 306507 No stated maturity 1 5 0000 1 35 6 1 8
Total $2380 1 830 $22745 730 $ 4 1 2789 I $ 4433 023
There were no sales of investments during the year ended December 3 I 20 I 4 During the year ended December 3 1 20 I 3 the Company sold securities availabl e for sale with a book value of $0 resulting in realized gains of $ I 8026 There were no gross realized losses on sales of securities available for sale for the year ended December 3 I 20 1 3
1 6
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Information pertain ing to securi ti es with gross un realized losses at December 31 20 1 4 an d 20 1 3 aggregated by investment category an d length of time that in dividual securities have been in a continuous loss position is as follows
December 3 1 20 1 4 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Unrealized Estimated
Losses Fair Value Losses Fair Val ue Available-for-sale securities
US government agen cies $ (2793) $ 2056 222 $ $ Mortgage-backed securities (2264) 25247 1 0 Other ( 1 1 89982) 3 960018
Total available-for-sale secu rities $ (5 05 7) $ 45 80932 $ ( 1 1 89982) $ 3 9600 1 8
December 3 I 20 1 3 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Un realized Estimated
Losses Fair Value Losses Fair Valu e Available-for-sale securities
Mun icipal securities $ (50 1 48) $ 677262 $ $ Other ( 1 383 5 63) 3 766437
Total available-for-sale securities $ (SO 1 48) $ 677262 $ ( 1 3835 63) $ 3 766437
Un realized l osses on securities have n ot been recogn ized into in come because the issu ers bonds are of high credit quality we have the inten t and ability to hold the secu rities for the foreseeable futu re and the declin e in fair value is primarily due to increased market interest rates The fair values a re generally expected to recover as the bonds approach their maturity dates
1 7
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Within other secu rities there is $ 1 1 75 600 of u nrealized losses related to two perpetual preferred secu rities to two large international bank holding companies The u nrealized losses on the perpetual preferred secu rities is attributable to the cu rrent variable dividend rates compared to similar fixed-rate instru ments at each institution The fair value of the Companys perpetual preferred secu rities is expected to increase as the variable dividend rate increases which is contingent u pon the three-month LIB O R rate The Company has the ability and intent to hold the secu rities u ntil their estimated fair values increase
Note 4 - Loans
A summary of the balances of loans follows (in thousands)
20 1 4 20 1 3
Residential $ 1 1 493 $ 1 1 686 Construction and land 5 298 1 303 Commercial real estate 60262 48570 Commercial 38472 7844 I nventory 1 0239 9 649 Professional practice 45890 48224 Life insurance contracts 1 933 Automobile 1 22 789 Consu mer 1 038 1 083
Total gross loans 1 728 1 4 1 3 1 08 1
Less Allowance for loan losses (5 627) (5 334) Net deferred loan fees (6 1 ) ( I 03)
Net loans $ 1 67 1 26 $ 1 25 644
1 8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Loans and the all owance for loan losses ar e disaggregated by segment as foll ows (i n thousands)
Allowance for loan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Allowance for Joan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Ending allowance attributable to loans
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Beginning
Balance
$ 276 $ 2 1 3 900 377
3250 259
12 9
38
$ 5334 $
Beginning
Balance
$ 392 $ 72
849 338 626 587 106
5 54
$ 3029 $
1 9
Year Ended December 3 1 2014
Charge-offs Recoveries Provision Ending Balance
$ $ (45) $ 23 1 42 255
( 142) 758 144 (8) 5 1 3
1 85 3435 ( 1 9) 240
(4) 1 0 ( 1 7) I ( I ) 8
148 1 86
(4) $ 1 54 $ 143 $ 5627
Year Ended December 3 1 2013
Charge-offs Recoveries Provision Ending Balance
$ $ ( 1 1 6) $ 276 ( I 33) 274 2 1 3
5 1 900 9 30 377
(2658) 5282 3250 (328) 259
(36) 1 6 (74) 1 2 4 9
( 1 6) 38
(2827) $ 25 $ 5 107 $ 5334
Year Ended December 3 I bull 2014 Individually Collectively
Evaluated for Evaluated for
Impairment Impairment Ending Balance
$ 130 $ 1 0 1 $ 23 1 255 255
180 578 758 5 1 3 5 1 3
3335 1 00 3435 240 240
I I 8 8
186 186
$ 3645 $ 1 982 $ 5627
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 2014 and 2013
Note 4 - Loans (Continued)
Individually Collectively Evaluated for Evaluated for Impairment Impairment Ending Balance
Loans
Residential $ 595 $ 1 0898 $ 1 1 493 Construction and land 5298 5298 Commercial real estate 1 297 58965 60262 Commercial 38472 38472 Inventory 5576 4663 1 0239 Professional practice 45890 45890 Automobile 122 122 Consumer l 038 1038
Total $ 7468 $ 1 65346 $ 1728 1 4
Year Ended December 3 1 20 1 3 Individually Collectively
Evaluated for Evaluated for Impairment Impairment Ending Balance
Ending allowance attributable to loans
Residential $ 130 $ 146 $ 276 Construction and land 2 13 2 13 Commercial real estate 250 650 900 Commercial 269 1 08 377 Inventory 3000 250 3250 Professional practice 259 259 Automobile 12 12 Consumer 9 9 Unallocated 38 38
Total $ 3649 $ 1685 $ 5334
Individually Collectively Evaluated for Evaluated for Impairment lmpaiffilent Ending Balance
Loans
Residential $ 595 $ 1 1 09 1 $ 1 1 686 Construction and land 1303 1303 Commercial real estate 1 298 47272 48570 Commercial 1587 6257 7844 Inventory 5215 4434 9649 Professional practice 48224 48224 Life insurance contraets 1933 1 933 Automobile 789 789 Consumer 1 083 l 083
Total $ 8695 $ 122386 $ 1 3 1 08 1
20
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 201 4 and 2013
Note 4 - Loans (Continued)
Credit Risk Grading
The Company util izes a loan rating system as a means of identifying problem and potential problem loans The Company assigned the fo llowing loan ratings to loans disaggregated by segment and class as of December 3 1 20 1 4 and 20 1 3 (in thousands)
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile
Consumer
Total
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Life insurance contracts Automobile
Consumer
Total
December 3 1 20 14 Loans rated Loans rated Loans rated
1-5
$ 1 0898 $ 5298
58965 38472
4663 45890
1 22 1 038
$ 1 65346 $
6
===
$
$
7 Total
595 $ 1 1 493 5298
1 297 60262 38472
5576 I 0239 45890
1 22 1 038
7468 $ 1 728 1 4 ====
December 3 1 20 1 3 Loans rated Loans rated Loans rated
1-5 6 7 Total
$ 1 0626 $ 465 $ 595 $ 1 1 686 1 303 1 303
47272 1 298 48570 6257 J 587 7844 4434 52 1 5 9649
48224 48224 I 933 I 933
789 789 1 083 1 083
$ 1 2 1 921 $ 465 $ 8695 $ 1 3 1 08 1
The Company categorized each loan into credit risk categori es based on current fi nancial information overall debt service coverage comparison against industry averages col lateral coverage historical payment experience and current economic trends The Company uses the following definitions for credit risk ratings
2 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Comprehensive Income (Topic 220) -
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income - The Financial Accounting Standards B oard (FASB) issued Accou nting Standards Update (ASU) No 20 1 3-02 Comprehensive Income (Topic 220) - Reporting of Amounts Recossified Out of Accumulated Other Comprehensive Income The ASU requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is requ ired under US generally accepted accounting principles (US GAAP) to be reclassified in its entirety to net income For other amounts that are not requ ired u nder US GAAP to be reclassified in their entirety to net income in the same reporting period an entity is requ ired to cross-reference other disclosures required under US GAAP that provide additional detail about those amounts For nonpu blic entities the ASU is effective prospectively for reporting periods beginning after December 1 5 20 1 3 (therefore for the year ended December 3 I 20 1 4 fo r the Company) and early adoption was allowed Adoption of this update did not have a material effect on the consolidated financial statements
New Accounting Pronouncement - Receivables - Troubled Debt Restructurings by
Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateral
Consumer Mortgage Loans upon Foreclosure - The FASB issued ASU No 20 1 4-04 Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure The amendments in this u pdate clarify that when an in-substance repossession or foreclosu re occu rs and a creditor is considered to have received physical possession of residential property col lateral izing a consu mer mortgage loan u pon either ( I ) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy the loan through completion of a deed in l ieu of foreclosure or through a similar legal agreement Additionally the amendment requ ires disclosure of both ( I ) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans col lateralized by residential real estate property that are in the process of foreclosure according to local requ irements of the applicable jurisdiction The amendments in this u pdate are effective for annual periods beginning after December I 5 20 1 4 (therefore December 3 I 20 I 5 for the Company) Management does not expect the update to have a material effect on the Companys consol idated financial statements
1 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Revenue from Contracts with Customers
(Topic 606) - In May 20 1 4 the Financial Accounting Standards Board issued Accounting Standards Update No 20 1 4-09 Revenue from Contracts with Customers (Topic 606) which will supersede the current revenue recognition requirements in Topic 605 Revenue Recognition The ASU is based o n the princip le that revenue is recognized to depict the transfer of goods or services to customers in an amount that refl ects the consideration to wh ich the entity expects to be entitled in exchange for those goods or services Th e ASU also requ ires additional disclosure about the nature amount timing and uncertainty of revenue and cash fl ows arising from customer contracts including significant judgments and changes in judgments and assets recognized from costs incu rred to obtain or fulfill a contract The new gu idance will be effective for periods beginning af ter December 1 5 201 7 (th erefo re for the year ending December 3 I 20 1 8 for th e Company) Th e ASU permits the new revenue recognition gu idance to be appl ied u sing one of two retrospective application methods The Company h as not yet determined wh ich application method it will use or th e potential eff ects of th e new standard on th e financial statements i f any
Subsequent Events - Th e financial statements and related disclosures include evaluation of events up through and including April 1 3 20 15 wh ich is the date the consolidated financial statements were available to be issued
Note 2 - Restrictions on Cash and Amounts Due from Banks
Th e B ank is required to maintain average cash balances on hand or on deposit with the Federal Reserve B ank At December 3 1 20 1 4 and 20 1 3 th ese reserve balances amounted to $ 1 5 67000 and $ 1 45 2000 respectively
1 4
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities
The amortized cost and estimated fair value of secu rities with gross unreal ized gains and losses are as fol lows
December 3 1 20 1 4 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $ 6988 1 44 $ 86 1 05 $ (2793) $ 707 1 456 M unicipal securities 6363935 438 1 4 6407749 Mortgage-backed securities 5 29975 1 9020 (2264) 5 306507 Other 5 1 50000 ( 1 1 89982) 3 9600 1 8
Total available-for-sale securities $2380 1 830 $ 1 38939 $ ( I I 95039) $ 22745730
Held-to-maturity securities -Mun icipal securities $ 4 I 2789 I $ 305 1 32 $ $ 4433 023
December 3 I 20 I 3 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $187 1 5 1 05 $ 93349 $ $ I 8808454 State and municipal 6 8 I 3 063 77408 (SO I 48) 6 840323 Other 5 I 50000 ( I 383563) 3 766437
Total available-for-sale securities $30678 I 68 $ I 70757 $ ( 1 433 7 1 I ) $ 29 4 1 5 2 1 4
Held-to-maturity secu rities -Municipal securities $ 3 303 774 $ $ (22364) $ 3 28 I 4 I 0
At December 3 I 20 1 4 and 20 1 3 securities with a carrying value of $503498 1 and $8595033 respectively were pledged to secure publ ic deposits repu rchase agreements and for other purposes requ ired or permitted by law
15
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
The amort ized cost and estimated fair value of debt securities by contractual maturity at December 3 1 20 1 4 are as fo llows
Available for Sale Held to Maturity Amort ized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
Due in one year or less $ 5 1 42415 $ 5 1 70 1 88 $ $ Due in one through five
years 32805 35 3 293 783 Due after five years through
ten years 4929 1 29 5 0 1 5 234 Due after ten years 5 000000 3824400 4 1 27891 4433 023
Total 1 8352079 1 7303605 4 1 2789 1 4433 023
Mortgage-backed securities 5 29975 1 5 306507 No stated maturity 1 5 0000 1 35 6 1 8
Total $2380 1 830 $22745 730 $ 4 1 2789 I $ 4433 023
There were no sales of investments during the year ended December 3 I 20 I 4 During the year ended December 3 1 20 I 3 the Company sold securities availabl e for sale with a book value of $0 resulting in realized gains of $ I 8026 There were no gross realized losses on sales of securities available for sale for the year ended December 3 I 20 1 3
1 6
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Information pertain ing to securi ti es with gross un realized losses at December 31 20 1 4 an d 20 1 3 aggregated by investment category an d length of time that in dividual securities have been in a continuous loss position is as follows
December 3 1 20 1 4 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Unrealized Estimated
Losses Fair Value Losses Fair Val ue Available-for-sale securities
US government agen cies $ (2793) $ 2056 222 $ $ Mortgage-backed securities (2264) 25247 1 0 Other ( 1 1 89982) 3 960018
Total available-for-sale secu rities $ (5 05 7) $ 45 80932 $ ( 1 1 89982) $ 3 9600 1 8
December 3 I 20 1 3 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Un realized Estimated
Losses Fair Value Losses Fair Valu e Available-for-sale securities
Mun icipal securities $ (50 1 48) $ 677262 $ $ Other ( 1 383 5 63) 3 766437
Total available-for-sale securities $ (SO 1 48) $ 677262 $ ( 1 3835 63) $ 3 766437
Un realized l osses on securities have n ot been recogn ized into in come because the issu ers bonds are of high credit quality we have the inten t and ability to hold the secu rities for the foreseeable futu re and the declin e in fair value is primarily due to increased market interest rates The fair values a re generally expected to recover as the bonds approach their maturity dates
1 7
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Within other secu rities there is $ 1 1 75 600 of u nrealized losses related to two perpetual preferred secu rities to two large international bank holding companies The u nrealized losses on the perpetual preferred secu rities is attributable to the cu rrent variable dividend rates compared to similar fixed-rate instru ments at each institution The fair value of the Companys perpetual preferred secu rities is expected to increase as the variable dividend rate increases which is contingent u pon the three-month LIB O R rate The Company has the ability and intent to hold the secu rities u ntil their estimated fair values increase
Note 4 - Loans
A summary of the balances of loans follows (in thousands)
20 1 4 20 1 3
Residential $ 1 1 493 $ 1 1 686 Construction and land 5 298 1 303 Commercial real estate 60262 48570 Commercial 38472 7844 I nventory 1 0239 9 649 Professional practice 45890 48224 Life insurance contracts 1 933 Automobile 1 22 789 Consu mer 1 038 1 083
Total gross loans 1 728 1 4 1 3 1 08 1
Less Allowance for loan losses (5 627) (5 334) Net deferred loan fees (6 1 ) ( I 03)
Net loans $ 1 67 1 26 $ 1 25 644
1 8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Loans and the all owance for loan losses ar e disaggregated by segment as foll ows (i n thousands)
Allowance for loan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Allowance for Joan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Ending allowance attributable to loans
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Beginning
Balance
$ 276 $ 2 1 3 900 377
3250 259
12 9
38
$ 5334 $
Beginning
Balance
$ 392 $ 72
849 338 626 587 106
5 54
$ 3029 $
1 9
Year Ended December 3 1 2014
Charge-offs Recoveries Provision Ending Balance
$ $ (45) $ 23 1 42 255
( 142) 758 144 (8) 5 1 3
1 85 3435 ( 1 9) 240
(4) 1 0 ( 1 7) I ( I ) 8
148 1 86
(4) $ 1 54 $ 143 $ 5627
Year Ended December 3 1 2013
Charge-offs Recoveries Provision Ending Balance
$ $ ( 1 1 6) $ 276 ( I 33) 274 2 1 3
5 1 900 9 30 377
(2658) 5282 3250 (328) 259
(36) 1 6 (74) 1 2 4 9
( 1 6) 38
(2827) $ 25 $ 5 107 $ 5334
Year Ended December 3 I bull 2014 Individually Collectively
Evaluated for Evaluated for
Impairment Impairment Ending Balance
$ 130 $ 1 0 1 $ 23 1 255 255
180 578 758 5 1 3 5 1 3
3335 1 00 3435 240 240
I I 8 8
186 186
$ 3645 $ 1 982 $ 5627
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 2014 and 2013
Note 4 - Loans (Continued)
Individually Collectively Evaluated for Evaluated for Impairment Impairment Ending Balance
Loans
Residential $ 595 $ 1 0898 $ 1 1 493 Construction and land 5298 5298 Commercial real estate 1 297 58965 60262 Commercial 38472 38472 Inventory 5576 4663 1 0239 Professional practice 45890 45890 Automobile 122 122 Consumer l 038 1038
Total $ 7468 $ 1 65346 $ 1728 1 4
Year Ended December 3 1 20 1 3 Individually Collectively
Evaluated for Evaluated for Impairment Impairment Ending Balance
Ending allowance attributable to loans
Residential $ 130 $ 146 $ 276 Construction and land 2 13 2 13 Commercial real estate 250 650 900 Commercial 269 1 08 377 Inventory 3000 250 3250 Professional practice 259 259 Automobile 12 12 Consumer 9 9 Unallocated 38 38
Total $ 3649 $ 1685 $ 5334
Individually Collectively Evaluated for Evaluated for Impairment lmpaiffilent Ending Balance
Loans
Residential $ 595 $ 1 1 09 1 $ 1 1 686 Construction and land 1303 1303 Commercial real estate 1 298 47272 48570 Commercial 1587 6257 7844 Inventory 5215 4434 9649 Professional practice 48224 48224 Life insurance contraets 1933 1 933 Automobile 789 789 Consumer 1 083 l 083
Total $ 8695 $ 122386 $ 1 3 1 08 1
20
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 201 4 and 2013
Note 4 - Loans (Continued)
Credit Risk Grading
The Company util izes a loan rating system as a means of identifying problem and potential problem loans The Company assigned the fo llowing loan ratings to loans disaggregated by segment and class as of December 3 1 20 1 4 and 20 1 3 (in thousands)
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile
Consumer
Total
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Life insurance contracts Automobile
Consumer
Total
December 3 1 20 14 Loans rated Loans rated Loans rated
1-5
$ 1 0898 $ 5298
58965 38472
4663 45890
1 22 1 038
$ 1 65346 $
6
===
$
$
7 Total
595 $ 1 1 493 5298
1 297 60262 38472
5576 I 0239 45890
1 22 1 038
7468 $ 1 728 1 4 ====
December 3 1 20 1 3 Loans rated Loans rated Loans rated
1-5 6 7 Total
$ 1 0626 $ 465 $ 595 $ 1 1 686 1 303 1 303
47272 1 298 48570 6257 J 587 7844 4434 52 1 5 9649
48224 48224 I 933 I 933
789 789 1 083 1 083
$ 1 2 1 921 $ 465 $ 8695 $ 1 3 1 08 1
The Company categorized each loan into credit risk categori es based on current fi nancial information overall debt service coverage comparison against industry averages col lateral coverage historical payment experience and current economic trends The Company uses the following definitions for credit risk ratings
2 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I - Nature of Business and Significant Accounting Policies (Continued)
New Accounting Pronouncement - Revenue from Contracts with Customers
(Topic 606) - In May 20 1 4 the Financial Accounting Standards Board issued Accounting Standards Update No 20 1 4-09 Revenue from Contracts with Customers (Topic 606) which will supersede the current revenue recognition requirements in Topic 605 Revenue Recognition The ASU is based o n the princip le that revenue is recognized to depict the transfer of goods or services to customers in an amount that refl ects the consideration to wh ich the entity expects to be entitled in exchange for those goods or services Th e ASU also requ ires additional disclosure about the nature amount timing and uncertainty of revenue and cash fl ows arising from customer contracts including significant judgments and changes in judgments and assets recognized from costs incu rred to obtain or fulfill a contract The new gu idance will be effective for periods beginning af ter December 1 5 201 7 (th erefo re for the year ending December 3 I 20 1 8 for th e Company) Th e ASU permits the new revenue recognition gu idance to be appl ied u sing one of two retrospective application methods The Company h as not yet determined wh ich application method it will use or th e potential eff ects of th e new standard on th e financial statements i f any
Subsequent Events - Th e financial statements and related disclosures include evaluation of events up through and including April 1 3 20 15 wh ich is the date the consolidated financial statements were available to be issued
Note 2 - Restrictions on Cash and Amounts Due from Banks
Th e B ank is required to maintain average cash balances on hand or on deposit with the Federal Reserve B ank At December 3 1 20 1 4 and 20 1 3 th ese reserve balances amounted to $ 1 5 67000 and $ 1 45 2000 respectively
1 4
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities
The amortized cost and estimated fair value of secu rities with gross unreal ized gains and losses are as fol lows
December 3 1 20 1 4 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $ 6988 1 44 $ 86 1 05 $ (2793) $ 707 1 456 M unicipal securities 6363935 438 1 4 6407749 Mortgage-backed securities 5 29975 1 9020 (2264) 5 306507 Other 5 1 50000 ( 1 1 89982) 3 9600 1 8
Total available-for-sale securities $2380 1 830 $ 1 38939 $ ( I I 95039) $ 22745730
Held-to-maturity securities -Mun icipal securities $ 4 I 2789 I $ 305 1 32 $ $ 4433 023
December 3 I 20 I 3 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $187 1 5 1 05 $ 93349 $ $ I 8808454 State and municipal 6 8 I 3 063 77408 (SO I 48) 6 840323 Other 5 I 50000 ( I 383563) 3 766437
Total available-for-sale securities $30678 I 68 $ I 70757 $ ( 1 433 7 1 I ) $ 29 4 1 5 2 1 4
Held-to-maturity secu rities -Municipal securities $ 3 303 774 $ $ (22364) $ 3 28 I 4 I 0
At December 3 I 20 1 4 and 20 1 3 securities with a carrying value of $503498 1 and $8595033 respectively were pledged to secure publ ic deposits repu rchase agreements and for other purposes requ ired or permitted by law
15
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
The amort ized cost and estimated fair value of debt securities by contractual maturity at December 3 1 20 1 4 are as fo llows
Available for Sale Held to Maturity Amort ized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
Due in one year or less $ 5 1 42415 $ 5 1 70 1 88 $ $ Due in one through five
years 32805 35 3 293 783 Due after five years through
ten years 4929 1 29 5 0 1 5 234 Due after ten years 5 000000 3824400 4 1 27891 4433 023
Total 1 8352079 1 7303605 4 1 2789 1 4433 023
Mortgage-backed securities 5 29975 1 5 306507 No stated maturity 1 5 0000 1 35 6 1 8
Total $2380 1 830 $22745 730 $ 4 1 2789 I $ 4433 023
There were no sales of investments during the year ended December 3 I 20 I 4 During the year ended December 3 1 20 I 3 the Company sold securities availabl e for sale with a book value of $0 resulting in realized gains of $ I 8026 There were no gross realized losses on sales of securities available for sale for the year ended December 3 I 20 1 3
1 6
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Information pertain ing to securi ti es with gross un realized losses at December 31 20 1 4 an d 20 1 3 aggregated by investment category an d length of time that in dividual securities have been in a continuous loss position is as follows
December 3 1 20 1 4 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Unrealized Estimated
Losses Fair Value Losses Fair Val ue Available-for-sale securities
US government agen cies $ (2793) $ 2056 222 $ $ Mortgage-backed securities (2264) 25247 1 0 Other ( 1 1 89982) 3 960018
Total available-for-sale secu rities $ (5 05 7) $ 45 80932 $ ( 1 1 89982) $ 3 9600 1 8
December 3 I 20 1 3 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Un realized Estimated
Losses Fair Value Losses Fair Valu e Available-for-sale securities
Mun icipal securities $ (50 1 48) $ 677262 $ $ Other ( 1 383 5 63) 3 766437
Total available-for-sale securities $ (SO 1 48) $ 677262 $ ( 1 3835 63) $ 3 766437
Un realized l osses on securities have n ot been recogn ized into in come because the issu ers bonds are of high credit quality we have the inten t and ability to hold the secu rities for the foreseeable futu re and the declin e in fair value is primarily due to increased market interest rates The fair values a re generally expected to recover as the bonds approach their maturity dates
1 7
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Within other secu rities there is $ 1 1 75 600 of u nrealized losses related to two perpetual preferred secu rities to two large international bank holding companies The u nrealized losses on the perpetual preferred secu rities is attributable to the cu rrent variable dividend rates compared to similar fixed-rate instru ments at each institution The fair value of the Companys perpetual preferred secu rities is expected to increase as the variable dividend rate increases which is contingent u pon the three-month LIB O R rate The Company has the ability and intent to hold the secu rities u ntil their estimated fair values increase
Note 4 - Loans
A summary of the balances of loans follows (in thousands)
20 1 4 20 1 3
Residential $ 1 1 493 $ 1 1 686 Construction and land 5 298 1 303 Commercial real estate 60262 48570 Commercial 38472 7844 I nventory 1 0239 9 649 Professional practice 45890 48224 Life insurance contracts 1 933 Automobile 1 22 789 Consu mer 1 038 1 083
Total gross loans 1 728 1 4 1 3 1 08 1
Less Allowance for loan losses (5 627) (5 334) Net deferred loan fees (6 1 ) ( I 03)
Net loans $ 1 67 1 26 $ 1 25 644
1 8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Loans and the all owance for loan losses ar e disaggregated by segment as foll ows (i n thousands)
Allowance for loan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Allowance for Joan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Ending allowance attributable to loans
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Beginning
Balance
$ 276 $ 2 1 3 900 377
3250 259
12 9
38
$ 5334 $
Beginning
Balance
$ 392 $ 72
849 338 626 587 106
5 54
$ 3029 $
1 9
Year Ended December 3 1 2014
Charge-offs Recoveries Provision Ending Balance
$ $ (45) $ 23 1 42 255
( 142) 758 144 (8) 5 1 3
1 85 3435 ( 1 9) 240
(4) 1 0 ( 1 7) I ( I ) 8
148 1 86
(4) $ 1 54 $ 143 $ 5627
Year Ended December 3 1 2013
Charge-offs Recoveries Provision Ending Balance
$ $ ( 1 1 6) $ 276 ( I 33) 274 2 1 3
5 1 900 9 30 377
(2658) 5282 3250 (328) 259
(36) 1 6 (74) 1 2 4 9
( 1 6) 38
(2827) $ 25 $ 5 107 $ 5334
Year Ended December 3 I bull 2014 Individually Collectively
Evaluated for Evaluated for
Impairment Impairment Ending Balance
$ 130 $ 1 0 1 $ 23 1 255 255
180 578 758 5 1 3 5 1 3
3335 1 00 3435 240 240
I I 8 8
186 186
$ 3645 $ 1 982 $ 5627
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 2014 and 2013
Note 4 - Loans (Continued)
Individually Collectively Evaluated for Evaluated for Impairment Impairment Ending Balance
Loans
Residential $ 595 $ 1 0898 $ 1 1 493 Construction and land 5298 5298 Commercial real estate 1 297 58965 60262 Commercial 38472 38472 Inventory 5576 4663 1 0239 Professional practice 45890 45890 Automobile 122 122 Consumer l 038 1038
Total $ 7468 $ 1 65346 $ 1728 1 4
Year Ended December 3 1 20 1 3 Individually Collectively
Evaluated for Evaluated for Impairment Impairment Ending Balance
Ending allowance attributable to loans
Residential $ 130 $ 146 $ 276 Construction and land 2 13 2 13 Commercial real estate 250 650 900 Commercial 269 1 08 377 Inventory 3000 250 3250 Professional practice 259 259 Automobile 12 12 Consumer 9 9 Unallocated 38 38
Total $ 3649 $ 1685 $ 5334
Individually Collectively Evaluated for Evaluated for Impairment lmpaiffilent Ending Balance
Loans
Residential $ 595 $ 1 1 09 1 $ 1 1 686 Construction and land 1303 1303 Commercial real estate 1 298 47272 48570 Commercial 1587 6257 7844 Inventory 5215 4434 9649 Professional practice 48224 48224 Life insurance contraets 1933 1 933 Automobile 789 789 Consumer 1 083 l 083
Total $ 8695 $ 122386 $ 1 3 1 08 1
20
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 201 4 and 2013
Note 4 - Loans (Continued)
Credit Risk Grading
The Company util izes a loan rating system as a means of identifying problem and potential problem loans The Company assigned the fo llowing loan ratings to loans disaggregated by segment and class as of December 3 1 20 1 4 and 20 1 3 (in thousands)
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile
Consumer
Total
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Life insurance contracts Automobile
Consumer
Total
December 3 1 20 14 Loans rated Loans rated Loans rated
1-5
$ 1 0898 $ 5298
58965 38472
4663 45890
1 22 1 038
$ 1 65346 $
6
===
$
$
7 Total
595 $ 1 1 493 5298
1 297 60262 38472
5576 I 0239 45890
1 22 1 038
7468 $ 1 728 1 4 ====
December 3 1 20 1 3 Loans rated Loans rated Loans rated
1-5 6 7 Total
$ 1 0626 $ 465 $ 595 $ 1 1 686 1 303 1 303
47272 1 298 48570 6257 J 587 7844 4434 52 1 5 9649
48224 48224 I 933 I 933
789 789 1 083 1 083
$ 1 2 1 921 $ 465 $ 8695 $ 1 3 1 08 1
The Company categorized each loan into credit risk categori es based on current fi nancial information overall debt service coverage comparison against industry averages col lateral coverage historical payment experience and current economic trends The Company uses the following definitions for credit risk ratings
2 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities
The amortized cost and estimated fair value of secu rities with gross unreal ized gains and losses are as fol lows
December 3 1 20 1 4 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $ 6988 1 44 $ 86 1 05 $ (2793) $ 707 1 456 M unicipal securities 6363935 438 1 4 6407749 Mortgage-backed securities 5 29975 1 9020 (2264) 5 306507 Other 5 1 50000 ( 1 1 89982) 3 9600 1 8
Total available-for-sale securities $2380 1 830 $ 1 38939 $ ( I I 95039) $ 22745730
Held-to-maturity securities -Mun icipal securities $ 4 I 2789 I $ 305 1 32 $ $ 4433 023
December 3 I 20 I 3 Gross Gross
Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value
Available-for-sale securities
US government agencies $187 1 5 1 05 $ 93349 $ $ I 8808454 State and municipal 6 8 I 3 063 77408 (SO I 48) 6 840323 Other 5 I 50000 ( I 383563) 3 766437
Total available-for-sale securities $30678 I 68 $ I 70757 $ ( 1 433 7 1 I ) $ 29 4 1 5 2 1 4
Held-to-maturity secu rities -Municipal securities $ 3 303 774 $ $ (22364) $ 3 28 I 4 I 0
At December 3 I 20 1 4 and 20 1 3 securities with a carrying value of $503498 1 and $8595033 respectively were pledged to secure publ ic deposits repu rchase agreements and for other purposes requ ired or permitted by law
15
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
The amort ized cost and estimated fair value of debt securities by contractual maturity at December 3 1 20 1 4 are as fo llows
Available for Sale Held to Maturity Amort ized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
Due in one year or less $ 5 1 42415 $ 5 1 70 1 88 $ $ Due in one through five
years 32805 35 3 293 783 Due after five years through
ten years 4929 1 29 5 0 1 5 234 Due after ten years 5 000000 3824400 4 1 27891 4433 023
Total 1 8352079 1 7303605 4 1 2789 1 4433 023
Mortgage-backed securities 5 29975 1 5 306507 No stated maturity 1 5 0000 1 35 6 1 8
Total $2380 1 830 $22745 730 $ 4 1 2789 I $ 4433 023
There were no sales of investments during the year ended December 3 I 20 I 4 During the year ended December 3 1 20 I 3 the Company sold securities availabl e for sale with a book value of $0 resulting in realized gains of $ I 8026 There were no gross realized losses on sales of securities available for sale for the year ended December 3 I 20 1 3
1 6
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Information pertain ing to securi ti es with gross un realized losses at December 31 20 1 4 an d 20 1 3 aggregated by investment category an d length of time that in dividual securities have been in a continuous loss position is as follows
December 3 1 20 1 4 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Unrealized Estimated
Losses Fair Value Losses Fair Val ue Available-for-sale securities
US government agen cies $ (2793) $ 2056 222 $ $ Mortgage-backed securities (2264) 25247 1 0 Other ( 1 1 89982) 3 960018
Total available-for-sale secu rities $ (5 05 7) $ 45 80932 $ ( 1 1 89982) $ 3 9600 1 8
December 3 I 20 1 3 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Un realized Estimated
Losses Fair Value Losses Fair Valu e Available-for-sale securities
Mun icipal securities $ (50 1 48) $ 677262 $ $ Other ( 1 383 5 63) 3 766437
Total available-for-sale securities $ (SO 1 48) $ 677262 $ ( 1 3835 63) $ 3 766437
Un realized l osses on securities have n ot been recogn ized into in come because the issu ers bonds are of high credit quality we have the inten t and ability to hold the secu rities for the foreseeable futu re and the declin e in fair value is primarily due to increased market interest rates The fair values a re generally expected to recover as the bonds approach their maturity dates
1 7
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Within other secu rities there is $ 1 1 75 600 of u nrealized losses related to two perpetual preferred secu rities to two large international bank holding companies The u nrealized losses on the perpetual preferred secu rities is attributable to the cu rrent variable dividend rates compared to similar fixed-rate instru ments at each institution The fair value of the Companys perpetual preferred secu rities is expected to increase as the variable dividend rate increases which is contingent u pon the three-month LIB O R rate The Company has the ability and intent to hold the secu rities u ntil their estimated fair values increase
Note 4 - Loans
A summary of the balances of loans follows (in thousands)
20 1 4 20 1 3
Residential $ 1 1 493 $ 1 1 686 Construction and land 5 298 1 303 Commercial real estate 60262 48570 Commercial 38472 7844 I nventory 1 0239 9 649 Professional practice 45890 48224 Life insurance contracts 1 933 Automobile 1 22 789 Consu mer 1 038 1 083
Total gross loans 1 728 1 4 1 3 1 08 1
Less Allowance for loan losses (5 627) (5 334) Net deferred loan fees (6 1 ) ( I 03)
Net loans $ 1 67 1 26 $ 1 25 644
1 8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Loans and the all owance for loan losses ar e disaggregated by segment as foll ows (i n thousands)
Allowance for loan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Allowance for Joan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Ending allowance attributable to loans
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Beginning
Balance
$ 276 $ 2 1 3 900 377
3250 259
12 9
38
$ 5334 $
Beginning
Balance
$ 392 $ 72
849 338 626 587 106
5 54
$ 3029 $
1 9
Year Ended December 3 1 2014
Charge-offs Recoveries Provision Ending Balance
$ $ (45) $ 23 1 42 255
( 142) 758 144 (8) 5 1 3
1 85 3435 ( 1 9) 240
(4) 1 0 ( 1 7) I ( I ) 8
148 1 86
(4) $ 1 54 $ 143 $ 5627
Year Ended December 3 1 2013
Charge-offs Recoveries Provision Ending Balance
$ $ ( 1 1 6) $ 276 ( I 33) 274 2 1 3
5 1 900 9 30 377
(2658) 5282 3250 (328) 259
(36) 1 6 (74) 1 2 4 9
( 1 6) 38
(2827) $ 25 $ 5 107 $ 5334
Year Ended December 3 I bull 2014 Individually Collectively
Evaluated for Evaluated for
Impairment Impairment Ending Balance
$ 130 $ 1 0 1 $ 23 1 255 255
180 578 758 5 1 3 5 1 3
3335 1 00 3435 240 240
I I 8 8
186 186
$ 3645 $ 1 982 $ 5627
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 2014 and 2013
Note 4 - Loans (Continued)
Individually Collectively Evaluated for Evaluated for Impairment Impairment Ending Balance
Loans
Residential $ 595 $ 1 0898 $ 1 1 493 Construction and land 5298 5298 Commercial real estate 1 297 58965 60262 Commercial 38472 38472 Inventory 5576 4663 1 0239 Professional practice 45890 45890 Automobile 122 122 Consumer l 038 1038
Total $ 7468 $ 1 65346 $ 1728 1 4
Year Ended December 3 1 20 1 3 Individually Collectively
Evaluated for Evaluated for Impairment Impairment Ending Balance
Ending allowance attributable to loans
Residential $ 130 $ 146 $ 276 Construction and land 2 13 2 13 Commercial real estate 250 650 900 Commercial 269 1 08 377 Inventory 3000 250 3250 Professional practice 259 259 Automobile 12 12 Consumer 9 9 Unallocated 38 38
Total $ 3649 $ 1685 $ 5334
Individually Collectively Evaluated for Evaluated for Impairment lmpaiffilent Ending Balance
Loans
Residential $ 595 $ 1 1 09 1 $ 1 1 686 Construction and land 1303 1303 Commercial real estate 1 298 47272 48570 Commercial 1587 6257 7844 Inventory 5215 4434 9649 Professional practice 48224 48224 Life insurance contraets 1933 1 933 Automobile 789 789 Consumer 1 083 l 083
Total $ 8695 $ 122386 $ 1 3 1 08 1
20
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 201 4 and 2013
Note 4 - Loans (Continued)
Credit Risk Grading
The Company util izes a loan rating system as a means of identifying problem and potential problem loans The Company assigned the fo llowing loan ratings to loans disaggregated by segment and class as of December 3 1 20 1 4 and 20 1 3 (in thousands)
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile
Consumer
Total
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Life insurance contracts Automobile
Consumer
Total
December 3 1 20 14 Loans rated Loans rated Loans rated
1-5
$ 1 0898 $ 5298
58965 38472
4663 45890
1 22 1 038
$ 1 65346 $
6
===
$
$
7 Total
595 $ 1 1 493 5298
1 297 60262 38472
5576 I 0239 45890
1 22 1 038
7468 $ 1 728 1 4 ====
December 3 1 20 1 3 Loans rated Loans rated Loans rated
1-5 6 7 Total
$ 1 0626 $ 465 $ 595 $ 1 1 686 1 303 1 303
47272 1 298 48570 6257 J 587 7844 4434 52 1 5 9649
48224 48224 I 933 I 933
789 789 1 083 1 083
$ 1 2 1 921 $ 465 $ 8695 $ 1 3 1 08 1
The Company categorized each loan into credit risk categori es based on current fi nancial information overall debt service coverage comparison against industry averages col lateral coverage historical payment experience and current economic trends The Company uses the following definitions for credit risk ratings
2 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
The amort ized cost and estimated fair value of debt securities by contractual maturity at December 3 1 20 1 4 are as fo llows
Available for Sale Held to Maturity Amort ized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
Due in one year or less $ 5 1 42415 $ 5 1 70 1 88 $ $ Due in one through five
years 32805 35 3 293 783 Due after five years through
ten years 4929 1 29 5 0 1 5 234 Due after ten years 5 000000 3824400 4 1 27891 4433 023
Total 1 8352079 1 7303605 4 1 2789 1 4433 023
Mortgage-backed securities 5 29975 1 5 306507 No stated maturity 1 5 0000 1 35 6 1 8
Total $2380 1 830 $22745 730 $ 4 1 2789 I $ 4433 023
There were no sales of investments during the year ended December 3 I 20 I 4 During the year ended December 3 1 20 I 3 the Company sold securities availabl e for sale with a book value of $0 resulting in realized gains of $ I 8026 There were no gross realized losses on sales of securities available for sale for the year ended December 3 I 20 1 3
1 6
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Information pertain ing to securi ti es with gross un realized losses at December 31 20 1 4 an d 20 1 3 aggregated by investment category an d length of time that in dividual securities have been in a continuous loss position is as follows
December 3 1 20 1 4 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Unrealized Estimated
Losses Fair Value Losses Fair Val ue Available-for-sale securities
US government agen cies $ (2793) $ 2056 222 $ $ Mortgage-backed securities (2264) 25247 1 0 Other ( 1 1 89982) 3 960018
Total available-for-sale secu rities $ (5 05 7) $ 45 80932 $ ( 1 1 89982) $ 3 9600 1 8
December 3 I 20 1 3 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Un realized Estimated
Losses Fair Value Losses Fair Valu e Available-for-sale securities
Mun icipal securities $ (50 1 48) $ 677262 $ $ Other ( 1 383 5 63) 3 766437
Total available-for-sale securities $ (SO 1 48) $ 677262 $ ( 1 3835 63) $ 3 766437
Un realized l osses on securities have n ot been recogn ized into in come because the issu ers bonds are of high credit quality we have the inten t and ability to hold the secu rities for the foreseeable futu re and the declin e in fair value is primarily due to increased market interest rates The fair values a re generally expected to recover as the bonds approach their maturity dates
1 7
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Within other secu rities there is $ 1 1 75 600 of u nrealized losses related to two perpetual preferred secu rities to two large international bank holding companies The u nrealized losses on the perpetual preferred secu rities is attributable to the cu rrent variable dividend rates compared to similar fixed-rate instru ments at each institution The fair value of the Companys perpetual preferred secu rities is expected to increase as the variable dividend rate increases which is contingent u pon the three-month LIB O R rate The Company has the ability and intent to hold the secu rities u ntil their estimated fair values increase
Note 4 - Loans
A summary of the balances of loans follows (in thousands)
20 1 4 20 1 3
Residential $ 1 1 493 $ 1 1 686 Construction and land 5 298 1 303 Commercial real estate 60262 48570 Commercial 38472 7844 I nventory 1 0239 9 649 Professional practice 45890 48224 Life insurance contracts 1 933 Automobile 1 22 789 Consu mer 1 038 1 083
Total gross loans 1 728 1 4 1 3 1 08 1
Less Allowance for loan losses (5 627) (5 334) Net deferred loan fees (6 1 ) ( I 03)
Net loans $ 1 67 1 26 $ 1 25 644
1 8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Loans and the all owance for loan losses ar e disaggregated by segment as foll ows (i n thousands)
Allowance for loan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Allowance for Joan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Ending allowance attributable to loans
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Beginning
Balance
$ 276 $ 2 1 3 900 377
3250 259
12 9
38
$ 5334 $
Beginning
Balance
$ 392 $ 72
849 338 626 587 106
5 54
$ 3029 $
1 9
Year Ended December 3 1 2014
Charge-offs Recoveries Provision Ending Balance
$ $ (45) $ 23 1 42 255
( 142) 758 144 (8) 5 1 3
1 85 3435 ( 1 9) 240
(4) 1 0 ( 1 7) I ( I ) 8
148 1 86
(4) $ 1 54 $ 143 $ 5627
Year Ended December 3 1 2013
Charge-offs Recoveries Provision Ending Balance
$ $ ( 1 1 6) $ 276 ( I 33) 274 2 1 3
5 1 900 9 30 377
(2658) 5282 3250 (328) 259
(36) 1 6 (74) 1 2 4 9
( 1 6) 38
(2827) $ 25 $ 5 107 $ 5334
Year Ended December 3 I bull 2014 Individually Collectively
Evaluated for Evaluated for
Impairment Impairment Ending Balance
$ 130 $ 1 0 1 $ 23 1 255 255
180 578 758 5 1 3 5 1 3
3335 1 00 3435 240 240
I I 8 8
186 186
$ 3645 $ 1 982 $ 5627
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 2014 and 2013
Note 4 - Loans (Continued)
Individually Collectively Evaluated for Evaluated for Impairment Impairment Ending Balance
Loans
Residential $ 595 $ 1 0898 $ 1 1 493 Construction and land 5298 5298 Commercial real estate 1 297 58965 60262 Commercial 38472 38472 Inventory 5576 4663 1 0239 Professional practice 45890 45890 Automobile 122 122 Consumer l 038 1038
Total $ 7468 $ 1 65346 $ 1728 1 4
Year Ended December 3 1 20 1 3 Individually Collectively
Evaluated for Evaluated for Impairment Impairment Ending Balance
Ending allowance attributable to loans
Residential $ 130 $ 146 $ 276 Construction and land 2 13 2 13 Commercial real estate 250 650 900 Commercial 269 1 08 377 Inventory 3000 250 3250 Professional practice 259 259 Automobile 12 12 Consumer 9 9 Unallocated 38 38
Total $ 3649 $ 1685 $ 5334
Individually Collectively Evaluated for Evaluated for Impairment lmpaiffilent Ending Balance
Loans
Residential $ 595 $ 1 1 09 1 $ 1 1 686 Construction and land 1303 1303 Commercial real estate 1 298 47272 48570 Commercial 1587 6257 7844 Inventory 5215 4434 9649 Professional practice 48224 48224 Life insurance contraets 1933 1 933 Automobile 789 789 Consumer 1 083 l 083
Total $ 8695 $ 122386 $ 1 3 1 08 1
20
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 201 4 and 2013
Note 4 - Loans (Continued)
Credit Risk Grading
The Company util izes a loan rating system as a means of identifying problem and potential problem loans The Company assigned the fo llowing loan ratings to loans disaggregated by segment and class as of December 3 1 20 1 4 and 20 1 3 (in thousands)
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile
Consumer
Total
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Life insurance contracts Automobile
Consumer
Total
December 3 1 20 14 Loans rated Loans rated Loans rated
1-5
$ 1 0898 $ 5298
58965 38472
4663 45890
1 22 1 038
$ 1 65346 $
6
===
$
$
7 Total
595 $ 1 1 493 5298
1 297 60262 38472
5576 I 0239 45890
1 22 1 038
7468 $ 1 728 1 4 ====
December 3 1 20 1 3 Loans rated Loans rated Loans rated
1-5 6 7 Total
$ 1 0626 $ 465 $ 595 $ 1 1 686 1 303 1 303
47272 1 298 48570 6257 J 587 7844 4434 52 1 5 9649
48224 48224 I 933 I 933
789 789 1 083 1 083
$ 1 2 1 921 $ 465 $ 8695 $ 1 3 1 08 1
The Company categorized each loan into credit risk categori es based on current fi nancial information overall debt service coverage comparison against industry averages col lateral coverage historical payment experience and current economic trends The Company uses the following definitions for credit risk ratings
2 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Information pertain ing to securi ti es with gross un realized losses at December 31 20 1 4 an d 20 1 3 aggregated by investment category an d length of time that in dividual securities have been in a continuous loss position is as follows
December 3 1 20 1 4 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Unrealized Estimated
Losses Fair Value Losses Fair Val ue Available-for-sale securities
US government agen cies $ (2793) $ 2056 222 $ $ Mortgage-backed securities (2264) 25247 1 0 Other ( 1 1 89982) 3 960018
Total available-for-sale secu rities $ (5 05 7) $ 45 80932 $ ( 1 1 89982) $ 3 9600 1 8
December 3 I 20 1 3 Less Than Twelve Months Over Twelve Months
Gross Gross Unrealized Estimated Un realized Estimated
Losses Fair Value Losses Fair Valu e Available-for-sale securities
Mun icipal securities $ (50 1 48) $ 677262 $ $ Other ( 1 383 5 63) 3 766437
Total available-for-sale securities $ (SO 1 48) $ 677262 $ ( 1 3835 63) $ 3 766437
Un realized l osses on securities have n ot been recogn ized into in come because the issu ers bonds are of high credit quality we have the inten t and ability to hold the secu rities for the foreseeable futu re and the declin e in fair value is primarily due to increased market interest rates The fair values a re generally expected to recover as the bonds approach their maturity dates
1 7
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Within other secu rities there is $ 1 1 75 600 of u nrealized losses related to two perpetual preferred secu rities to two large international bank holding companies The u nrealized losses on the perpetual preferred secu rities is attributable to the cu rrent variable dividend rates compared to similar fixed-rate instru ments at each institution The fair value of the Companys perpetual preferred secu rities is expected to increase as the variable dividend rate increases which is contingent u pon the three-month LIB O R rate The Company has the ability and intent to hold the secu rities u ntil their estimated fair values increase
Note 4 - Loans
A summary of the balances of loans follows (in thousands)
20 1 4 20 1 3
Residential $ 1 1 493 $ 1 1 686 Construction and land 5 298 1 303 Commercial real estate 60262 48570 Commercial 38472 7844 I nventory 1 0239 9 649 Professional practice 45890 48224 Life insurance contracts 1 933 Automobile 1 22 789 Consu mer 1 038 1 083
Total gross loans 1 728 1 4 1 3 1 08 1
Less Allowance for loan losses (5 627) (5 334) Net deferred loan fees (6 1 ) ( I 03)
Net loans $ 1 67 1 26 $ 1 25 644
1 8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Loans and the all owance for loan losses ar e disaggregated by segment as foll ows (i n thousands)
Allowance for loan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Allowance for Joan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Ending allowance attributable to loans
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Beginning
Balance
$ 276 $ 2 1 3 900 377
3250 259
12 9
38
$ 5334 $
Beginning
Balance
$ 392 $ 72
849 338 626 587 106
5 54
$ 3029 $
1 9
Year Ended December 3 1 2014
Charge-offs Recoveries Provision Ending Balance
$ $ (45) $ 23 1 42 255
( 142) 758 144 (8) 5 1 3
1 85 3435 ( 1 9) 240
(4) 1 0 ( 1 7) I ( I ) 8
148 1 86
(4) $ 1 54 $ 143 $ 5627
Year Ended December 3 1 2013
Charge-offs Recoveries Provision Ending Balance
$ $ ( 1 1 6) $ 276 ( I 33) 274 2 1 3
5 1 900 9 30 377
(2658) 5282 3250 (328) 259
(36) 1 6 (74) 1 2 4 9
( 1 6) 38
(2827) $ 25 $ 5 107 $ 5334
Year Ended December 3 I bull 2014 Individually Collectively
Evaluated for Evaluated for
Impairment Impairment Ending Balance
$ 130 $ 1 0 1 $ 23 1 255 255
180 578 758 5 1 3 5 1 3
3335 1 00 3435 240 240
I I 8 8
186 186
$ 3645 $ 1 982 $ 5627
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 2014 and 2013
Note 4 - Loans (Continued)
Individually Collectively Evaluated for Evaluated for Impairment Impairment Ending Balance
Loans
Residential $ 595 $ 1 0898 $ 1 1 493 Construction and land 5298 5298 Commercial real estate 1 297 58965 60262 Commercial 38472 38472 Inventory 5576 4663 1 0239 Professional practice 45890 45890 Automobile 122 122 Consumer l 038 1038
Total $ 7468 $ 1 65346 $ 1728 1 4
Year Ended December 3 1 20 1 3 Individually Collectively
Evaluated for Evaluated for Impairment Impairment Ending Balance
Ending allowance attributable to loans
Residential $ 130 $ 146 $ 276 Construction and land 2 13 2 13 Commercial real estate 250 650 900 Commercial 269 1 08 377 Inventory 3000 250 3250 Professional practice 259 259 Automobile 12 12 Consumer 9 9 Unallocated 38 38
Total $ 3649 $ 1685 $ 5334
Individually Collectively Evaluated for Evaluated for Impairment lmpaiffilent Ending Balance
Loans
Residential $ 595 $ 1 1 09 1 $ 1 1 686 Construction and land 1303 1303 Commercial real estate 1 298 47272 48570 Commercial 1587 6257 7844 Inventory 5215 4434 9649 Professional practice 48224 48224 Life insurance contraets 1933 1 933 Automobile 789 789 Consumer 1 083 l 083
Total $ 8695 $ 122386 $ 1 3 1 08 1
20
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 201 4 and 2013
Note 4 - Loans (Continued)
Credit Risk Grading
The Company util izes a loan rating system as a means of identifying problem and potential problem loans The Company assigned the fo llowing loan ratings to loans disaggregated by segment and class as of December 3 1 20 1 4 and 20 1 3 (in thousands)
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile
Consumer
Total
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Life insurance contracts Automobile
Consumer
Total
December 3 1 20 14 Loans rated Loans rated Loans rated
1-5
$ 1 0898 $ 5298
58965 38472
4663 45890
1 22 1 038
$ 1 65346 $
6
===
$
$
7 Total
595 $ 1 1 493 5298
1 297 60262 38472
5576 I 0239 45890
1 22 1 038
7468 $ 1 728 1 4 ====
December 3 1 20 1 3 Loans rated Loans rated Loans rated
1-5 6 7 Total
$ 1 0626 $ 465 $ 595 $ 1 1 686 1 303 1 303
47272 1 298 48570 6257 J 587 7844 4434 52 1 5 9649
48224 48224 I 933 I 933
789 789 1 083 1 083
$ 1 2 1 921 $ 465 $ 8695 $ 1 3 1 08 1
The Company categorized each loan into credit risk categori es based on current fi nancial information overall debt service coverage comparison against industry averages col lateral coverage historical payment experience and current economic trends The Company uses the following definitions for credit risk ratings
2 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 3 - Investment Securities (Continued)
Within other secu rities there is $ 1 1 75 600 of u nrealized losses related to two perpetual preferred secu rities to two large international bank holding companies The u nrealized losses on the perpetual preferred secu rities is attributable to the cu rrent variable dividend rates compared to similar fixed-rate instru ments at each institution The fair value of the Companys perpetual preferred secu rities is expected to increase as the variable dividend rate increases which is contingent u pon the three-month LIB O R rate The Company has the ability and intent to hold the secu rities u ntil their estimated fair values increase
Note 4 - Loans
A summary of the balances of loans follows (in thousands)
20 1 4 20 1 3
Residential $ 1 1 493 $ 1 1 686 Construction and land 5 298 1 303 Commercial real estate 60262 48570 Commercial 38472 7844 I nventory 1 0239 9 649 Professional practice 45890 48224 Life insurance contracts 1 933 Automobile 1 22 789 Consu mer 1 038 1 083
Total gross loans 1 728 1 4 1 3 1 08 1
Less Allowance for loan losses (5 627) (5 334) Net deferred loan fees (6 1 ) ( I 03)
Net loans $ 1 67 1 26 $ 1 25 644
1 8
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Loans and the all owance for loan losses ar e disaggregated by segment as foll ows (i n thousands)
Allowance for loan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Allowance for Joan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Ending allowance attributable to loans
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Beginning
Balance
$ 276 $ 2 1 3 900 377
3250 259
12 9
38
$ 5334 $
Beginning
Balance
$ 392 $ 72
849 338 626 587 106
5 54
$ 3029 $
1 9
Year Ended December 3 1 2014
Charge-offs Recoveries Provision Ending Balance
$ $ (45) $ 23 1 42 255
( 142) 758 144 (8) 5 1 3
1 85 3435 ( 1 9) 240
(4) 1 0 ( 1 7) I ( I ) 8
148 1 86
(4) $ 1 54 $ 143 $ 5627
Year Ended December 3 1 2013
Charge-offs Recoveries Provision Ending Balance
$ $ ( 1 1 6) $ 276 ( I 33) 274 2 1 3
5 1 900 9 30 377
(2658) 5282 3250 (328) 259
(36) 1 6 (74) 1 2 4 9
( 1 6) 38
(2827) $ 25 $ 5 107 $ 5334
Year Ended December 3 I bull 2014 Individually Collectively
Evaluated for Evaluated for
Impairment Impairment Ending Balance
$ 130 $ 1 0 1 $ 23 1 255 255
180 578 758 5 1 3 5 1 3
3335 1 00 3435 240 240
I I 8 8
186 186
$ 3645 $ 1 982 $ 5627
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 2014 and 2013
Note 4 - Loans (Continued)
Individually Collectively Evaluated for Evaluated for Impairment Impairment Ending Balance
Loans
Residential $ 595 $ 1 0898 $ 1 1 493 Construction and land 5298 5298 Commercial real estate 1 297 58965 60262 Commercial 38472 38472 Inventory 5576 4663 1 0239 Professional practice 45890 45890 Automobile 122 122 Consumer l 038 1038
Total $ 7468 $ 1 65346 $ 1728 1 4
Year Ended December 3 1 20 1 3 Individually Collectively
Evaluated for Evaluated for Impairment Impairment Ending Balance
Ending allowance attributable to loans
Residential $ 130 $ 146 $ 276 Construction and land 2 13 2 13 Commercial real estate 250 650 900 Commercial 269 1 08 377 Inventory 3000 250 3250 Professional practice 259 259 Automobile 12 12 Consumer 9 9 Unallocated 38 38
Total $ 3649 $ 1685 $ 5334
Individually Collectively Evaluated for Evaluated for Impairment lmpaiffilent Ending Balance
Loans
Residential $ 595 $ 1 1 09 1 $ 1 1 686 Construction and land 1303 1303 Commercial real estate 1 298 47272 48570 Commercial 1587 6257 7844 Inventory 5215 4434 9649 Professional practice 48224 48224 Life insurance contraets 1933 1 933 Automobile 789 789 Consumer 1 083 l 083
Total $ 8695 $ 122386 $ 1 3 1 08 1
20
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 201 4 and 2013
Note 4 - Loans (Continued)
Credit Risk Grading
The Company util izes a loan rating system as a means of identifying problem and potential problem loans The Company assigned the fo llowing loan ratings to loans disaggregated by segment and class as of December 3 1 20 1 4 and 20 1 3 (in thousands)
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile
Consumer
Total
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Life insurance contracts Automobile
Consumer
Total
December 3 1 20 14 Loans rated Loans rated Loans rated
1-5
$ 1 0898 $ 5298
58965 38472
4663 45890
1 22 1 038
$ 1 65346 $
6
===
$
$
7 Total
595 $ 1 1 493 5298
1 297 60262 38472
5576 I 0239 45890
1 22 1 038
7468 $ 1 728 1 4 ====
December 3 1 20 1 3 Loans rated Loans rated Loans rated
1-5 6 7 Total
$ 1 0626 $ 465 $ 595 $ 1 1 686 1 303 1 303
47272 1 298 48570 6257 J 587 7844 4434 52 1 5 9649
48224 48224 I 933 I 933
789 789 1 083 1 083
$ 1 2 1 921 $ 465 $ 8695 $ 1 3 1 08 1
The Company categorized each loan into credit risk categori es based on current fi nancial information overall debt service coverage comparison against industry averages col lateral coverage historical payment experience and current economic trends The Company uses the following definitions for credit risk ratings
2 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Loans and the all owance for loan losses ar e disaggregated by segment as foll ows (i n thousands)
Allowance for loan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Allowance for Joan losses
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Ending allowance attributable to loans
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile Consumer
Unallocated
Total
Beginning
Balance
$ 276 $ 2 1 3 900 377
3250 259
12 9
38
$ 5334 $
Beginning
Balance
$ 392 $ 72
849 338 626 587 106
5 54
$ 3029 $
1 9
Year Ended December 3 1 2014
Charge-offs Recoveries Provision Ending Balance
$ $ (45) $ 23 1 42 255
( 142) 758 144 (8) 5 1 3
1 85 3435 ( 1 9) 240
(4) 1 0 ( 1 7) I ( I ) 8
148 1 86
(4) $ 1 54 $ 143 $ 5627
Year Ended December 3 1 2013
Charge-offs Recoveries Provision Ending Balance
$ $ ( 1 1 6) $ 276 ( I 33) 274 2 1 3
5 1 900 9 30 377
(2658) 5282 3250 (328) 259
(36) 1 6 (74) 1 2 4 9
( 1 6) 38
(2827) $ 25 $ 5 107 $ 5334
Year Ended December 3 I bull 2014 Individually Collectively
Evaluated for Evaluated for
Impairment Impairment Ending Balance
$ 130 $ 1 0 1 $ 23 1 255 255
180 578 758 5 1 3 5 1 3
3335 1 00 3435 240 240
I I 8 8
186 186
$ 3645 $ 1 982 $ 5627
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 2014 and 2013
Note 4 - Loans (Continued)
Individually Collectively Evaluated for Evaluated for Impairment Impairment Ending Balance
Loans
Residential $ 595 $ 1 0898 $ 1 1 493 Construction and land 5298 5298 Commercial real estate 1 297 58965 60262 Commercial 38472 38472 Inventory 5576 4663 1 0239 Professional practice 45890 45890 Automobile 122 122 Consumer l 038 1038
Total $ 7468 $ 1 65346 $ 1728 1 4
Year Ended December 3 1 20 1 3 Individually Collectively
Evaluated for Evaluated for Impairment Impairment Ending Balance
Ending allowance attributable to loans
Residential $ 130 $ 146 $ 276 Construction and land 2 13 2 13 Commercial real estate 250 650 900 Commercial 269 1 08 377 Inventory 3000 250 3250 Professional practice 259 259 Automobile 12 12 Consumer 9 9 Unallocated 38 38
Total $ 3649 $ 1685 $ 5334
Individually Collectively Evaluated for Evaluated for Impairment lmpaiffilent Ending Balance
Loans
Residential $ 595 $ 1 1 09 1 $ 1 1 686 Construction and land 1303 1303 Commercial real estate 1 298 47272 48570 Commercial 1587 6257 7844 Inventory 5215 4434 9649 Professional practice 48224 48224 Life insurance contraets 1933 1 933 Automobile 789 789 Consumer 1 083 l 083
Total $ 8695 $ 122386 $ 1 3 1 08 1
20
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 201 4 and 2013
Note 4 - Loans (Continued)
Credit Risk Grading
The Company util izes a loan rating system as a means of identifying problem and potential problem loans The Company assigned the fo llowing loan ratings to loans disaggregated by segment and class as of December 3 1 20 1 4 and 20 1 3 (in thousands)
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile
Consumer
Total
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Life insurance contracts Automobile
Consumer
Total
December 3 1 20 14 Loans rated Loans rated Loans rated
1-5
$ 1 0898 $ 5298
58965 38472
4663 45890
1 22 1 038
$ 1 65346 $
6
===
$
$
7 Total
595 $ 1 1 493 5298
1 297 60262 38472
5576 I 0239 45890
1 22 1 038
7468 $ 1 728 1 4 ====
December 3 1 20 1 3 Loans rated Loans rated Loans rated
1-5 6 7 Total
$ 1 0626 $ 465 $ 595 $ 1 1 686 1 303 1 303
47272 1 298 48570 6257 J 587 7844 4434 52 1 5 9649
48224 48224 I 933 I 933
789 789 1 083 1 083
$ 1 2 1 921 $ 465 $ 8695 $ 1 3 1 08 1
The Company categorized each loan into credit risk categori es based on current fi nancial information overall debt service coverage comparison against industry averages col lateral coverage historical payment experience and current economic trends The Company uses the following definitions for credit risk ratings
2 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 2014 and 2013
Note 4 - Loans (Continued)
Individually Collectively Evaluated for Evaluated for Impairment Impairment Ending Balance
Loans
Residential $ 595 $ 1 0898 $ 1 1 493 Construction and land 5298 5298 Commercial real estate 1 297 58965 60262 Commercial 38472 38472 Inventory 5576 4663 1 0239 Professional practice 45890 45890 Automobile 122 122 Consumer l 038 1038
Total $ 7468 $ 1 65346 $ 1728 1 4
Year Ended December 3 1 20 1 3 Individually Collectively
Evaluated for Evaluated for Impairment Impairment Ending Balance
Ending allowance attributable to loans
Residential $ 130 $ 146 $ 276 Construction and land 2 13 2 13 Commercial real estate 250 650 900 Commercial 269 1 08 377 Inventory 3000 250 3250 Professional practice 259 259 Automobile 12 12 Consumer 9 9 Unallocated 38 38
Total $ 3649 $ 1685 $ 5334
Individually Collectively Evaluated for Evaluated for Impairment lmpaiffilent Ending Balance
Loans
Residential $ 595 $ 1 1 09 1 $ 1 1 686 Construction and land 1303 1303 Commercial real estate 1 298 47272 48570 Commercial 1587 6257 7844 Inventory 5215 4434 9649 Professional practice 48224 48224 Life insurance contraets 1933 1 933 Automobile 789 789 Consumer 1 083 l 083
Total $ 8695 $ 122386 $ 1 3 1 08 1
20
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 201 4 and 2013
Note 4 - Loans (Continued)
Credit Risk Grading
The Company util izes a loan rating system as a means of identifying problem and potential problem loans The Company assigned the fo llowing loan ratings to loans disaggregated by segment and class as of December 3 1 20 1 4 and 20 1 3 (in thousands)
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile
Consumer
Total
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Life insurance contracts Automobile
Consumer
Total
December 3 1 20 14 Loans rated Loans rated Loans rated
1-5
$ 1 0898 $ 5298
58965 38472
4663 45890
1 22 1 038
$ 1 65346 $
6
===
$
$
7 Total
595 $ 1 1 493 5298
1 297 60262 38472
5576 I 0239 45890
1 22 1 038
7468 $ 1 728 1 4 ====
December 3 1 20 1 3 Loans rated Loans rated Loans rated
1-5 6 7 Total
$ 1 0626 $ 465 $ 595 $ 1 1 686 1 303 1 303
47272 1 298 48570 6257 J 587 7844 4434 52 1 5 9649
48224 48224 I 933 I 933
789 789 1 083 1 083
$ 1 2 1 921 $ 465 $ 8695 $ 1 3 1 08 1
The Company categorized each loan into credit risk categori es based on current fi nancial information overall debt service coverage comparison against industry averages col lateral coverage historical payment experience and current economic trends The Company uses the following definitions for credit risk ratings
2 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 201 4 and 2013
Note 4 - Loans (Continued)
Credit Risk Grading
The Company util izes a loan rating system as a means of identifying problem and potential problem loans The Company assigned the fo llowing loan ratings to loans disaggregated by segment and class as of December 3 1 20 1 4 and 20 1 3 (in thousands)
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Automobile
Consumer
Total
Residential Construction and land Commercial real estate Commercial Inventory Professional practice Life insurance contracts Automobile
Consumer
Total
December 3 1 20 14 Loans rated Loans rated Loans rated
1-5
$ 1 0898 $ 5298
58965 38472
4663 45890
1 22 1 038
$ 1 65346 $
6
===
$
$
7 Total
595 $ 1 1 493 5298
1 297 60262 38472
5576 I 0239 45890
1 22 1 038
7468 $ 1 728 1 4 ====
December 3 1 20 1 3 Loans rated Loans rated Loans rated
1-5 6 7 Total
$ 1 0626 $ 465 $ 595 $ 1 1 686 1 303 1 303
47272 1 298 48570 6257 J 587 7844 4434 52 1 5 9649
48224 48224 I 933 I 933
789 789 1 083 1 083
$ 1 2 1 921 $ 465 $ 8695 $ 1 3 1 08 1
The Company categorized each loan into credit risk categori es based on current fi nancial information overall debt service coverage comparison against industry averages col lateral coverage historical payment experience and current economic trends The Company uses the following definitions for credit risk ratings
2 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
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Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
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Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
The loan off icer is responsible for recommending a rating for each loan when seeking credit approval and for reviewing accurate ratings for each loan in hisher portfolio on an ongoing basis with the chief credit officer
(a) Credit Rating = I (Superior)
Typically reserved for l oans fu lly secured by the following
bull Certificates of deposit or other deposit accounts held at the Bank bull Property margined unrestricted marketable secu rities bull Cash surrender value of l ife insurance policies where the insurance company
providing the policy as an AM B est rating of A or better
(b) Credit Rating = 2 (Strong)
This rating should be assigned to credits extended to businesses with the following characteristics
bull Have audited financial statements with an unqualified opinion bull Have strong historical cash flow well in excess of debt service requ irements bull Possess a stable balance sheet with l imited use of borrowed debt bull Company management is experienced and well regarded bull Collateral is deemed necessary only for control purposes bull Minimal impact from economic cycles is deemed likely
Additional ly credits that might normally receive a rating of 11 I 11 but for higher than guideline advance rates on B ank deposits marketable securities or cash su rrender values of life insurance polices might be assigned a rating of 2
(c) Credit Rating = 3 (Acceptable)
3a Loans with strong debt service coverage collateral coverage and liqu idity of companyguarantor
3b Loans with acceptable debt service coverage collateral coverage and liquidity of companyguarantor Any loan with a policy exception of any kind shall be rated no higher than 3b A l l loans with a policy exception of any kind shall be reported to the board of directors on a quarterly basis Any second loan extension on a commercial real estate loan would be grouped into this category
22
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
3c Loans with generally acceptable debt service coverage collateral coverage and l iquidity of companyguarantor Any third extension or higher on a commercial real estate loan would be grouped into this category
This rating should be assigned to the typical commercial credit Credits in this category would be extended to businesses with the following characteristics
bull Generate good quality timely financial information bull Debt service coverage generally above I 2x from internally generated
cash flow bull Possess a stable balance sheet with reasonable leverage commensurate
with industry norms bull Company management is experienced and well regarded bull Collateral coverage is ample to secure the loan Credit is structured to
allow for adequate collateral monitoring bull I ndustry and business risks are manageable in light of anticipated
economic conditions
(d) Credit Rating = 4 (Marginal)
Credits of below average qual ity should be assigned this rating Credits receiving this rating would be extended to businesses with the following characteristics
bull Deteriorating profitability Debt service coverage is generally 1 0- 1 2x bull Balance sheet reflects increasing leverage bull Collateral coverage is ample to secure the loan but requires very close
monitoring bull Business and economic outlook is acceptable
(e) Credit Rating = 5 (Watch List)
Credits rated S or below are to be placed on the Watch List Characteristics of businesses in this category as as follows
bull Debt service coverage is generally lt I Ox bull Increasing leverage and shrinking net worth bull Full collateral coverage is in question bull Significant potential for adverse impact from business risks U ncertain longshy
term industry outlook
23
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
(f) Credit Rating = 6 (Problem)
Credits in this category are extended to businesses with the following characteristics
bull Deteriorating debtworth and liquidity bull Poor quality financial information generated bull Debt service coverage is generally lt I Ox and improvement is unl ikely or
questionable bull Leverage is increasing Trade debt is stretched bull Collateral coverage is marginal and improper structuring may be in place bull There is a significant potential for adverse impacts from business risks and
the long-term industry outlook is questionable
(g) Credit Rating = 7 (Substandard)
Credits in this category are placed on nonaccrual Characteristics of businesses in this category are as fol lows
bull Generate questionable financial information that is issued on an untimely basis
bull Possesses unsatisfactory debt service coverage bull Have high deteriorating debtworth and poor l iquidity bull Management is fighting for business survival bull Collateral is improperly structured and insufficient to cover loan bull Business and economic conditions are poor
On an annual basis or more often if needed the Company formally reviews the ratings on al l commercial real estate construction and commercial l oans
24
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 4 - Loans (Continued)
Age Analysis of Past Due Loans
The following tables detail the age analysis of past due loans by loan segment and class at December 3 1 20 1 4 and 20 1 3 (in thousands)
December 3 1 20 1 4 Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ 264 $ $ 595 $ 859 $ 1 0634 $ 1 1 493 $ Construction and land 5298 5298 Commercial real estate 1 297 1 297 58965 60262 Commercial 38472 38472 Inventory 1 433 1 433 8806 1 0239 Professional practice 45890 45890 Automobile 3 3 1 1 9 1 22
Consumer 1 038 l 038
Total $ 267 $ $ 3325 $ 3592 $ I 69222 $ 1 728 1 4 $
December 3 1 20 1 3
Recorded
Greater Investment
30-59 Days 60-89 Days Than 90 Total Past gt 90 Days
Past Due Past Due Days Due Current Total Loans and Accruing
Residential $ $ $ 595 $ 595 $ 1 1 09 1 $ 1 1 686 $ Construction and land l 303 1 303 Commercial real estate 1 298 1 298 47272 48570 Commercial 1 587 1 587 6257 7844 Inventory 52 1 5 52 1 5 4434 9649 Professional practice 48224 48224 Life insurance contracts 1 5 4 1 9 l 9 1 4 l 933 Automobile 789 789
Consumer 1 083 1 083
Total $ I S $ 4 $ 8695 $ 87 1 4 $ 1 22367 $ 1 3 1 08 1 $
25
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 4 - Loans (Continued)
Impaired Loans
Impaired loans by loan segment and class were as follows at December 3 1 20 1 4 and 20 1 3 (in thousands)
With an allowance recorded
Residential Commercial real estate
Inventory
Total
With an allowance recorded
Residential Commercial real estate Commercial
Inventory
Total
$
$
$
$
Recorded
Investment
595 1 297 5576
7468
Recorded
Investment
595 J 298 1 587 52 1 5
8695
26
As ofand For the Year Ended December 3 I 20 1 4
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ 1 297 BO 1 297 5576 3335 5396
s 7468 $ 3 645 s 7288 s
As of and For the Year Ended December 3 1 20 1 3
Average Interest
Unpaid Recorded Income
Principal Related Investment for Recognized for
Balance Allowance the Year the Year
$ 595 $ 1 3 0 $ 595 $ l 298 250 J 298 59 1 587 269 1 76 52 52 1 5 3000 2608 3 8 1
$ 8695 $ 3649 $ 4677 s 492
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 20 1 4 and 20 1 3
Note 4 - Loans (Continued)
For the purpose of the disclosure above recorded investment represents the borrowers unpaid principal balance less partial charge-offs to date
No additional funds were committed to be advanced in connection with impaired loans at December 3 1 20 I 4 and 20 I 3
Nonaccrual Loans
Nonaccrual loan balances by loan segment and class at December 3 I 20 1 4 and 20 1 3 are as follows (in thousands)
Residential Commercial real estate Commercial Inventory
Subtotal
$
$
20 1 4
595 1 297
5576
7468
20 1 3
$ 595 1 298
1 587 52 1 5
8695
There were no troubled debt restructurings for the years ended December 3 1 20 1 4 and 20 1 3
Note 5 - Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment at December 3 1 is as follows
20 1 4 20 1 3
Land $ 3000000 $ 3 000000 Buildings and building improvements 5058427 5 048252 Furniture fixtures and equipment 3 074527 2935 764
Total 1 1 1 32954 I 09840 1 6
Accumulated depreciation (497463 1) ( 4648248)
Total $ 6 1 58323 $ 6 335 768
Depreciation expense for the years ended December 3 I 20 1 4 and 2013 amounted to $326383 and $3 1 7863 respectively
27
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 6 - Deposits
The following is a summary of the distribution of deposits at December 3 I
Noninterest-bearing deposits NOW accounts Savings and money market accounts Time
Under $ I 00000 $ I 00000 and over
Total
20 1 4
$ 62956469 $ 30660732 62884602
23 7 1 9 362 35966609
20 1 3
56029979 29 1 72 328 59262664
29435960 46757324
$ 2 1 6 1 87774 $ 220658255
At December 3 1 20 1 4 the scheduled maturities of time deposits are as follows
20 1 5 20 1 6 20 1 7
Total
$ 49 I 04657 I 0 I 03 825
477489
$ 596859 7 1
As of December 3 1 20 1 4 and 20 1 3 deposit balances from officers and directors of the Bank andor Company totaled approximately $ 1 3 1 8000 and $ 1 276000 respectively
The aggregate amount of time deposits in denominations that meet or exceed the $250000 Federal Deposit I nsurance Corporation insurance l imit was approximately $ 1 5 933 000 and $2 1 955000 at December 3 1 20 1 4 and 20 1 3 respectively
28
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 7 - Junior Suordinated Notes
Chicago Shore Capital Statutory Trust I is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I bear i nterest of LIBOR plus 400 percent (an effective rate of 425 percent and 424 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning September 30 2008 and have a maturity date of September 1 8 2033
Chicago Shore Capital Statutory Trust I I i s a wholly owned subsidiary of the Company and has $4000000 of trust preferred securities outstanding at December 3 I 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I I bear interest of LIBOR plus 279 percent (an effective rate of 3 04 percent and 303 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning March 1 7 2009 and have a maturity date of March 1 7 2034
Chicago Shore Capital Statutory Trust I l l is a wholly owned subsidiary of the Company and has $3500000 of trust preferred securities outstanding at December 3 1 20 1 4 and 20 1 3 The trust preferred securities of Chicago Shore Capital Statutory Trust I l l bear interest of LIBOR plus 1 50 percent (an effective rate of 1 75 percent and 1 74 percent at December 3 1 20 1 4 and 20 1 3 respectively) are callable beginning December 1 5 20 I 0 and have a maturity date of December 1 5 2035
In accordance with ASC Topic 8 1 0 Consolidation the Company does not consolidate the Chicago Shore Capital Trust entities The Company has recorded its investment in Chicago Shore Capital Trusts of $342000 and the junior subordinated notes of $ 1 1 2 1 2335 and $ I 1 205687 on its consolidated balance sheet at December 3 1 20 1 4 and 20 1 3 respectively The junior subordinated notes are presented net of capitalized debt issuance costs of $ 1 29655 and $ 1 363 1 3 as of December 3 1 20 1 4 and 20 1 3 The capitalized debt issuance costs are being amortized straight l ine as an adjustment to interest expense through the maturity dates of the notes The junior subordinated notes bear interest consistent with the trust preferred securities of the Chicago Shore Capital Trust entities and must be redeemed by the Company at the earl ier of the time the trust preferred securities are called or matured
Note B - Income Taxes
The allocation of income taxes between current and deferred portions is as follows
Current income tax expense Deferred income tax benefit
Total income tax benefit
29
$
$
20 1 4
1 3 940 $ ( 1 85304)
( 1 7 1 364) $
20 1 3
43 1 90 (202 1 472)
( 1 978282)
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note 8 - Income Taxes (Continued)
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows
I ncome tax benefit computed at 34 of pretax loss $ State income tax - Net of federal benefit Impact of statutory state income tax rate change Effect of tax-exempt interest Dividends received deduction Other - Net
Total income tax (benefit) expense
The details of the net deferred tax asset are as follows
Deferred tax assets Allowance for loan losses Nonaccrual loan interest Deferred compensation Debt issuance costs
$
Unrealized loss on investment securities - Available for sale
Restricted stock Write down of money market preferred Other real estate owned Alternative minimum tax credit carryforward State net operating loss carryforward Federal net operating loss carryforward Other
Gross deferred tax assets
Deferred tax liabilities FHLB dividends Depreciation Prepaid expenses Accretion
Gross deferred tax liabilities
Net deferred tax asset
30
$
$
20 1 4 20 1 3
(68496) $ ( 1 7 1 9203) (7323) (5 1 32 1 ) 50076
(92778) (904 1 8) (47268) (43475)
(5575) (73 865)
( 1 7 1 364) $ ( 1 978282)
20 1 4 20 1 3
1 332899 $ 1 297323 28 1 8 1 5
33362 59094 48066 5 1 498
398966 46727 1 1 54 1 6 1 1 1 0 647
1 07 1 424 I 1 29 1 09 562 1 72 557 350 1 9 1 056 1 88564 452330 469893
225 1 692 2334907 20567 1 5 866
67985 1 0 668 1 522
(89 986) (9 1 359) (7280 I ) ( 1 29266) (23452) (59030) (24655)
(245269) (245280)
6553 24 1 $ 6436242
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 8 - Income Taxes (Continued)
ASC Topic 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized The deferred tax asset recoverabil ity is calculated using a consistent approach which considers the relative impact of negative and positive evidence including historical financial performance projections of future taxable income including tax planning strategies future reversals of existing taxable temporary differences and any carryback availabil ity This process involves significant management judgment about assumptions that are subject to change from period to period Management has concluded that based on the weight of all available evidence no valuation allowance was required at December 3 1 20 1 4 and 20 1 3
The Company has $66380 1 9 and $7394258 of federal and state net operating loss carryforwards respectively available to reduce future income taxes which begin expiring in 2029 and 2027 respectively I n addition the Company has an alternative minimum tax credit carryforward of $290406 as of December 3 1 20 1 4 which has no expiration
Tax benefits from tax positions not deemed to meet the more-likely-than-not threshold should not be recognized in the year of determination Management has reviewed the Companys tax positions for al l open tax years and concluded that the Company has no material uncertain tax positions at December 3 I 20 1 4 As of December 3 I 20 1 4 the Company has recorded no liability for net unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns The Company has not recorded any penalties andor i nterest related to uncertain tax positions
Note 9 - Employee Benefit Plan
The Company sponsors a 40 I (k) plan (the Plan) covering substantial ly all full-tim e employees who have completed 90 days of service Employees are fu l ly vested after five years of employment and 1 000 hours of service for each year of employment The Companys contributions to the Plan are discretionary and do not exceed the amounts al lowable for federal income tax purposes Employee contributions to the Plan are voluntary and made from eligible earnings Employees may contribute from I to 1 5 percent of eligible earnings The Plan includes a 50 percent match of up to 3 percent of the employees eligible earnings The Company contributed approximately $56000 and $52600 to the Plan as of December 3 1 20 1 4 and 20 1 3 respectively
3 1
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 0 - Stock-based Compensation
The Company has a share option plan for directors officers and key executive employees pursuant to which the Company may grant options to purchase up to 1 67289 common shares These shares will be issued from time to time under such arrangements contracts or plans and at such prices as are recommended by management of the Company and approved by the board of directors
A summary of option activity under the Plan for the year ended December 3 I 20 1 4 is as follows
Options
Outstanding at January I 20 1 4 Forfeited
Outstanding at December 31 2014
Weighted Average
Remaining Weighted Average Contractual Term
Number of Shares Exercise Price (in years)
59259 $ 1359 42 (12000)
47259 $ 1379 30 =
Options granted vest over a four-year period and expire between I 0 and I 5 years At December 3 1 20 1 4 and 20 1 3 47259 and 59259 options respectively are vested
In 20 1 4 and 20 1 3 the Company granted no restricted shares At December 3 1 20 1 4 and 20 1 3 3 000 restricted shares were outstanding and vested In 20 1 4 no shares were forfeited In 20 1 3 1 000 shares were forfeited
Restricted stock units (RSUs) are awarded at no cost to employees upon their grant RS Us are granted annually and vest over a period of five years on a straight-l ine basis Two RSU plans have been put in place at Chicago Shore Corporation The first plan was granted on March 5 20 1 2 for a 20 I I RSU award (20 I I plan) The projected cost of the 20 I I plan is $ 1 80000 (32727 shares at approximately $550 per share) of which $36000 of expense was recognized in 20 1 4 and 20 1 3 The second plan was granted on March 1 6 20 1 2 for a 20 1 3 award (20 1 3 Plan) The projected cost of the 20 1 3 plan is $429384 (78069 shares at approximately $550 per share) of which $85877 of expense was recognized in 20 1 4 and 20 1 3 and is included in salaries and other employee benefits on the consolidated statement of operations Unrecognized compensation costs associated with the RSU plans was $267 7 1 2 at December 3 I 20 1 4 and will be recognized on a straight-line basis through March 20 1 7
32
- I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I I - Common Share Subscriptions
The December 3 1 20 1 4 and 20 1 3 share subscriptions represent a secured promissory note for the purchase of 38000 common shares by one officer of the Company in the amount of $475000 The promissory note has an interest rate of 475 percent and 1 5 7 percent at December 3 1 20 1 4 and 20 1 3 respectively The promissory note had a maturity date of January 28 20 1 4 and was extended to January 28 20 1 9 Principal and interest are due at maturity or the earlier of any sale of the common shares or the termination of employment with the Company The interest was forgiven by the Company on a prorated basis annually through January 29 2004 (25 percent of accumulated interest annually from 1 999 through 2004) I nterest is expected to subsequently be forgiven annually through January 28 20 1 9 The Company will record any interest income on the cash basis No income was recorded in 20 1 4 or 20 1 3
Note 1 2 - Preferred Stock
The Company has authorized the issuance of 500000 shares of preferred stock The Company sold 7000 shares of Series A cumulative perpetual preferred shares I n addition the Company issued issued a warrant to purchase 350 shares of Series B cumulative perpetual preferred stock which was immediately exercised Both Series A and Series B preferred stock qualify as Tier I capital for regulatory purposes
Series A preferred shares are senior cumulative prepetual preferred shares that have a liquidation preference of $ 1 000 per share pay cumulative dividends at a rate of 5 percent per year for the first 5 years and thereafter at a rate of 9 percent The dividend rate was 9 percent and 5 percent at December 3 1 20 1 4 and 20 1 3 respectively
Series B preferred shares are cumulative perpetual preferred shares that have the same rights privileges voting rights and other terms as the Series A preferred shares except that dividends have had a dividend rate of 9 percent per year since their issuance Series B preferred shares may not be redeemed until all of the Series A preferred shares have been redeemed
Proceeds from the issuance of the Series A and Series B were allocated based on a relative fair value of each series based on a discounted cash flow model resulting in in itial book value of approximately $66 mil lion for the Series A and approximately $400000 for the Series B This resulted in a discount of approximately $400000 for Series A and a premium of approximately $50000 for Series B As a result of the increasing rate feature of the Series A preferred shares the discount is accreted over what the Company estimated to be the l ife of five years using the level-yield method The Series A discount accretion for the years ended December 3 I 20 1 4 and 20 1 3 was $80 728 and $8 1 075 respectively The Series B premium amortization was $48749 during the year ended December 3 I 20 1 4 Dividends on the preferred shares are not recorded until they are declared and paid
3 3
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities
Credit-related Financial Instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers These financial instruments include commitments to extend credit and standby letters of credit Such commitments involve to varying degrees elements of credit and interest rate risk in excess of the amount recognized in the balance sheet
The Banks exposure to credit loss is represented by the contractual amount of these commitments The Bank fol lows the same credit policies in making commitments as it does for on-balance-sheet instruments
At December 3 1 20 1 4 and 20 1 3 the fol lowing financial instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit Standby letters of credit
Contract Amount 20 1 4 20 1 3
$ 2856 1 294 $ 20857 7 1 8 622345 902855
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for lines of credit may expire without being drawn upon Therefore the total commitment amounts do not necessarily represent future cash requirements The amount of collateral obtained if it is deemed necessary by the Bank is based on managements credit evaluation of the customer
Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party Those letters of credit are used primarily to support publ ic and private borrowing arrangements Essentially all letters of credit issued have expiration dates within one year The credit risk involved is extending loan facilities to customers The Bank generally holds collateral supporting those commitments if deemed necessary
Collateral Requirements - To reduce credit risk related to the use of credit-related financial instruments the Bank might deem it necessary to obtain col lateral The amount and nature of the collateral obtained are based on the Banks credit evaluation of the customer Collateral held varies but may include cash securities accounts receivable inventory property plant and equipment and real estate
If the counterparty does not have the right and ability to redeem the col lateral or the Bank is permitted to sel l or repledge the collateral on short notice the Bank records the collateral in its balance sheet at fair value with a corresponding obligation to return it
34
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note I 3 - Off-balance-sheet Activities (Continued)
Legal Contingencies - Various legal claims also arise from time to time in the normal course of business which in the opinion of management will have no material effect on the Banks financial statements
Note 1 4 - Minimum Regulatory Capital Requirements
Banking regulations l imit the amount of dividends that may be paid by the Bank to the Company without prior approval by the Banks regulatory agency These regulations generally limit the amount of dividends the Bank may pay to the Company to an amount equal to its undistributed net income subject to the capital needs of the Bank
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can in itiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks consolidated financial statements Under capital adequacy guidelines and the regulatory framework for prompt corrective action the Bank must meet specific capital guidelines that involve quantitative measures of their assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors
Quantitative measures establ ished by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the fol lowing table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined) Management believes as of December 3 1 20 1 4 and 20 1 3 that the Bank met all capital adequacy requirements to which it is subject
35
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 1 10 14 and 10 I 3
Note 1 4 - Minimum Regulatory Capital Requirements (Continued)
As of December 3 1 20 1 4 the most recent notification from the Banks primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized an institution m ust maintain minimum total risk-based Tier I risked-based and Tier I leverage ratios as set forth in the fol lowing tables There are no conditions or events since the notification that management believes have changed the Banks category The Banks actual capital amounts and ratios as of December 3 I 20 1 4 and 20 I 3 are also presented in the table
To be Well-capitalized under
For Capital Adequacy Prompt Corrective Action
Actual Purposes Provisions
(OOOs omitted) Amount Ratio Amount Ratio Amount Ratio As of December 3 1 1 20 1 4
Total capital to risk-weighted assets $ 2 1 355 1 063 $ 1 6068 800 $ 20085 1 000
Tier I capital to risk-weighted assets 1 8806 936 8034 400 12051 600
Tier I capital to average assets 1 8806 801 9393 400 1 1 742 500
As of December 3 1 20 1 3 Total capital to risk-
weighted assets 1 9924 1 222 1 3299 800 1 6624 1 000 Tier I capital to risk-
weighted assets 1 7846 1 095 6649 400 9974 600 Tier I capital to average
assets 1 7846 733 I 0039 400 1 2549 500
I n 20 1 3 the federal banking agencies issued revisions to the existing capital rules to incorporate certain changes to the Basel capital framework including Basel I l l and other elements The intent is to strengthen the definition of regulatory capital increase riskshybased capital requirements and make selected changes to the calculation of riskshyweighted assets Beginning January I 20 1 5 banks transitioned to the new rules and wil l report results with its first quarter call report of 20 I 5 As part of the new rules there are several provisions affecting the Bank such as the implementation of a new common tier I capital ratio the start of a capital conservation buffer and increased prompt corrective action capital thresholds The Bank is currently evaluating the impact of the new regulatory capital requirements however Bank management does not bel ieve the adoption of the Basel I l l capital requirements wil l have a material impact on its classification as well capitalized under the capital framework
36
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 2014 and 20 I 3
Note I 5 - Fair Value of Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties other than in a forced liquidation Fair value is best determined based upon quoted market prices However in many instances there are no quoted market prices for the Companys various financial instruments In cases where quoted market prices are not available fair values are based on estimates using present value or other valuation techniques Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows Accordingly the fair value estimates may not be realized in an immediate settlement of the instrument Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements Accordingly the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values
Investment Securities - Fair values of securities are based on quoted market prices If
a quoted market price is not available fair value is estimated using quoted market prices for similar securities The carrying values of the FHLB stock and Chicago Shore Capital Trusts approximate fair value
Loans - For variable-rate loans that reprice frequently and with no significant change in credit risk fair values are based on carrying values Fair values for other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit qual ity Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values where applicable
Deposits - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date (ie their carrying amounts) The carrying amounts of variable-rate fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits
Junior Subordinated Notes - The fair values of the Companys junior subordinated debentures are estimated using discounted cash flow analyses based on the Companys current incremental borrowing rates for similar types of borrowing arrangements
37
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 5 - Fair Value of Financial Instruments (Continued)
Note
Repurchase Agreements - The carrying amount is a reasonable estimate of fair value for these short-term obl igations
Accrued Interest - The carrying amounts of accrued interest relating to deposits loans and investments approximate fair value The fair value of accrued interest related to junior subordinated notes is estimated using discounted cash flow analyses based on current rates of the contractual agreements
Other Financial Instruments - The fair value of other financial instruments including loan commitments and unfunded letters of credit based on discounted cash flow analyses is not material
The estimated fair values and related carrying or notional amounts of the Companys financial instruments are as follows (in thousands)
20 1 4 20 1 3
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Financial assets
Cash and equivalents $ 28753 $ 28753 $ 69060 $ 69060 Investment securities - Available
for sale 22745 22745 294 1 5 294 1 5 Investment securities - Held to
maturity 4 1 28 443 3 3 304 3 3 04 FHLB Stock 1 000 1 000 1 000 1 000 Loans - Net 1 67 1 26 1 669 1 1 1 25 644 1 28380 Accrued interest receivable 624 624 535 535 Investment in Chicago Shore
Capital Trusts 342 342 342 342 Financial liabilities
Noninterest-bearing deposits 62956 62956 56030 56030 Interest-bearing deposits 1 53 23 1 1 5248 1 1 64628 1 64340 Repurchase agreements 628 628 1 3 3 1 1 3 3 1 J unior subordinated notes 1 1 2 1 2 4336 1 1 206 1 1 342 Accrued interest payable 80 80 79 79
I 6 - Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value
38
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 3 I 20 14 and 20 I 3
Note 1 6 - Fair Value Measurements (Continued)
The following tables present information about the Companys assets measured at fair value on a recurring basis at December 3 I 20 1 4 and 20 1 3 and the valuation techniques used by the Company to determine those fair values
Fair values determined by Level I inputs use quoted prices in active markets for identical assets that the Company has the ability to access
Fair values determined by Level 2 inputs use other inputs that are observable either directly or indirectly These Level 2 inputs include quoted prices for similar assets i n active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals
Level 3 inputs are unobservable inputs including inputs that are avai lable in situations where there is little if any market activity for the related asset These Level 3 fair value measurements are based primarily on managements own estimates using pricing models discounted cash flow methodologies or similar techniques taking into account the characteristics of the asset
I n instances whereby inputs used to measure fair value fall into different levels i n the above fair value hierarchy fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation The Companys assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
The Companys policy is to recognize transfers between levels of the fair value h ierarchy as of the end of the reporting period
Assets Measured at Fair Value on a Recurring Basis at December 3 1 2014
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 4
Investment securities - Available for sale
US government agencies $ $ 707 1 456 $ $ 707 1 456 Municipal securities 6407749 6407749 Mortgage-backed
securities 5306507 5306507
Other 1 356 1 8 3824400 39600 1 8
Total investment securities -Available for sale $ 1356 1 8 $ 226 10 I 12 $ $ 22745730
39
I
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries
Notes to Consolidated Financial Statements December 31 2014 and 2013
Note 1 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Recurring Basis at December 3 1 20 1 3
Quoted Prices in Active
Markets for Identical Assets
Investment securities - Available for sale
US government agencies $ Municipal securities
(Level I )
Significant Other
Observable Inputs
(Level 2)
$ I 8808454 $ 6840323 Other I 1 9637 3646800
Significant Unobservable
Inputs (Leve13)
Total investment securities -Available for sale $ I 1 9637 $ 29295577 $====
Balance at December 3 I
20 1 3
$ I 8808454 6840323 3 766437
$ 294 1 5 2 1 4
The fair value of investment securities - available for sale at December 3 I 20 1 4 and 20 1 3 were determined primarily based on Level 2 inputs The Company estimates the fair value of these investments based on comparable security transactions or observable yield curves for comparable securities
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis These assets include impaired loans and other real estate owned The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above using discounted cash flow analyses market prices and collateral valuations The fair value of collateral and the fair value of other real estate owned are generally estimated based on appraisals or other valuations which include Level 3 inputs based on customized discounting criteria The numeric range of discounting criteria is not meaningful
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 1 20 1 4
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 14 Impaired loans $ $ $ 3823590 $ 3823590 Other real estate owned 5486 I 6 1 5486 I 6 1
40
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corporation and Subsidiaries Notes to Consolidated Financial Statements
December 3 I 1014 and 10 I 3
Note I 6 - Fair Value Measurements (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis at December 3 I 20 1 3
Quoted Prices Significant in Active Other Significant
Markets for Observable Unobservable Balance at Identical Assets Inputs Inputs December 3 I
(Level I) (Level 2) (Level 3) 20 1 3 Impaired loans $ $ $ 4853 996 $ 4853996 Other real estate owned 5723065 5723065
4 1
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Form FR Y-6
Chicago Shore Corporation Chicago Illinois
Fiscal Year Ending December 31 2014
Repmi item
1 a The BHC is not required to prepare form 1 OK with the SEC
1 b The BHC does not prepare an annual report for its shareholders 2 Organization chmi
1 00
Security Chicago Corporation Chicago IL
Incorporated in Delaware
1 00
Chicago Shore Corporation Chicago IL
Incorporated in D elaware
1 00
(A Delaware corporation)
1 00
Chicago Shore Capital Trust I
Chicago IL middot
Incorporated in Delaware
Chicago Shore Capital Statutory Trust
II
Chicago Shore Capital Statutory Trust
III
1 00
Chicago IL Incorporated in
D elaware
D elaware Place Bank Chicago 11
Incorporated in Illinois
Chicago IL Incorporated in
D elaware
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Results A list of branches for your depository institution DELAWARE PLACE BANK (ID_RSSD 352035)
This depository institution is held by CHICAGO SHORE CORPORATION (2485076) of CHICAGO I L
The data are as of 12312014 Data reflects Information that was received and processed through Ol07 2015
Reconclllatfon and Verification Steps
1 In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
Actions
OK If the branch information is correct enter OK in the Data Action column
Change If the branch information is incorrect or incomplete revise the data enter Change In the Data Action column and the date when this information first became valid in the Effective Date column
Close If a branch listed was sold or closed enter Close in the Data Action column and the sale or closure date in the Effective Date column
Delete Jf a branch listed was never owned by this depository institution enter Delete in the Data Action column
Add If a reportable branch Is missing insert a row add the branch data and enter Add in the Data Action column and the opening or acquisition date in the Effective Date column
If printing this list you may need to adjust your page setup in MS Excel Try using landscape orientation page scaling andor legal sized paper
Submission Procedure
When you are finfshed send a saved copy to your FRB contact See the detailed instructions on this site for more information
If you are e-maillng this to your FRB contact put your institution name city and state in the subject line of the e-mail
Note
To satisfy the FR Y-10 reporting requirements you must also submit FR Y-10 Domestic Branch Schedules for each branch with a Data Action of Change Close Delete or Add
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online applicatlon - httpsy10onlinefederalreservegov
bull FDIC UNINUM Office Number and IO_RSSO columns are for reference only Verification of these values is not required
Data Action Date Branch Service Type
OK
Branch ID_Rssobull Popu ar Name Street Address Oty State Zip Code County Country
352035 DELAWARE PLACE BANK 190 EAST DELAWARE PLACE CHICAGO IL 60611 COOK UNITED STAlli
FDIC UNINUMbull Head ice IO_RSSD Comments
352035
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
C h icago S h o re Corporation Form FR Y-6
December 3 1 2014
Report Item 3 Shareholders
Currcnl shareholders with ownership control or holdings of 5 or more Shareholders not listed in (3)(1)a) through 2(1tl that had owncrship1 control or with the power to vote as of 12middot31middot2014 holdings of 5 or monrc with power to vote during the fiscal year ending 1 2-31-14
(1 )(a) (1 )(b) (1 )(c) (2)(a) (2)(b) (2)(c)
Country of Number and Percentage of Number and Percentage of Names amp Address (City State Citizenship or Each Class of Voting Name and Address (City State Country of Citizenship or Each Class of Voting Country) Incorporation Securities Country) Incorporation Securities
James W Aldrich as trustee USA 1 1 1 296 - 922 None Under the James W Aldrich Declaration of Trust dated 81790 Chgo IL USA
Irene C Aldrich as trustee USA 93600 - 775 Under the Irene C Aldrich Declaralion of Trust dated 81790 Chgo IL USA
Theodore J Aldrich USA 81 030 - 671 Chicago IL
UMJL_FilesFR Y-G 2014 Chicago Shore Corpxlsx]Report Item 3
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Chicago Shore Corp Form FR Y-6
December 3 1 201 4
Report Item 4 Directors and Officers
(1) (2) (3)a (3)b (3)c (4)a (4)b (4)c
List of names of other companies (includes partnerships) if 25 or more of
Principal Occupation Title amp Position with Title amp Position with Percentage of Percentage of Voting voting securities are held (List if other than with Other Subsidiaries Other Businesses voting shares in Shares in subsidiaries names of companies and
Names amp Address (City Bank Holding Title amp Position (include names of (include names of Bank Holding (include names of percentage of voting securities State Country) Company with BHC other subsidiary) other businesses) Company subsidiaries) held)
James W Aldrich Chairman amp CEO Chairman Chairman amp CEO NIA 1 1 1 296 - 922 NIA NIA Chicago I L USA Delaware Place Director CEO Delaware Place 42000 options
Bank Bank
Charles D Collier Retired Director NIA NIA 1 0003 - 82 NIA NIA Libertyville IL USA
Theodore J Aldrich President + COO Director Pres + COO NIA 81 030 - 671 NIA NIA Chicago I L USA Delaware Place Pres Delaware Place 4500 options
Bank Bank
Martin Albert Jr Partner Director NIA NIA 1 0283 - 085 NIA NIA Buffalo Grove IL USA Albertamp Goodman CPAs
David A Kallick Attorney Director NIA NIA 1 0566 - 087 NIA NIA Chicago IL USA Tishler amp Wald
Irene C Aldrich Trust Retired Shareholder NIA NIA 93600 - 775 NIA NIA UIA 8117190 Chgo I L USA
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Report Item 3 Shareholders
Security Chicago Corporation Form FR Y-6
December 3 1 2014
Current shareholders with ownership control or holdings o f 5 or more
with the power to vote as of 12middot31-2014
Shareholders not listed In (3)(1)(a) through 2(1 ltCl th al had ownership control or
holdlngs of 5 or monrc with power to vote during the nscal year ending 12-31-14
(1)(a)
Names amp Address (Cily Slale Country)
(1)(b) Country at Citizenship or lncarparalion
(1)(c) Number and 1-ercentage at Each Class of Voling Securities
Securily Chicago Corparalian is 100 owned by Chicago Shore Corporation
UMJL_FilesFR Y-6 2014 Security Chicagoxlsx(llem 2
(2)(a)
Name and Address (City Stale Country)
None
(2)(b) (2)(c)
Counlry of Cilizenship or Number and Percentage of lncorporalion Each Class of Voting Securities
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE
Report Item 4 Directors and Officers
(1) (2)
Principal Occupation if other
Names amp Address than with Bank (City State Country) Holding Company
James W Aldrich Chairman amp CEO Chicago IL 6061 1 Delaware Place
Bank
Chairman amp CEO Chicago Shore Corporation
Chicago Shore Corporation 1 90 East Delaware Place Chicago IL 60611
Secu rity Ch icago Corp FORM FR Y-6
December 31 201 4
3)a (3)b
Title amp Position with Other Subsidiaries
Title amp Position (include names of with BHC other subsidiary)
Director CEO Chairman amp CEO Delaware Place Bank
NIA NIA
(3)c
Title amp position with Other Businesses (include names of other businesses)
NIA
NIA
(4)a
Percentage of voting shares in Bank Holding company
0
1 00
(4)b (4)c
List of names of other companies (includes
Percentage of partnerships) if 25 or Voting Shares in more of voting securities subsidiaries are held (list names of (include names of companies and percentage subsidiaries) of voting securities held)
0 NONE