lakeside bank and subsidiary · holding company act ... whether due to fraud or error. in making...
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COPY Board of Governors of the Federal Reserve System
FRY-6 OMB Number 7100-0297 Approval expires December31 2015 Page 1 012
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 21113(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 David Pinkerton Name of the Holding Company Director and Official
Vice President amp Director 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 Rules Regarding Availability of Informationmiddot 12 CFR Part 261 that the Reporter fJ1J1 individual consent to public release of all details in the report concerning that individual
SigU-nd Official
Date of Signature
For holding companies aQl registered with the SECshyIndicate status of Annual Report to Shareholders
0 is Included with the FR Y-6 report
l8l will be sent under separate cover 0 ls not prepared
For Federal Reserve B1j1k Use oi RSSD ID cX pound1_f
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 infonnation 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 Enlity Identifier (LEI) (20-Characler LEI Code)
Reporters Name Street and Mailing Address
Lakeside Bancorp Inc Legal Title ol Holding Company
55 W Wacker Drive (Malling Address ol the Holding Company) Streat I PO Box
Chicago IL 60601 -------
Sta ta ZlpCode
Physical Localion (ii ditlerent rrom malling address)
Person to whom questions about this report should be directed Todd Monte CFO Name
312-435-1549 Araa Code I Phone Number I Extension
312-435-9234 Area Code I FAX Number
tmontelakesidebankcom E-mail Address
Non e
nue
Addreu (URL) for the Holding Companybull web page
Does the reporter request confidental treatment for any portion of this
submission
0 Yes Please identify the report items to which this request applies
No
O In accordance with the instrudions on pages GEN-2 and 3 a letter justifying the request is being provided
O The Information for which confidenlial trealmenl Is sought
is being submitled separately labeled middotconfidential
Public reporting burden for this lnfonnallon collection Is estimated to vary from 13 to 101 hours per response with an average of 525 hoUB per response lnduding time lo galher and malnlaln dala In the required fonn and 10 review lnslructlons and eomplele the lnfonnallon cotlecilon Send conmenls regarding this burden esUmate or any other aspect or this cotlectlon or Information Including suggestions for reducing tlls burden to Secretary Board or Governors or tho Federal Reserve Syslem 2Dlh and C S1ree1a NW Wllshlnglon OC 20551 and to Iha Office o( Management and Budget Paperworilt Reduction Project (71000297) Washington DC 20503
102014
Lakeside Bank and Subsidiary Consolidated Financial Report December 31 2014
Contents
Independent Auditors Report
Financial Statements
Consolidated Balance Sheets
Consolidated Statements of I ncome
Consolidated Statements of Comprehensive Income
Consolidated Statements of Stockholders Equity
Consol idated Statements of Cash Flows
Notes to Consolidated Financial Statements
1 - 2
3
4
5
6
7
8 - 38
McGladrey
To the Board of Directors Lakeside Bank and Subsidiary Chicago Illinois
Independent Auditors Report
Report on the Financial Statements
McGladry LLP
We have audited the accompanying consolidated financial statements of Lakeside Bank and Subsidiary (the Bank) which comprise the consolidated balance sheets as of December 31 2014 and 2013 and the related consolidated statements of income comprehensive income stockholders equity and cash flows for the years 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 audits We conducted our audits 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 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 reasonable 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 Lakeside Bank and Subsidiary as of December 31 2014 and 2013 and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America
Mbullmbor of 1he RSM fntemilltkgtnal nvtwork or lnndent ccounung tu and comulUng firm
Other Matter
We also have examined in accordance with attestation standards established by the American Institute of Certified Public Accountants the internal control over financial reporting of Lakeside Bank as of December 31 2014 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of Treadway Commission (COSO) in 2013 and our report dated April 30 2015 expressed an unmodified opinion
Chicago I llinois April 30 2015
2
Lakeside Bank and Subsidiary
Consolidated Balance Sheets
December 31 2014 and 2013
2014 2013
Assets
Cash and due from banks $ 112952000 $ 66775000
Interest-bearing deposits in banks 6938000 953000
Securities available for sale 50802000 61848000
Federal Home Loan Bank stock at cost 2403000 2403000
Loans net of allowance for loan losses of $26581000 in 2014 and
$27626000 in 2013 1001896000 955 764000
Premises and equipment net 22289000 16557000
Other real estate owned 4719000 11399000
Other assets 5266000 7697000
$ 1207265000 $ 1 123396000
Liabilities and Stockholders Equity
Deposits
Noninterest-bearing $ 286622000 $ 249247000
Savings and NOW 266307 000 289093000
Time certificates $250000 or more 73 116000 79453000
Other time certificates 375046000 324465000
1001091000 942258000
Short-term borrowings 4518000 1314000
Long-term borrowings 28000000 13000000
Accrued expenses and other liabilities 15597000 14834000
1049206000 971406000
Commitments Contingencies and Credit Risk (See Notes 6 and 12)
Stockholders Equity
Common stock $5 par value authorized 656907 shares
issued and outstanding 446062 shares 2230000 2230000
Surplus 39879000 39879000
Undivided profits 120032000 113181000
Accumulated other comprehensive loss (4082000) (3300000)
158059000 151990000
$ 1207265000 $ 1 123396000
See Notes to Consolidated Financial Statements
3
Lakeside Bank and Subsidiary
Consolidated Statements of Income
Years Ended December 31 2014 and 2013
Interest and dividend income
Loans including fees
Investment securities
Taxable
Tax-exempt
Federal funds sold
Other
Total interest and dividend income
Interest expense
Deposits
Borrowings
Total interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Noninterest income
Fees for banking services
Gain on sale of premises and equipment
Loss on sale of securities
Total noninterest income
Noninterest expenses
Salaries and employee benefits
Occupancy
Equipment
Data processing
Other real estate owned net
FDIC insurance
Other general and administrative
Total noninterest expenses
Net income before income taxes
Income taxes
Net income
See Notes to Consolidated Financial Statements
$
$
4
2014 2013
51751000 $ 51 176000
349000 375000
615000 792000
196000 212000
111000 133000
53022000 52688000
5097000 5789000
194000 139000
5291000 5928000
47731000 46760000
6900000 8550000
40831000 38210000
2258000 5 114000
9011000
(89000) (246000)
2 169000 13879000
10477000 9967000
2077000 2110000
1010000 957000
773000 728000
(319000) 1947000
1531000 1401000
2777000 4060000
18326000 21 170000
24674000 30919000
311000 230000
24363000 $ 30689000
Lakeside Bank and Subsidiary
Consolidated Statements of Comprehensive Income
Years Ended December 31 2014 and 2013
Net income
Other comprehensive loss
Unrealized holding gains (losses) arising during the year
Less reclassification adjustment for losses included in
net income
Change in net unrealized (losses) gains on defined benefit pension plan
Comprehensive income
See Notes to Consolidated Financial Statements
5
$
$
2014 2013
24363000 $ 30689000
1025000 (1939000)
89000 246000
(1896000) 1604000
(782000) (89000)
23581000 $ 30600000
Lakeside Bank and Subsidiary
Consolidated Statements of Stockholders Equity
Years Ended December 31 2014 and 2013
Accumulated
Other
Common Undivided Comprehensive
Stock Surplus Profits Loss Total
Balance at December 31 2012 $ 2230000 $ 39879000 $ 951 49000 $ (3 21 1 000) $ 1 34047000
Net income 30689000 30689000
Other comprehensive loss (89000) (89000)
Cash dividends on common stock (12657000) ( 12 657000)
Balance at December 31 2013 2230000 39879000 1131 8 1 000 (3300000) 151 990000
Net income 24363000 24363000
Other comprehensive loss (782000) (782000)
Cash dividends on common stock (1 7512000) ( 17 512000)
Balance at December 31 2 014 $ 2230000 $ 39879000 $ 120032000 $ (4082000) $ 158059000
See Notes to Consolidated Financial Statements
6
lakeside Bank and Subsidiary
Consolidated Statements of Cash Flows
Years Ended December 31 2014 and 2013
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses
Depreciation of premises and equipment
Arriortization of security prerniums and discounts net
Loss on sale of securities
Gain on sale of premises and equipment
(Gain) loss on sale and writedown of other real estate owned
Net change in
Other assets
Other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities
Net change in interest-bearing deposits in banks
Proceeds from maturities sales and calls of securities
available for sale
Purchase of securities available for sale
Net increase in loans
Additions to premises and equipment
Improvements in other real eatate owned
Proceeds from sale of premises and equipment
Proceeds from sale of other real estate owned
Net cash used in investing activities
Cash Flows from Financing Activities
Net increase in deposits
Net change in short-term borrowings
Net change in long-term borrowings
Cash dividends paid on common stock
Net cash provided by used in) financing activities
Net change in cash and due from banks
Cash and due from banks at beginning of year
Cash and due from banks at end of year
Supplementary cash flow information
Interest paid on deposits and borrowed funds
Income taxes paid
Supplementary schedule of noncash investing activities
Transfer of loans to other real estate owned Sales of other real estate owned financed bv the Bank
See Notes to Consolidated Financial Statements
7
$
$
$
$
2014 2013
24363000 $ 30689000
6900000 8550000
906000 1013000
730000 953000
89000 246000
(9011000)
(1066000) 1764000
535000 (1 108000)
763000 1115000
33220000 34211000
(5985000) 2497000
11841000 13944000
(500000) (10179000)
(49224000) (55 734000)
(6638000) (5604000)
(706000)
9600000
4644000 2225000
(46568000) (43251000)
58833000 6414000
3204000 (10487000)
15000000 4000000
(17512000) (12657000)
59525000 (12730000)
46177000 (21 770000)
66775000 88545000
112952 000 $ 66775000
5249000 $ 6050000
378000 130000
1881000 $ 1345000 5689000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies
Principles of consolidation The consolidated financial statements include the accounts of Lakeside Bank (the Bank) and its wholly owned subsidiary Lakeside Community Development LLC All intercompany transactions and balances have been eliminated The Bank is a wholly owned subsidiary of Lakeside Bancorp Inc
Nature of operations Lakeside Bank is a state chartered bank whose operations consist primarily of those financial activities common to the commercial banking industry The Bank serves northeastern Illinois and services are provided at six locations throughout Chicago The Banks wholly owned subsidiary Lakeside Community Development LLC invests in various community development activities
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 the reported amounts of revenue and expenses during the reporting period Actual results could differ from those estimates Material estimates that are susceptible to significant change in the near term relate to the determination of the allowance for loan losses valuation of other real estate owned the defined benefit plan liability and fair value of financial instruments
Presentation of cash flows For purposes of the consolidated statements of cash flows cash and due from banks include cash on hand and amounts due from banks (including cash items in process of clearing) Cash flows from interest-bearing deposits in banks loans deposits federal funds purchased and short-term and long-term borrowings are reported on a net basis
Interest-bearing deposits in banks Interest-bearing deposits in banks mature within one year and are carried at cost
Securities available for sale All securities are classified as available for sale as the Bank intends to hold the securities for an indefinite period of time but not necessarily to maturity Any decision to sell a security classified as available for sale would be based on various factors including significant movements in interest rates changes in the maturity mix of the Banks assets and liabil ities liquidity needs regulatory capital considerations and other similar factors Securities available for sale are carried at fair value U nrealized gains or losses are reported as increases or decreases in accumulated other comprehensive income Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities Realized gains or losses on sales of available for sale securities are recorded using the specific identification method
Management evaluates securities for other-than-temporary impairment (OTII) at least on a quarterly basis and more frequently when economic or market conditions warrant such evaluation Declines in the fair value of individual securities available for sale below their amortized cost that are determined to be other-than-temporary are reflected in earnings as realized losses In estimating other-than-temporary impairment losses management considers the length of time and the extent to which the fair value has been less than cost the financial condition and near-term prospects of the issuer and whether it is more likely than not to sell the security before recovery of its cost basis If they intend to sell an impaired security the Bank records an other-than-temporary loss in an amount equal to the entire difference between the fair value and amortized cost I f the Bank does not intend to sell the security only the credit portion of the estimated loss is recognized in earnings with the other portion recognized in accumulated other comprehensive income
8
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
Federal Home Loan Bank stock The Bank as a member of the Federal Home Loan Bank of Chicago (the FHLB) is required to maintain an investment in capital stock of the FHLB The stock does not have a readily determinable fair value as ownership is restricted and it lacks a ready market As a result this stock is carried at cost and evaluated periodically for impairment
Loans The Bank extends commercial mortgage and consumer loans to customers A substantial portion of the loan portfolio is represented by commercial loans in northeastern Illinois The ability of the Banks debtors to honor their contracts is dependent upon the general economic conditions in this area
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are generally reported at their outstanding unpaid principal balances adjusted for charge-offs and the allowance for loan losses I nterest income is accrued on the unpaid principal balance Loan balances include loan origination fees and direct loan origination costs that are being deferred and the net amount amortized as an adjustment of the related loans yield The Bank is amortizing these amounts over the contractual loan maturity
The accrual of interest on loans is typically discontinued at the time the loan is 90 days delinquent In al l cases loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful All interest accrued but not collected for loans that are placed on non accrual or charged-off is reversed against interest income The interest on these loans is accounted for on the cash-basis or cost-recovery method until qualifying for return to accrual Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured
Troubled debt restructurings A loan is classified as a troubled debt restructuring when a borrower is experiencing financial difficulties that leads to a restructuring of the loan and the Bank grants concessions to the borrower in the restructuring that it would not otherwise consider These concessions may include rate reductions principal forgiveness extension of maturity date and other actions intended to minimize potential losses Troubled debt restructurings are classified as impaired loans A loan that is modified at a market rate of interest may no longer be classified as a troubled debt restructuring and impaired in the calendar year subsequent to the restructuring if it is in compliance with the mod1f1ed terms Performance prior to the restructuring is considered when assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual at the time of the restructuring or after a shorter performance period
Allowance for loan losses The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to expense Loan losses are charged against the allowance when management believes that collectability of the principal is unlikely Subsequent recoveries if any are credited to the allowance
When establishing the allowance for loan losses management categorizes loans into risk categories generally based on the nature of the collateral and the basis of repayment These risk categories and the relevant risk characteristics are as follows
Commercial loans - Commercial loans are loans for corporate and business purposes including issuing letters of credit The Banks commercial business loan portfolio is comprised of loans for a variety of purposes and generally is secured by equipment machinery and other business assets Commercial business loans generally have terms of five years or less and interest rates that float in accordance with a designated published index Substantially all of such loans are secured and backed by the personal guarantees of the owners of the business
9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements -------------------------------middot middot-----------
Note 1 Summary of Significant Accounting Policies (Continued)
Commercial real estate loans - Commercial real estate loans are primarily secured by apartment buildings office and industrial buildings mixed-use properties small retail shopping centers and various special purpose properties including warehouses and restaurants Although terms vary commercial real estate loans generally have amortizations of 15 to 30 years as well as balloon payments of two to seven years and terms which provide that the interest rates thereon may be adjusted annually at the Banks discretion based on a designated index
Construction and land development loans - Construction land development loans consist of vacant land and property that is in the process of improvement Repayment of these loans can be dependent on the sale of the property to third parties or the successful completion of the improvements by the builder for the end user In the event a loan is made on property that is not yet approved for the planned development there is the risk that approvals will not be granted or will be delayed Construction and land development loans also run the risk that improvements will not be completed on time or in accordance with specifications and projected costs Construction and land development loans generally have terms of one year to 18 months during the construction period and interest rates based on a designated index
Residential real estate loans - Residential real estate loans include home equity lines of credit secured by a first or second mortgage and 1-4 family residential real estate loans Loans are generally smaller in size and are homogenous because they exhibit similar characteristics
Consumer installment loans - Consumer installment loans generally have higher interest rates than mortgage loans The risk involved in consumer loans is the type and nature of the collateral and in certain cases the absence of collateral These loans are secured by personal assets or may be unsecured and repayment is directly dependent on the borrowers income and the borrowers ability to service debt payments
The allowance for loan losses is evaluated on a regular basis by management and is based upon managements periodic review of the collectability of the loans in light of historical experience the nature and volume of the loan portfolio estimated value of any underlying collateral and prevailing economic conditions and adverse situations that may affect the borrowers ability to pay This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available In addition regulatory agencies as an integral part of their examination process periodically review the Banks allowance for loan losses and may require the Bank to make additions to the allowance based on their Judgment about information available to them at the time of their examinations
The allowance consists of specific and general components The specific component relates to loans that are classified as impaired and an allowance is established when the collateral value discounted cash flows or observable market price of the impaired loan is lower than the carrying value of that loan The general component covers non-impaired loans and is based on the Banks own loss experience adjusted for qualitative factors These qualitative factors consider local economic trends concentrations management experience and other elements of the Banks lending operations
10
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
A loan is impaired based on current information and events when it is probable the Bank will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Factors considered by management in determining impairment include payment status collateral value and the probability for collecting scheduled principal and interest payment when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on an individual-loan basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reason for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on an individual loan basis based on the fair value of the collateral if the loan is collateral dependent the present value of expected future cash flows discounted at the loans effective interest rate or the loans obtainable market price
Large groups of homogenous loans are collectively evaluated for impairment Accordingly the Bank does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Other real estate owned Assets acquired through or in lieu of loan foreclosure are held for sale and initially recorded at fair value less estimated costs to sell at the date of foreclosure establishing a new cost basis Subsequent to foreclosure valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less costs to sell Revenue and expenses from operations and changes in the valuation allowance are included in noninterest expenses-other real estate owned net
Premises and equipment Land is carried at cost Premises and equipment are stated at cost less accumulated depreciation (building 12-25 years leasehold improvements 3-15 years furniture and fixtures 3-20 years) Depreciation is provided principally by the straight-line method over the estimated useful lives of the assets Amortization of leasehold improvements is computed on the straight-line method over the lease term or the estimated useful lives of the improvements whichever 1s shorter
Transfers of financial assets Transfers of financial assets are accounted for as sales when control over the assets has been surrendered Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank - put presumptively beyond the reach of the transferor and its creditors even in bankruptcy or other receivership (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets
Income taxes Lakeside Bancorp Inc with the consent of its stockholders elected to be taxed as an S corporation under sections of the federal and state income tax laws which provide that in lieu of corporate income taxes the stockholder accounts for the Banks items of income deductions losses and credits As a wholly owned subsidiary the Banks income and expenses are included in the Lakeside Bancorp Inc consolidated tax returns As a result for the periods covered by this election no corporate income taxes will be recognized in the accompanying consolidated financial statements except for certain state income taxes
11
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
The Bank evaluates its tax positions to determine the appropriate level of tax reserves to maintain for uncertain tax positions The Bank has no uncertain tax positions as of December 3 1 2014 and 2013
The Bank would recognize interest and penalties on income taxes as a component of income tax expense
The Bank is generally no longer subject to US federal or state and local income tax examinations by tax authorities for years before 201 1
Comprehensive income Comprehensive income consists of net income changes in net unrealized gains and losses on securities available for sale reclassification adjustments for realized gains and losses on sales of AFS securities and changes in defined benefit pension obligation and is presented in the consolidated statements of stockholders equity
Recent accounting pronouncements In January 2014 the FASB (Financial Accounting Standards Board) issued guidance which requires an entity derecognize the loan receivable and recognize the real estate property when it has received physical possession of residential real estate property collateralizing a consumer mortgage loan upon either ( 1 ) 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 that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement Additionally the amendments require annual disclosures This guidance is effective for the Company for fiscal years beginning after December 15 2014 The adoption of this guidance is not expected to have a material impact on the consolidated financial statements
Subsequent events The Bank has evaluated subsequent events for potential recognition andor disclosure through April 30 2015 the date the consolidated financial statements were available to be issued
1 2
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 2 Restricted Cash and Due from Banks
The Bank is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank of Chicago The total of those reserve balances averaged $1 01 2000 and $935000 in 2014 and 2013 respectively The Bank maintains amounts due from banks which exceed federally insured limits The Bank has not experienced any losses in such accounts
Note 3 Securities Available for Sale
The amortized cost and fair value of securities with gross unrealized gains and losses follows
December 31 2014
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
December 31 2013
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
$
$
$
$
Amor1ized
Cost
15917000 $
23417000
6038000
5159000
50531000
250000
50781000 $
17835000 $
32338000
6590000
5928000
62691000
250000
62941000 $
Gross
Unrealized
Gains
41000 $
216000
22000
70000
349000
17000
366000 $
41000 $
190000
39000
26000
296000
11000
307000 s
Gross
Unrealized Fair
Losses Value
(53000) s 15905000
(243000) 23390000
(8000) 6052000
(41000) 5188000
(345000) 50535000
267000
(345000) $ 50802000
(255000) $ 17621000
(987000) 31541000
(32000) 6597000
(126000) 5828000
(1400000) 61587000
261000
(1400000) $ 61848000
Securities available for sale with a carrying value of $8339000 and $3848000 at December 31 2014 and 201 3 respectively were pledged on deposits of the United States Government and other public funds as required or permitted and other short-term borrowings
The amortized costs and fair values of debt securities available for sale as of December 3 1 2014 by contractual maturity are shown below Maturities may differ from contractual maturities in mortgageshybacked securities because the mortgages underlying the securities may be called or repaid without any penalties Therefore these securities are not included in the maturity categories in the following maturity summary
1 3
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements middot-
Note 3 Securities Available for Sale (Continued)
Amortized Fair
Cost Value
Due in one year or less $ 3049000 $ 3057000 Due after one year through five years 21 506000 21 507000
Due after five years through ten years 71 70000 7163000
Due after ten years 1 3647000 1 3620000
45372000 45347000
Residential mortgage-backed securities 5 159000 5188000 Totals $ 50531 000 $ 50535000
The following tables show the gross unrealized losses and fair value of investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 3 1 2 0 1 4 and 2 0 1 3
less than 12 Months 12 Months or More Total Fair Unrealized Fair Unreahzed Fair Unrealized
2014 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 498000 s (2000) $ 7695000 s (51000) $ 8193000 $ (53000) Obligations of states and
pol1ilca subd1v1sions 13671000 (243000) 13671000 (243000) Corporate debt obligations 1132000 (8000 1 132000 (8000) Residential mortgage-backed
obligations 2128000 (4100D) 2128000 (41000) Total temporary
impaired securities s 498000 s (2000) $ 24626000 $ (343000) s 25124000 s (345000)
Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized
2013 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 10867000 $ (232000) s 2632000 $ (23000) $ 13499000 s 255000) Obligations of states and
polillcal subdivisions 11195000 (365000) 11169000 (622000) 22364000 (987000) Corporate debt obligations 1179000 (32000) 1179000 (32000) Residential mortgage-backed
obligations 3977000 (126000) 3977000 (126000) Total temporary
impaired securities 26039000 s (723000) $ 14980000 s (677000) s 41019000 $ (1400000)
In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysis reports Since management does not intend to sell any temporarily impaired securities before recovery of their cost basis no declines are deemed other-than-temporary
On sale proceeds of $5637000 there were $57000 in realized gains and $146000 in realized losses on the sale of securities during the year ended December 3 1 2 0 1 4 On sale proceeds of $708000 there were no realized gains and $246000 realized losses on the sale of securities during the year ended December 3 1 2 0 1 3
1 4
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans
A summary of the balances of loans follows
Commercial $
Commercial real estate
Construction and land development
Residential real estate
Consumer installment
Less allowance for loan losses
Loans net $
December 3 1
2014 2013
62894000
658 153000
163 1 08000
1 43579000
743000
1 028477000
2658 1 000
1 001 896 000
$ 62642000
666095000
123519000
129905000
1 229000
983390000
27626000
$ 955764000
The following tables present the contractual aging of the recorded investment in loans by class of loans as of December 3 1 2014 and 2013
Loans Past 90 Days or 30-59 Days 60middot89 Days Due 90 Days More Past Due
December 31 2014 Current Past Due Past Due or More Total and Accruin
Commercial $ 62655000 $ 4000 $ 36000 $ 199000 s 62894000 $ 199000
Commercial real estate Relail properties 295610000 105000 1212000 296927000 199000
Multifamily 90507000 90507000
Mixed-use properties 93 116000 2455000 95571000
Industrial manufacturing warehouse 63660000 1353000 65013000
Other commerc1al real estate 106101000 4034000 110135000
Construction and land development 162512000 596000 163 108000
Residential real estate 140636000 208000 2735000 143579000
Consumer installment 743000 743000
Total $ 1 015 540000 $ 109 000 $ 244 000 12584 000 $ 1 028 477 000 s 398 000
15
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Loans Past 90 Days or 30-59 Days 60-89 Days Due 90 Days More Past Due
December 31 2013 Current Past Due Past Due or More Total and Accruing
Commercial $ 61588000 $ $ 755000 $ 299000 s 62642000 $ 33000 Commercial real estate
Retail properties 284 162000 1152000 1331000 15307000 301952000 44000 Mu11ifamily 78203000 1223000 450000 4526000 84402000 Mixed-use properties 93292000 262000 316000 3644000 97514000 Industrial manufacturing
warehouse 58947000 1696000 273000 60916000 Other commercial real
estate 109449000 282000 74000 11506000 121311000 Construction and land
development 121492000 2027000 123519000 Residential real estate 126229000 1062000 306000 2308000 129905000 89000 Consumer installment 1226000 1000 2000 1229000
Total $ 934 588000 $ 3982 000 s 4 930 000 39 890 000 983 390 000 $ 166 000
The following table presents the recorded investment in nonaccrual loans by class of loans as of December 31 2014 and 2013
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties
Industrial manufacturing warehouse Other commercial real estate
Construction and land development Residential real estate
Total
$
$
16
Nonaccrual Loans 2014 2013
168000 $ 266000
2470000 15263000
4526000
2728000 3644000
1353000 273000
4480000 11506000
1609000 2027000
2796000 2219000
15604000 $ 39724000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
As part of the on-going monitoring of the credit quality of the Banks loan portfolio management categorizes loans into rrsk categories based on relevant information about the ability of borrowers to service their debt and comply with various terms of their loan agreements The Bank considers current financial information historical payment experrence credit documentation public information and current economic trends Generally all sizeable credits receive a financial review no less than annually to monitor and adjust if necessary the credits risk profile Credits classified as watch generally receive a review more frequently than annually For substandard and doubtful credit classifications the frequency of review is increased to no less than quarterly in order to determine potential impact on credit loss estimates
The Bank categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt
Pass - A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors if any) or by the fair value less cost to acquire and sell of any underlying collateral in a timely manner Pass assets also include certain assets considered watch which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring
Special Mention - A special mention asset or risk rating of 6 has potential weaknesses that deserve managements close attention The asset may also be subject to a weak or speculative market or to economic conditions which may in the future adversely affect the obligor If left uncorrected these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Banks credit position at some future date Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification
Substandard - A substandard asset or risk rating of 7 is an asset with a well-defined weakness that jeopardizes repayment in whole or in part of the debt These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged These assets are characterized by the distinct possibility that the institution will sustain some loss of principal andor interest if the deficiencies are not corrected A loan does necessarily need to have an identifiable loss potential in order to receive this rating
Doubtful - An asset that has all the weaknesses or risk rating of 8 inherent in the substandard classification with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently known facts conditions and values highly questionable and improbable The possibility of loss is extremely likely but it is not identified at this point due to pending factors
Loss - An asset or portion thereof classified as loss is considered uncollectible and of such little value that its continuance on the Companys books as an asset is not warranted This classification does not necessarily mean that an asset has no recovery or salvage value but rather there is much doubt about whether how much or when the recovery would occur As such it is not practical or desirable to defer the write-off Therefore there is no loss balance to report at December 31 2014
Residential real estate and consumer installment loans are assessed for credit quality based on the contractual aging status of the loan and payment activity Such assessment is completed at the end of each reporting period
1 7
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present the risk category of loans evaluated by internal asset classification based on the most recent analysis performed and the contractual aging as of December 31 2014 and 2013
December 31 2014
Commercial Commercial real estate
Retail properties Multifamily
Mixed-use properties Industrial manufacturing warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
December 31 201 J
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties lndustnal manufactunng warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
Pass
$ 61710000 $
272359000 88002000 85430000 63660000
104525000
1531 14000
$ 828800000 $
$
$
Pass
s 62034000 $
250040000 76086000 85355000 60643000
108880000 1 1 7047000
s 760085000 $
$
$
1 8
Special Mention Substandard Doubtful Total
$ 1 016000 $ 168000 s 62894000
3701000 17384000 3483000 296927000 635000 1870000 90507000 238000 7175000 2728000 95571000
1353000 65013000 1 130000 4480000 110 135000
5937000 3461000 596000 163108000
10511 000 $ 32036000 $ 12808000 $ 884155000
Performing Non-periorming Total
140783000 s 2796000 $ 143579000
743000 743000
141 526000 s 2796000 $ 144322000
Special Mention Substandard Doubtful Total
$ 342000 $ 266000 s 62642000
10871000 25778000 15263000 301952000 1 885000 1905000 4526000 84402000 1 714000 6801000 3644000 97514000
273000 60916000 925000 11 506000 1213 1 1 000
381000 4064000 2027000 123519000
14851 000 $ 39815000 s 37505000 $ 852256000
Performing Non-performing Total
127597000 $ 2308000 $ 129905000
1 229000 1 229000
1 28826000 $ 2308000 $ 1 3 1 1 34000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables provide additional detail of the activity in the allowance for loan losses by portfolio segment for the years ended December 3 1 2014 and 2013
Construction
Commercial and land Rcs1dent1al Consumer
December 31 2014 Commercial Real Es1ate Develoement Real Estate lnsallment Total
Allowanco for loan lossos
Beg1nn1ng balance 1385000 20052000 3549000 2623000 17000 27626000
PrOV1Son for loan losses 2210000 2680000 2007000 3000 6900000
Loans chargedmiddotoff (179000) (8163000) 687000) (2140000) (11169000)
Recovenes of loans
previously charged-off 85000 2916000 223000 3224000
Ending balance s 1291000 1701 5000 5542000 271 3000 s 20000 s 26581000
Poriod-ondtd llmount allocatod to loans
lndMdually evaluated for
1mpa1rment 200000 445000 36000 52000 s 733000
Collec11vely evaluated
for 1mpa1rrnent 1091 000 16570000 5506000 2661000 20000 25648000
Ending balance 1291000 17015000 5542000 s 2713000 20000 26581000
Loans
lndMdually evaluated for
impairment 368000 17274000 3526000 4048000 25216000
Collecively evalua1ed
for 1mpa1rrnent 62526000 640879000 159582000 139531000 743000 1003261000
Ending balance 62894000 658 153000 163108000 143579000 743000 1028477000
Construct1on
Commercial and Land Residential Consumer
December 31 2013 Commeroal Real Estate Development Real Eslale Installment Total
Allowance for loan losses
Beginning balance 1040000 18719000 2484000 2248000 17000 24508000
Provision for loan losses 363000 6508000 867000 784000 28000 8550000
Loans chargedmiddot Off (59000) (5817000) (122000) (457000) (28000) (6483000)
Recoveries ol loans
previously charged-off 41 000 642000 320000 48000 1051000
Ending balance 1385000 20052000 3549000 s 2623000 17000 27626000
Period-ended amount allocated to loans
Individually evaluated for
impairment 3475000 239000 61000 3775000
Collectively evaluated
for impairment 1385000 16577000 3310000 2562000 17000 23851000
Ending balance 1385000 20052000 3549000 2623000 17000 27626000
Loans
Individually evaluated for
1mpa1rment 266000 42380000 5522000 s 3307000 51475000
Collectively evalua1ed
for impairment 62376000 623715000 1 17997000 126598000 1229000 931915000
Endrng balance 62642000 666095000 123519000 129905000 1229000 983390000
1 9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present additional detail of impaired loans segregated by class as of December 3 1 2014 and 2013 The unpaid principal balance represents the recorded balance prior to any partial charge-offs The recorded investment represents customer balances net of any partial charge-offs recognized on the loans The interest income recognized column represents all interest income reported either on a cash or accrued basis after the loan became impaired The cash basis income column represents only the interest income recognized on a cash basis after the loan was classified as impaired
December 31 2014
Wih no relaed allowance recorded
Commercial Commercial real estale
Reail properties Multifamily Mixed-use properties lndustnal manufacturing
warehouse Other commercial real estate
Construction and land developmen
Residential real estate Consumer installment
Wi1h an allowance recorded Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties Industrial manufacturing
warehouse Other commercial real estate
Construction and land development
Residential real estate Consumer installment
To1al
$
$
Unpaid Principal Balance
216000 $
7266000
3283000
2861000 6121000
3672000 6045000
200000
564000 2421000
1 62000 170000
Recorded Investment
168000 s
5543000
3119000
1353000 4480000
3400000 3878000
200000
564000 2215000
126000 170000
32981000 $ 25216000 $
20
Allowance for Loan Losses
Allocated
200000
42000 403000
36000 52000
733000
Average Recorded
Investment
$ 208000 $
1 1 474000 3514000 4354000
131 5000 5509000
4 183000 4673000
29000
677000 2270000
141 000 44000
$ 38391000 $
Interest Income
Recognized
109000 48000
161 000
125000 33000
38000
5000
519000
$
$
Cash Basis Interest Income
Recognized
108000 48000
1 57000
1 1 3000 32000
38000
5000
501000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Cash Basis Unpaid Allowance for Average Interest Interest
Principal Recorded Loan Losses Recorded Income Income December 31 2013 Balance Investment Allocated Investment Recognized Recognized
With no related allowance recordedmiddot
Commercial $ 266000 $ 266000 $ $ 326000 $ $ Commercial real estate
Retail properties 26699000 12500000 10635000 146000 139000 Multifamily 5542000 4526000 4838000 88000 88000 Mixed-use properties 3123000 2527000 2750000 103000 102000 Industrial manufacturing
warehouse 1 641000 273000 528000 Other commercial real estate 4056000 3497000 3617000
Construction and land development 8517000 3965000 4971000 1 1 4000 1 14000
Residenial rear estate 3769000 3203000 3203000 47000 43000 Consumer installment
With an allowance recorded Commercial Commercial real estate
Retarl properties 6138000 5239000 2045000 4759000 35000 35000 Multifamily 692000 682000 69000 687000 38000 38000 Mixed-use properties 5764000 5 127000 778000 4200000 92000 87000 Industrial manufacturing
warehouse Other commercial real estate 10001000 8009000 583000 8986000
Construction and land development 2770000 1 557000 239000 1 853000
Residential real estate 120000 104000 61000 1 04000 Consumer installment
Total $ 79298000 $ 51475000 $ 3775000 $ 51457000 $ 663000 $ 646000
21
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present troubled debt restructurings and the financial effects of troubled debt restructurings
Year Ended December 31 2014
Pre-Modification Post-Modification Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reserves
Commercial $ 288000 $ 168000 $
Commercial real estate
Retail properties 3 1790000 2060000
Multifamily 1 409000 672000 732000
Mixed-use properties 6 4660000 3 118000 974000
Industrial manufacturing warehouse Other commercial real estate 4682000 2864000 1 272000
Construction and land development 1 3924000 2930000 500000
Residential real estate 3 1288000 1 252000 52000
Consumer installment Total 16 $ 1 8041000 $ 13064000 $ 3530000
Year Ended December 3 1 2013
Pre-Modification Post-Modification
Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reseives
Commercial $ $ $
Commercial real estate
Retail properties 3 8596000 3651000 4363000
Multifamily 2 7026000 5090000 1598000
Mixed-use properties 7 6005000 4421000 1 612000
Industrial manufacturing warehouse
Other commercial real estate 5 14589000 10888000 2578000
Construction and land development 3 7409000 4493000 1 162000
Residential real estate 3 1515000 1 371000 117000
Consumer installment Total 23 $ 45 140000 $ 29914000 $ 11430000
Troubled debt restructurings that were accruing interest were $9520000 and $ 1 1 382000 respectively as of December 3 1 2014 and 2013 Troubled debt restructurings that were non-accruing were $3544000 and $ 1 8532000 respectively as of December 3 1 2014 and 201 3 Troubled debt restructurings included loans where the loan principal and corresponding interest rate was reduced and i n some instances the loan amortization period was extended During 2014 there were three troubled debt restructurings with outstanding balances at the time of re-default was $ 1 1 55000 and loan balances outstanding for these loans at December 3 1 2014 was $239000
22
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary Consolidated Financial Report December 31 2014
Contents
Independent Auditors Report
Financial Statements
Consolidated Balance Sheets
Consolidated Statements of I ncome
Consolidated Statements of Comprehensive Income
Consolidated Statements of Stockholders Equity
Consol idated Statements of Cash Flows
Notes to Consolidated Financial Statements
1 - 2
3
4
5
6
7
8 - 38
McGladrey
To the Board of Directors Lakeside Bank and Subsidiary Chicago Illinois
Independent Auditors Report
Report on the Financial Statements
McGladry LLP
We have audited the accompanying consolidated financial statements of Lakeside Bank and Subsidiary (the Bank) which comprise the consolidated balance sheets as of December 31 2014 and 2013 and the related consolidated statements of income comprehensive income stockholders equity and cash flows for the years 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 audits We conducted our audits 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 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 reasonable 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 Lakeside Bank and Subsidiary as of December 31 2014 and 2013 and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America
Mbullmbor of 1he RSM fntemilltkgtnal nvtwork or lnndent ccounung tu and comulUng firm
Other Matter
We also have examined in accordance with attestation standards established by the American Institute of Certified Public Accountants the internal control over financial reporting of Lakeside Bank as of December 31 2014 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of Treadway Commission (COSO) in 2013 and our report dated April 30 2015 expressed an unmodified opinion
Chicago I llinois April 30 2015
2
Lakeside Bank and Subsidiary
Consolidated Balance Sheets
December 31 2014 and 2013
2014 2013
Assets
Cash and due from banks $ 112952000 $ 66775000
Interest-bearing deposits in banks 6938000 953000
Securities available for sale 50802000 61848000
Federal Home Loan Bank stock at cost 2403000 2403000
Loans net of allowance for loan losses of $26581000 in 2014 and
$27626000 in 2013 1001896000 955 764000
Premises and equipment net 22289000 16557000
Other real estate owned 4719000 11399000
Other assets 5266000 7697000
$ 1207265000 $ 1 123396000
Liabilities and Stockholders Equity
Deposits
Noninterest-bearing $ 286622000 $ 249247000
Savings and NOW 266307 000 289093000
Time certificates $250000 or more 73 116000 79453000
Other time certificates 375046000 324465000
1001091000 942258000
Short-term borrowings 4518000 1314000
Long-term borrowings 28000000 13000000
Accrued expenses and other liabilities 15597000 14834000
1049206000 971406000
Commitments Contingencies and Credit Risk (See Notes 6 and 12)
Stockholders Equity
Common stock $5 par value authorized 656907 shares
issued and outstanding 446062 shares 2230000 2230000
Surplus 39879000 39879000
Undivided profits 120032000 113181000
Accumulated other comprehensive loss (4082000) (3300000)
158059000 151990000
$ 1207265000 $ 1 123396000
See Notes to Consolidated Financial Statements
3
Lakeside Bank and Subsidiary
Consolidated Statements of Income
Years Ended December 31 2014 and 2013
Interest and dividend income
Loans including fees
Investment securities
Taxable
Tax-exempt
Federal funds sold
Other
Total interest and dividend income
Interest expense
Deposits
Borrowings
Total interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Noninterest income
Fees for banking services
Gain on sale of premises and equipment
Loss on sale of securities
Total noninterest income
Noninterest expenses
Salaries and employee benefits
Occupancy
Equipment
Data processing
Other real estate owned net
FDIC insurance
Other general and administrative
Total noninterest expenses
Net income before income taxes
Income taxes
Net income
See Notes to Consolidated Financial Statements
$
$
4
2014 2013
51751000 $ 51 176000
349000 375000
615000 792000
196000 212000
111000 133000
53022000 52688000
5097000 5789000
194000 139000
5291000 5928000
47731000 46760000
6900000 8550000
40831000 38210000
2258000 5 114000
9011000
(89000) (246000)
2 169000 13879000
10477000 9967000
2077000 2110000
1010000 957000
773000 728000
(319000) 1947000
1531000 1401000
2777000 4060000
18326000 21 170000
24674000 30919000
311000 230000
24363000 $ 30689000
Lakeside Bank and Subsidiary
Consolidated Statements of Comprehensive Income
Years Ended December 31 2014 and 2013
Net income
Other comprehensive loss
Unrealized holding gains (losses) arising during the year
Less reclassification adjustment for losses included in
net income
Change in net unrealized (losses) gains on defined benefit pension plan
Comprehensive income
See Notes to Consolidated Financial Statements
5
$
$
2014 2013
24363000 $ 30689000
1025000 (1939000)
89000 246000
(1896000) 1604000
(782000) (89000)
23581000 $ 30600000
Lakeside Bank and Subsidiary
Consolidated Statements of Stockholders Equity
Years Ended December 31 2014 and 2013
Accumulated
Other
Common Undivided Comprehensive
Stock Surplus Profits Loss Total
Balance at December 31 2012 $ 2230000 $ 39879000 $ 951 49000 $ (3 21 1 000) $ 1 34047000
Net income 30689000 30689000
Other comprehensive loss (89000) (89000)
Cash dividends on common stock (12657000) ( 12 657000)
Balance at December 31 2013 2230000 39879000 1131 8 1 000 (3300000) 151 990000
Net income 24363000 24363000
Other comprehensive loss (782000) (782000)
Cash dividends on common stock (1 7512000) ( 17 512000)
Balance at December 31 2 014 $ 2230000 $ 39879000 $ 120032000 $ (4082000) $ 158059000
See Notes to Consolidated Financial Statements
6
lakeside Bank and Subsidiary
Consolidated Statements of Cash Flows
Years Ended December 31 2014 and 2013
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses
Depreciation of premises and equipment
Arriortization of security prerniums and discounts net
Loss on sale of securities
Gain on sale of premises and equipment
(Gain) loss on sale and writedown of other real estate owned
Net change in
Other assets
Other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities
Net change in interest-bearing deposits in banks
Proceeds from maturities sales and calls of securities
available for sale
Purchase of securities available for sale
Net increase in loans
Additions to premises and equipment
Improvements in other real eatate owned
Proceeds from sale of premises and equipment
Proceeds from sale of other real estate owned
Net cash used in investing activities
Cash Flows from Financing Activities
Net increase in deposits
Net change in short-term borrowings
Net change in long-term borrowings
Cash dividends paid on common stock
Net cash provided by used in) financing activities
Net change in cash and due from banks
Cash and due from banks at beginning of year
Cash and due from banks at end of year
Supplementary cash flow information
Interest paid on deposits and borrowed funds
Income taxes paid
Supplementary schedule of noncash investing activities
Transfer of loans to other real estate owned Sales of other real estate owned financed bv the Bank
See Notes to Consolidated Financial Statements
7
$
$
$
$
2014 2013
24363000 $ 30689000
6900000 8550000
906000 1013000
730000 953000
89000 246000
(9011000)
(1066000) 1764000
535000 (1 108000)
763000 1115000
33220000 34211000
(5985000) 2497000
11841000 13944000
(500000) (10179000)
(49224000) (55 734000)
(6638000) (5604000)
(706000)
9600000
4644000 2225000
(46568000) (43251000)
58833000 6414000
3204000 (10487000)
15000000 4000000
(17512000) (12657000)
59525000 (12730000)
46177000 (21 770000)
66775000 88545000
112952 000 $ 66775000
5249000 $ 6050000
378000 130000
1881000 $ 1345000 5689000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies
Principles of consolidation The consolidated financial statements include the accounts of Lakeside Bank (the Bank) and its wholly owned subsidiary Lakeside Community Development LLC All intercompany transactions and balances have been eliminated The Bank is a wholly owned subsidiary of Lakeside Bancorp Inc
Nature of operations Lakeside Bank is a state chartered bank whose operations consist primarily of those financial activities common to the commercial banking industry The Bank serves northeastern Illinois and services are provided at six locations throughout Chicago The Banks wholly owned subsidiary Lakeside Community Development LLC invests in various community development activities
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 the reported amounts of revenue and expenses during the reporting period Actual results could differ from those estimates Material estimates that are susceptible to significant change in the near term relate to the determination of the allowance for loan losses valuation of other real estate owned the defined benefit plan liability and fair value of financial instruments
Presentation of cash flows For purposes of the consolidated statements of cash flows cash and due from banks include cash on hand and amounts due from banks (including cash items in process of clearing) Cash flows from interest-bearing deposits in banks loans deposits federal funds purchased and short-term and long-term borrowings are reported on a net basis
Interest-bearing deposits in banks Interest-bearing deposits in banks mature within one year and are carried at cost
Securities available for sale All securities are classified as available for sale as the Bank intends to hold the securities for an indefinite period of time but not necessarily to maturity Any decision to sell a security classified as available for sale would be based on various factors including significant movements in interest rates changes in the maturity mix of the Banks assets and liabil ities liquidity needs regulatory capital considerations and other similar factors Securities available for sale are carried at fair value U nrealized gains or losses are reported as increases or decreases in accumulated other comprehensive income Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities Realized gains or losses on sales of available for sale securities are recorded using the specific identification method
Management evaluates securities for other-than-temporary impairment (OTII) at least on a quarterly basis and more frequently when economic or market conditions warrant such evaluation Declines in the fair value of individual securities available for sale below their amortized cost that are determined to be other-than-temporary are reflected in earnings as realized losses In estimating other-than-temporary impairment losses management considers the length of time and the extent to which the fair value has been less than cost the financial condition and near-term prospects of the issuer and whether it is more likely than not to sell the security before recovery of its cost basis If they intend to sell an impaired security the Bank records an other-than-temporary loss in an amount equal to the entire difference between the fair value and amortized cost I f the Bank does not intend to sell the security only the credit portion of the estimated loss is recognized in earnings with the other portion recognized in accumulated other comprehensive income
8
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
Federal Home Loan Bank stock The Bank as a member of the Federal Home Loan Bank of Chicago (the FHLB) is required to maintain an investment in capital stock of the FHLB The stock does not have a readily determinable fair value as ownership is restricted and it lacks a ready market As a result this stock is carried at cost and evaluated periodically for impairment
Loans The Bank extends commercial mortgage and consumer loans to customers A substantial portion of the loan portfolio is represented by commercial loans in northeastern Illinois The ability of the Banks debtors to honor their contracts is dependent upon the general economic conditions in this area
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are generally reported at their outstanding unpaid principal balances adjusted for charge-offs and the allowance for loan losses I nterest income is accrued on the unpaid principal balance Loan balances include loan origination fees and direct loan origination costs that are being deferred and the net amount amortized as an adjustment of the related loans yield The Bank is amortizing these amounts over the contractual loan maturity
The accrual of interest on loans is typically discontinued at the time the loan is 90 days delinquent In al l cases loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful All interest accrued but not collected for loans that are placed on non accrual or charged-off is reversed against interest income The interest on these loans is accounted for on the cash-basis or cost-recovery method until qualifying for return to accrual Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured
Troubled debt restructurings A loan is classified as a troubled debt restructuring when a borrower is experiencing financial difficulties that leads to a restructuring of the loan and the Bank grants concessions to the borrower in the restructuring that it would not otherwise consider These concessions may include rate reductions principal forgiveness extension of maturity date and other actions intended to minimize potential losses Troubled debt restructurings are classified as impaired loans A loan that is modified at a market rate of interest may no longer be classified as a troubled debt restructuring and impaired in the calendar year subsequent to the restructuring if it is in compliance with the mod1f1ed terms Performance prior to the restructuring is considered when assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual at the time of the restructuring or after a shorter performance period
Allowance for loan losses The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to expense Loan losses are charged against the allowance when management believes that collectability of the principal is unlikely Subsequent recoveries if any are credited to the allowance
When establishing the allowance for loan losses management categorizes loans into risk categories generally based on the nature of the collateral and the basis of repayment These risk categories and the relevant risk characteristics are as follows
Commercial loans - Commercial loans are loans for corporate and business purposes including issuing letters of credit The Banks commercial business loan portfolio is comprised of loans for a variety of purposes and generally is secured by equipment machinery and other business assets Commercial business loans generally have terms of five years or less and interest rates that float in accordance with a designated published index Substantially all of such loans are secured and backed by the personal guarantees of the owners of the business
9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements -------------------------------middot middot-----------
Note 1 Summary of Significant Accounting Policies (Continued)
Commercial real estate loans - Commercial real estate loans are primarily secured by apartment buildings office and industrial buildings mixed-use properties small retail shopping centers and various special purpose properties including warehouses and restaurants Although terms vary commercial real estate loans generally have amortizations of 15 to 30 years as well as balloon payments of two to seven years and terms which provide that the interest rates thereon may be adjusted annually at the Banks discretion based on a designated index
Construction and land development loans - Construction land development loans consist of vacant land and property that is in the process of improvement Repayment of these loans can be dependent on the sale of the property to third parties or the successful completion of the improvements by the builder for the end user In the event a loan is made on property that is not yet approved for the planned development there is the risk that approvals will not be granted or will be delayed Construction and land development loans also run the risk that improvements will not be completed on time or in accordance with specifications and projected costs Construction and land development loans generally have terms of one year to 18 months during the construction period and interest rates based on a designated index
Residential real estate loans - Residential real estate loans include home equity lines of credit secured by a first or second mortgage and 1-4 family residential real estate loans Loans are generally smaller in size and are homogenous because they exhibit similar characteristics
Consumer installment loans - Consumer installment loans generally have higher interest rates than mortgage loans The risk involved in consumer loans is the type and nature of the collateral and in certain cases the absence of collateral These loans are secured by personal assets or may be unsecured and repayment is directly dependent on the borrowers income and the borrowers ability to service debt payments
The allowance for loan losses is evaluated on a regular basis by management and is based upon managements periodic review of the collectability of the loans in light of historical experience the nature and volume of the loan portfolio estimated value of any underlying collateral and prevailing economic conditions and adverse situations that may affect the borrowers ability to pay This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available In addition regulatory agencies as an integral part of their examination process periodically review the Banks allowance for loan losses and may require the Bank to make additions to the allowance based on their Judgment about information available to them at the time of their examinations
The allowance consists of specific and general components The specific component relates to loans that are classified as impaired and an allowance is established when the collateral value discounted cash flows or observable market price of the impaired loan is lower than the carrying value of that loan The general component covers non-impaired loans and is based on the Banks own loss experience adjusted for qualitative factors These qualitative factors consider local economic trends concentrations management experience and other elements of the Banks lending operations
10
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
A loan is impaired based on current information and events when it is probable the Bank will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Factors considered by management in determining impairment include payment status collateral value and the probability for collecting scheduled principal and interest payment when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on an individual-loan basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reason for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on an individual loan basis based on the fair value of the collateral if the loan is collateral dependent the present value of expected future cash flows discounted at the loans effective interest rate or the loans obtainable market price
Large groups of homogenous loans are collectively evaluated for impairment Accordingly the Bank does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Other real estate owned Assets acquired through or in lieu of loan foreclosure are held for sale and initially recorded at fair value less estimated costs to sell at the date of foreclosure establishing a new cost basis Subsequent to foreclosure valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less costs to sell Revenue and expenses from operations and changes in the valuation allowance are included in noninterest expenses-other real estate owned net
Premises and equipment Land is carried at cost Premises and equipment are stated at cost less accumulated depreciation (building 12-25 years leasehold improvements 3-15 years furniture and fixtures 3-20 years) Depreciation is provided principally by the straight-line method over the estimated useful lives of the assets Amortization of leasehold improvements is computed on the straight-line method over the lease term or the estimated useful lives of the improvements whichever 1s shorter
Transfers of financial assets Transfers of financial assets are accounted for as sales when control over the assets has been surrendered Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank - put presumptively beyond the reach of the transferor and its creditors even in bankruptcy or other receivership (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets
Income taxes Lakeside Bancorp Inc with the consent of its stockholders elected to be taxed as an S corporation under sections of the federal and state income tax laws which provide that in lieu of corporate income taxes the stockholder accounts for the Banks items of income deductions losses and credits As a wholly owned subsidiary the Banks income and expenses are included in the Lakeside Bancorp Inc consolidated tax returns As a result for the periods covered by this election no corporate income taxes will be recognized in the accompanying consolidated financial statements except for certain state income taxes
11
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
The Bank evaluates its tax positions to determine the appropriate level of tax reserves to maintain for uncertain tax positions The Bank has no uncertain tax positions as of December 3 1 2014 and 2013
The Bank would recognize interest and penalties on income taxes as a component of income tax expense
The Bank is generally no longer subject to US federal or state and local income tax examinations by tax authorities for years before 201 1
Comprehensive income Comprehensive income consists of net income changes in net unrealized gains and losses on securities available for sale reclassification adjustments for realized gains and losses on sales of AFS securities and changes in defined benefit pension obligation and is presented in the consolidated statements of stockholders equity
Recent accounting pronouncements In January 2014 the FASB (Financial Accounting Standards Board) issued guidance which requires an entity derecognize the loan receivable and recognize the real estate property when it has received physical possession of residential real estate property collateralizing a consumer mortgage loan upon either ( 1 ) 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 that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement Additionally the amendments require annual disclosures This guidance is effective for the Company for fiscal years beginning after December 15 2014 The adoption of this guidance is not expected to have a material impact on the consolidated financial statements
Subsequent events The Bank has evaluated subsequent events for potential recognition andor disclosure through April 30 2015 the date the consolidated financial statements were available to be issued
1 2
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 2 Restricted Cash and Due from Banks
The Bank is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank of Chicago The total of those reserve balances averaged $1 01 2000 and $935000 in 2014 and 2013 respectively The Bank maintains amounts due from banks which exceed federally insured limits The Bank has not experienced any losses in such accounts
Note 3 Securities Available for Sale
The amortized cost and fair value of securities with gross unrealized gains and losses follows
December 31 2014
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
December 31 2013
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
$
$
$
$
Amor1ized
Cost
15917000 $
23417000
6038000
5159000
50531000
250000
50781000 $
17835000 $
32338000
6590000
5928000
62691000
250000
62941000 $
Gross
Unrealized
Gains
41000 $
216000
22000
70000
349000
17000
366000 $
41000 $
190000
39000
26000
296000
11000
307000 s
Gross
Unrealized Fair
Losses Value
(53000) s 15905000
(243000) 23390000
(8000) 6052000
(41000) 5188000
(345000) 50535000
267000
(345000) $ 50802000
(255000) $ 17621000
(987000) 31541000
(32000) 6597000
(126000) 5828000
(1400000) 61587000
261000
(1400000) $ 61848000
Securities available for sale with a carrying value of $8339000 and $3848000 at December 31 2014 and 201 3 respectively were pledged on deposits of the United States Government and other public funds as required or permitted and other short-term borrowings
The amortized costs and fair values of debt securities available for sale as of December 3 1 2014 by contractual maturity are shown below Maturities may differ from contractual maturities in mortgageshybacked securities because the mortgages underlying the securities may be called or repaid without any penalties Therefore these securities are not included in the maturity categories in the following maturity summary
1 3
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements middot-
Note 3 Securities Available for Sale (Continued)
Amortized Fair
Cost Value
Due in one year or less $ 3049000 $ 3057000 Due after one year through five years 21 506000 21 507000
Due after five years through ten years 71 70000 7163000
Due after ten years 1 3647000 1 3620000
45372000 45347000
Residential mortgage-backed securities 5 159000 5188000 Totals $ 50531 000 $ 50535000
The following tables show the gross unrealized losses and fair value of investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 3 1 2 0 1 4 and 2 0 1 3
less than 12 Months 12 Months or More Total Fair Unrealized Fair Unreahzed Fair Unrealized
2014 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 498000 s (2000) $ 7695000 s (51000) $ 8193000 $ (53000) Obligations of states and
pol1ilca subd1v1sions 13671000 (243000) 13671000 (243000) Corporate debt obligations 1132000 (8000 1 132000 (8000) Residential mortgage-backed
obligations 2128000 (4100D) 2128000 (41000) Total temporary
impaired securities s 498000 s (2000) $ 24626000 $ (343000) s 25124000 s (345000)
Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized
2013 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 10867000 $ (232000) s 2632000 $ (23000) $ 13499000 s 255000) Obligations of states and
polillcal subdivisions 11195000 (365000) 11169000 (622000) 22364000 (987000) Corporate debt obligations 1179000 (32000) 1179000 (32000) Residential mortgage-backed
obligations 3977000 (126000) 3977000 (126000) Total temporary
impaired securities 26039000 s (723000) $ 14980000 s (677000) s 41019000 $ (1400000)
In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysis reports Since management does not intend to sell any temporarily impaired securities before recovery of their cost basis no declines are deemed other-than-temporary
On sale proceeds of $5637000 there were $57000 in realized gains and $146000 in realized losses on the sale of securities during the year ended December 3 1 2 0 1 4 On sale proceeds of $708000 there were no realized gains and $246000 realized losses on the sale of securities during the year ended December 3 1 2 0 1 3
1 4
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans
A summary of the balances of loans follows
Commercial $
Commercial real estate
Construction and land development
Residential real estate
Consumer installment
Less allowance for loan losses
Loans net $
December 3 1
2014 2013
62894000
658 153000
163 1 08000
1 43579000
743000
1 028477000
2658 1 000
1 001 896 000
$ 62642000
666095000
123519000
129905000
1 229000
983390000
27626000
$ 955764000
The following tables present the contractual aging of the recorded investment in loans by class of loans as of December 3 1 2014 and 2013
Loans Past 90 Days or 30-59 Days 60middot89 Days Due 90 Days More Past Due
December 31 2014 Current Past Due Past Due or More Total and Accruin
Commercial $ 62655000 $ 4000 $ 36000 $ 199000 s 62894000 $ 199000
Commercial real estate Relail properties 295610000 105000 1212000 296927000 199000
Multifamily 90507000 90507000
Mixed-use properties 93 116000 2455000 95571000
Industrial manufacturing warehouse 63660000 1353000 65013000
Other commerc1al real estate 106101000 4034000 110135000
Construction and land development 162512000 596000 163 108000
Residential real estate 140636000 208000 2735000 143579000
Consumer installment 743000 743000
Total $ 1 015 540000 $ 109 000 $ 244 000 12584 000 $ 1 028 477 000 s 398 000
15
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Loans Past 90 Days or 30-59 Days 60-89 Days Due 90 Days More Past Due
December 31 2013 Current Past Due Past Due or More Total and Accruing
Commercial $ 61588000 $ $ 755000 $ 299000 s 62642000 $ 33000 Commercial real estate
Retail properties 284 162000 1152000 1331000 15307000 301952000 44000 Mu11ifamily 78203000 1223000 450000 4526000 84402000 Mixed-use properties 93292000 262000 316000 3644000 97514000 Industrial manufacturing
warehouse 58947000 1696000 273000 60916000 Other commercial real
estate 109449000 282000 74000 11506000 121311000 Construction and land
development 121492000 2027000 123519000 Residential real estate 126229000 1062000 306000 2308000 129905000 89000 Consumer installment 1226000 1000 2000 1229000
Total $ 934 588000 $ 3982 000 s 4 930 000 39 890 000 983 390 000 $ 166 000
The following table presents the recorded investment in nonaccrual loans by class of loans as of December 31 2014 and 2013
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties
Industrial manufacturing warehouse Other commercial real estate
Construction and land development Residential real estate
Total
$
$
16
Nonaccrual Loans 2014 2013
168000 $ 266000
2470000 15263000
4526000
2728000 3644000
1353000 273000
4480000 11506000
1609000 2027000
2796000 2219000
15604000 $ 39724000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
As part of the on-going monitoring of the credit quality of the Banks loan portfolio management categorizes loans into rrsk categories based on relevant information about the ability of borrowers to service their debt and comply with various terms of their loan agreements The Bank considers current financial information historical payment experrence credit documentation public information and current economic trends Generally all sizeable credits receive a financial review no less than annually to monitor and adjust if necessary the credits risk profile Credits classified as watch generally receive a review more frequently than annually For substandard and doubtful credit classifications the frequency of review is increased to no less than quarterly in order to determine potential impact on credit loss estimates
The Bank categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt
Pass - A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors if any) or by the fair value less cost to acquire and sell of any underlying collateral in a timely manner Pass assets also include certain assets considered watch which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring
Special Mention - A special mention asset or risk rating of 6 has potential weaknesses that deserve managements close attention The asset may also be subject to a weak or speculative market or to economic conditions which may in the future adversely affect the obligor If left uncorrected these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Banks credit position at some future date Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification
Substandard - A substandard asset or risk rating of 7 is an asset with a well-defined weakness that jeopardizes repayment in whole or in part of the debt These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged These assets are characterized by the distinct possibility that the institution will sustain some loss of principal andor interest if the deficiencies are not corrected A loan does necessarily need to have an identifiable loss potential in order to receive this rating
Doubtful - An asset that has all the weaknesses or risk rating of 8 inherent in the substandard classification with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently known facts conditions and values highly questionable and improbable The possibility of loss is extremely likely but it is not identified at this point due to pending factors
Loss - An asset or portion thereof classified as loss is considered uncollectible and of such little value that its continuance on the Companys books as an asset is not warranted This classification does not necessarily mean that an asset has no recovery or salvage value but rather there is much doubt about whether how much or when the recovery would occur As such it is not practical or desirable to defer the write-off Therefore there is no loss balance to report at December 31 2014
Residential real estate and consumer installment loans are assessed for credit quality based on the contractual aging status of the loan and payment activity Such assessment is completed at the end of each reporting period
1 7
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present the risk category of loans evaluated by internal asset classification based on the most recent analysis performed and the contractual aging as of December 31 2014 and 2013
December 31 2014
Commercial Commercial real estate
Retail properties Multifamily
Mixed-use properties Industrial manufacturing warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
December 31 201 J
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties lndustnal manufactunng warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
Pass
$ 61710000 $
272359000 88002000 85430000 63660000
104525000
1531 14000
$ 828800000 $
$
$
Pass
s 62034000 $
250040000 76086000 85355000 60643000
108880000 1 1 7047000
s 760085000 $
$
$
1 8
Special Mention Substandard Doubtful Total
$ 1 016000 $ 168000 s 62894000
3701000 17384000 3483000 296927000 635000 1870000 90507000 238000 7175000 2728000 95571000
1353000 65013000 1 130000 4480000 110 135000
5937000 3461000 596000 163108000
10511 000 $ 32036000 $ 12808000 $ 884155000
Performing Non-periorming Total
140783000 s 2796000 $ 143579000
743000 743000
141 526000 s 2796000 $ 144322000
Special Mention Substandard Doubtful Total
$ 342000 $ 266000 s 62642000
10871000 25778000 15263000 301952000 1 885000 1905000 4526000 84402000 1 714000 6801000 3644000 97514000
273000 60916000 925000 11 506000 1213 1 1 000
381000 4064000 2027000 123519000
14851 000 $ 39815000 s 37505000 $ 852256000
Performing Non-performing Total
127597000 $ 2308000 $ 129905000
1 229000 1 229000
1 28826000 $ 2308000 $ 1 3 1 1 34000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables provide additional detail of the activity in the allowance for loan losses by portfolio segment for the years ended December 3 1 2014 and 2013
Construction
Commercial and land Rcs1dent1al Consumer
December 31 2014 Commercial Real Es1ate Develoement Real Estate lnsallment Total
Allowanco for loan lossos
Beg1nn1ng balance 1385000 20052000 3549000 2623000 17000 27626000
PrOV1Son for loan losses 2210000 2680000 2007000 3000 6900000
Loans chargedmiddotoff (179000) (8163000) 687000) (2140000) (11169000)
Recovenes of loans
previously charged-off 85000 2916000 223000 3224000
Ending balance s 1291000 1701 5000 5542000 271 3000 s 20000 s 26581000
Poriod-ondtd llmount allocatod to loans
lndMdually evaluated for
1mpa1rment 200000 445000 36000 52000 s 733000
Collec11vely evaluated
for 1mpa1rrnent 1091 000 16570000 5506000 2661000 20000 25648000
Ending balance 1291000 17015000 5542000 s 2713000 20000 26581000
Loans
lndMdually evaluated for
impairment 368000 17274000 3526000 4048000 25216000
Collecively evalua1ed
for 1mpa1rrnent 62526000 640879000 159582000 139531000 743000 1003261000
Ending balance 62894000 658 153000 163108000 143579000 743000 1028477000
Construct1on
Commercial and Land Residential Consumer
December 31 2013 Commeroal Real Estate Development Real Eslale Installment Total
Allowance for loan losses
Beginning balance 1040000 18719000 2484000 2248000 17000 24508000
Provision for loan losses 363000 6508000 867000 784000 28000 8550000
Loans chargedmiddot Off (59000) (5817000) (122000) (457000) (28000) (6483000)
Recoveries ol loans
previously charged-off 41 000 642000 320000 48000 1051000
Ending balance 1385000 20052000 3549000 s 2623000 17000 27626000
Period-ended amount allocated to loans
Individually evaluated for
impairment 3475000 239000 61000 3775000
Collectively evaluated
for impairment 1385000 16577000 3310000 2562000 17000 23851000
Ending balance 1385000 20052000 3549000 2623000 17000 27626000
Loans
Individually evaluated for
1mpa1rment 266000 42380000 5522000 s 3307000 51475000
Collectively evalua1ed
for impairment 62376000 623715000 1 17997000 126598000 1229000 931915000
Endrng balance 62642000 666095000 123519000 129905000 1229000 983390000
1 9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present additional detail of impaired loans segregated by class as of December 3 1 2014 and 2013 The unpaid principal balance represents the recorded balance prior to any partial charge-offs The recorded investment represents customer balances net of any partial charge-offs recognized on the loans The interest income recognized column represents all interest income reported either on a cash or accrued basis after the loan became impaired The cash basis income column represents only the interest income recognized on a cash basis after the loan was classified as impaired
December 31 2014
Wih no relaed allowance recorded
Commercial Commercial real estale
Reail properties Multifamily Mixed-use properties lndustnal manufacturing
warehouse Other commercial real estate
Construction and land developmen
Residential real estate Consumer installment
Wi1h an allowance recorded Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties Industrial manufacturing
warehouse Other commercial real estate
Construction and land development
Residential real estate Consumer installment
To1al
$
$
Unpaid Principal Balance
216000 $
7266000
3283000
2861000 6121000
3672000 6045000
200000
564000 2421000
1 62000 170000
Recorded Investment
168000 s
5543000
3119000
1353000 4480000
3400000 3878000
200000
564000 2215000
126000 170000
32981000 $ 25216000 $
20
Allowance for Loan Losses
Allocated
200000
42000 403000
36000 52000
733000
Average Recorded
Investment
$ 208000 $
1 1 474000 3514000 4354000
131 5000 5509000
4 183000 4673000
29000
677000 2270000
141 000 44000
$ 38391000 $
Interest Income
Recognized
109000 48000
161 000
125000 33000
38000
5000
519000
$
$
Cash Basis Interest Income
Recognized
108000 48000
1 57000
1 1 3000 32000
38000
5000
501000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Cash Basis Unpaid Allowance for Average Interest Interest
Principal Recorded Loan Losses Recorded Income Income December 31 2013 Balance Investment Allocated Investment Recognized Recognized
With no related allowance recordedmiddot
Commercial $ 266000 $ 266000 $ $ 326000 $ $ Commercial real estate
Retail properties 26699000 12500000 10635000 146000 139000 Multifamily 5542000 4526000 4838000 88000 88000 Mixed-use properties 3123000 2527000 2750000 103000 102000 Industrial manufacturing
warehouse 1 641000 273000 528000 Other commercial real estate 4056000 3497000 3617000
Construction and land development 8517000 3965000 4971000 1 1 4000 1 14000
Residenial rear estate 3769000 3203000 3203000 47000 43000 Consumer installment
With an allowance recorded Commercial Commercial real estate
Retarl properties 6138000 5239000 2045000 4759000 35000 35000 Multifamily 692000 682000 69000 687000 38000 38000 Mixed-use properties 5764000 5 127000 778000 4200000 92000 87000 Industrial manufacturing
warehouse Other commercial real estate 10001000 8009000 583000 8986000
Construction and land development 2770000 1 557000 239000 1 853000
Residential real estate 120000 104000 61000 1 04000 Consumer installment
Total $ 79298000 $ 51475000 $ 3775000 $ 51457000 $ 663000 $ 646000
21
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present troubled debt restructurings and the financial effects of troubled debt restructurings
Year Ended December 31 2014
Pre-Modification Post-Modification Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reserves
Commercial $ 288000 $ 168000 $
Commercial real estate
Retail properties 3 1790000 2060000
Multifamily 1 409000 672000 732000
Mixed-use properties 6 4660000 3 118000 974000
Industrial manufacturing warehouse Other commercial real estate 4682000 2864000 1 272000
Construction and land development 1 3924000 2930000 500000
Residential real estate 3 1288000 1 252000 52000
Consumer installment Total 16 $ 1 8041000 $ 13064000 $ 3530000
Year Ended December 3 1 2013
Pre-Modification Post-Modification
Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reseives
Commercial $ $ $
Commercial real estate
Retail properties 3 8596000 3651000 4363000
Multifamily 2 7026000 5090000 1598000
Mixed-use properties 7 6005000 4421000 1 612000
Industrial manufacturing warehouse
Other commercial real estate 5 14589000 10888000 2578000
Construction and land development 3 7409000 4493000 1 162000
Residential real estate 3 1515000 1 371000 117000
Consumer installment Total 23 $ 45 140000 $ 29914000 $ 11430000
Troubled debt restructurings that were accruing interest were $9520000 and $ 1 1 382000 respectively as of December 3 1 2014 and 2013 Troubled debt restructurings that were non-accruing were $3544000 and $ 1 8532000 respectively as of December 3 1 2014 and 201 3 Troubled debt restructurings included loans where the loan principal and corresponding interest rate was reduced and i n some instances the loan amortization period was extended During 2014 there were three troubled debt restructurings with outstanding balances at the time of re-default was $ 1 1 55000 and loan balances outstanding for these loans at December 3 1 2014 was $239000
22
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Contents
Independent Auditors Report
Financial Statements
Consolidated Balance Sheets
Consolidated Statements of I ncome
Consolidated Statements of Comprehensive Income
Consolidated Statements of Stockholders Equity
Consol idated Statements of Cash Flows
Notes to Consolidated Financial Statements
1 - 2
3
4
5
6
7
8 - 38
McGladrey
To the Board of Directors Lakeside Bank and Subsidiary Chicago Illinois
Independent Auditors Report
Report on the Financial Statements
McGladry LLP
We have audited the accompanying consolidated financial statements of Lakeside Bank and Subsidiary (the Bank) which comprise the consolidated balance sheets as of December 31 2014 and 2013 and the related consolidated statements of income comprehensive income stockholders equity and cash flows for the years 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 audits We conducted our audits 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 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 reasonable 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 Lakeside Bank and Subsidiary as of December 31 2014 and 2013 and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America
Mbullmbor of 1he RSM fntemilltkgtnal nvtwork or lnndent ccounung tu and comulUng firm
Other Matter
We also have examined in accordance with attestation standards established by the American Institute of Certified Public Accountants the internal control over financial reporting of Lakeside Bank as of December 31 2014 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of Treadway Commission (COSO) in 2013 and our report dated April 30 2015 expressed an unmodified opinion
Chicago I llinois April 30 2015
2
Lakeside Bank and Subsidiary
Consolidated Balance Sheets
December 31 2014 and 2013
2014 2013
Assets
Cash and due from banks $ 112952000 $ 66775000
Interest-bearing deposits in banks 6938000 953000
Securities available for sale 50802000 61848000
Federal Home Loan Bank stock at cost 2403000 2403000
Loans net of allowance for loan losses of $26581000 in 2014 and
$27626000 in 2013 1001896000 955 764000
Premises and equipment net 22289000 16557000
Other real estate owned 4719000 11399000
Other assets 5266000 7697000
$ 1207265000 $ 1 123396000
Liabilities and Stockholders Equity
Deposits
Noninterest-bearing $ 286622000 $ 249247000
Savings and NOW 266307 000 289093000
Time certificates $250000 or more 73 116000 79453000
Other time certificates 375046000 324465000
1001091000 942258000
Short-term borrowings 4518000 1314000
Long-term borrowings 28000000 13000000
Accrued expenses and other liabilities 15597000 14834000
1049206000 971406000
Commitments Contingencies and Credit Risk (See Notes 6 and 12)
Stockholders Equity
Common stock $5 par value authorized 656907 shares
issued and outstanding 446062 shares 2230000 2230000
Surplus 39879000 39879000
Undivided profits 120032000 113181000
Accumulated other comprehensive loss (4082000) (3300000)
158059000 151990000
$ 1207265000 $ 1 123396000
See Notes to Consolidated Financial Statements
3
Lakeside Bank and Subsidiary
Consolidated Statements of Income
Years Ended December 31 2014 and 2013
Interest and dividend income
Loans including fees
Investment securities
Taxable
Tax-exempt
Federal funds sold
Other
Total interest and dividend income
Interest expense
Deposits
Borrowings
Total interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Noninterest income
Fees for banking services
Gain on sale of premises and equipment
Loss on sale of securities
Total noninterest income
Noninterest expenses
Salaries and employee benefits
Occupancy
Equipment
Data processing
Other real estate owned net
FDIC insurance
Other general and administrative
Total noninterest expenses
Net income before income taxes
Income taxes
Net income
See Notes to Consolidated Financial Statements
$
$
4
2014 2013
51751000 $ 51 176000
349000 375000
615000 792000
196000 212000
111000 133000
53022000 52688000
5097000 5789000
194000 139000
5291000 5928000
47731000 46760000
6900000 8550000
40831000 38210000
2258000 5 114000
9011000
(89000) (246000)
2 169000 13879000
10477000 9967000
2077000 2110000
1010000 957000
773000 728000
(319000) 1947000
1531000 1401000
2777000 4060000
18326000 21 170000
24674000 30919000
311000 230000
24363000 $ 30689000
Lakeside Bank and Subsidiary
Consolidated Statements of Comprehensive Income
Years Ended December 31 2014 and 2013
Net income
Other comprehensive loss
Unrealized holding gains (losses) arising during the year
Less reclassification adjustment for losses included in
net income
Change in net unrealized (losses) gains on defined benefit pension plan
Comprehensive income
See Notes to Consolidated Financial Statements
5
$
$
2014 2013
24363000 $ 30689000
1025000 (1939000)
89000 246000
(1896000) 1604000
(782000) (89000)
23581000 $ 30600000
Lakeside Bank and Subsidiary
Consolidated Statements of Stockholders Equity
Years Ended December 31 2014 and 2013
Accumulated
Other
Common Undivided Comprehensive
Stock Surplus Profits Loss Total
Balance at December 31 2012 $ 2230000 $ 39879000 $ 951 49000 $ (3 21 1 000) $ 1 34047000
Net income 30689000 30689000
Other comprehensive loss (89000) (89000)
Cash dividends on common stock (12657000) ( 12 657000)
Balance at December 31 2013 2230000 39879000 1131 8 1 000 (3300000) 151 990000
Net income 24363000 24363000
Other comprehensive loss (782000) (782000)
Cash dividends on common stock (1 7512000) ( 17 512000)
Balance at December 31 2 014 $ 2230000 $ 39879000 $ 120032000 $ (4082000) $ 158059000
See Notes to Consolidated Financial Statements
6
lakeside Bank and Subsidiary
Consolidated Statements of Cash Flows
Years Ended December 31 2014 and 2013
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses
Depreciation of premises and equipment
Arriortization of security prerniums and discounts net
Loss on sale of securities
Gain on sale of premises and equipment
(Gain) loss on sale and writedown of other real estate owned
Net change in
Other assets
Other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities
Net change in interest-bearing deposits in banks
Proceeds from maturities sales and calls of securities
available for sale
Purchase of securities available for sale
Net increase in loans
Additions to premises and equipment
Improvements in other real eatate owned
Proceeds from sale of premises and equipment
Proceeds from sale of other real estate owned
Net cash used in investing activities
Cash Flows from Financing Activities
Net increase in deposits
Net change in short-term borrowings
Net change in long-term borrowings
Cash dividends paid on common stock
Net cash provided by used in) financing activities
Net change in cash and due from banks
Cash and due from banks at beginning of year
Cash and due from banks at end of year
Supplementary cash flow information
Interest paid on deposits and borrowed funds
Income taxes paid
Supplementary schedule of noncash investing activities
Transfer of loans to other real estate owned Sales of other real estate owned financed bv the Bank
See Notes to Consolidated Financial Statements
7
$
$
$
$
2014 2013
24363000 $ 30689000
6900000 8550000
906000 1013000
730000 953000
89000 246000
(9011000)
(1066000) 1764000
535000 (1 108000)
763000 1115000
33220000 34211000
(5985000) 2497000
11841000 13944000
(500000) (10179000)
(49224000) (55 734000)
(6638000) (5604000)
(706000)
9600000
4644000 2225000
(46568000) (43251000)
58833000 6414000
3204000 (10487000)
15000000 4000000
(17512000) (12657000)
59525000 (12730000)
46177000 (21 770000)
66775000 88545000
112952 000 $ 66775000
5249000 $ 6050000
378000 130000
1881000 $ 1345000 5689000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies
Principles of consolidation The consolidated financial statements include the accounts of Lakeside Bank (the Bank) and its wholly owned subsidiary Lakeside Community Development LLC All intercompany transactions and balances have been eliminated The Bank is a wholly owned subsidiary of Lakeside Bancorp Inc
Nature of operations Lakeside Bank is a state chartered bank whose operations consist primarily of those financial activities common to the commercial banking industry The Bank serves northeastern Illinois and services are provided at six locations throughout Chicago The Banks wholly owned subsidiary Lakeside Community Development LLC invests in various community development activities
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 the reported amounts of revenue and expenses during the reporting period Actual results could differ from those estimates Material estimates that are susceptible to significant change in the near term relate to the determination of the allowance for loan losses valuation of other real estate owned the defined benefit plan liability and fair value of financial instruments
Presentation of cash flows For purposes of the consolidated statements of cash flows cash and due from banks include cash on hand and amounts due from banks (including cash items in process of clearing) Cash flows from interest-bearing deposits in banks loans deposits federal funds purchased and short-term and long-term borrowings are reported on a net basis
Interest-bearing deposits in banks Interest-bearing deposits in banks mature within one year and are carried at cost
Securities available for sale All securities are classified as available for sale as the Bank intends to hold the securities for an indefinite period of time but not necessarily to maturity Any decision to sell a security classified as available for sale would be based on various factors including significant movements in interest rates changes in the maturity mix of the Banks assets and liabil ities liquidity needs regulatory capital considerations and other similar factors Securities available for sale are carried at fair value U nrealized gains or losses are reported as increases or decreases in accumulated other comprehensive income Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities Realized gains or losses on sales of available for sale securities are recorded using the specific identification method
Management evaluates securities for other-than-temporary impairment (OTII) at least on a quarterly basis and more frequently when economic or market conditions warrant such evaluation Declines in the fair value of individual securities available for sale below their amortized cost that are determined to be other-than-temporary are reflected in earnings as realized losses In estimating other-than-temporary impairment losses management considers the length of time and the extent to which the fair value has been less than cost the financial condition and near-term prospects of the issuer and whether it is more likely than not to sell the security before recovery of its cost basis If they intend to sell an impaired security the Bank records an other-than-temporary loss in an amount equal to the entire difference between the fair value and amortized cost I f the Bank does not intend to sell the security only the credit portion of the estimated loss is recognized in earnings with the other portion recognized in accumulated other comprehensive income
8
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
Federal Home Loan Bank stock The Bank as a member of the Federal Home Loan Bank of Chicago (the FHLB) is required to maintain an investment in capital stock of the FHLB The stock does not have a readily determinable fair value as ownership is restricted and it lacks a ready market As a result this stock is carried at cost and evaluated periodically for impairment
Loans The Bank extends commercial mortgage and consumer loans to customers A substantial portion of the loan portfolio is represented by commercial loans in northeastern Illinois The ability of the Banks debtors to honor their contracts is dependent upon the general economic conditions in this area
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are generally reported at their outstanding unpaid principal balances adjusted for charge-offs and the allowance for loan losses I nterest income is accrued on the unpaid principal balance Loan balances include loan origination fees and direct loan origination costs that are being deferred and the net amount amortized as an adjustment of the related loans yield The Bank is amortizing these amounts over the contractual loan maturity
The accrual of interest on loans is typically discontinued at the time the loan is 90 days delinquent In al l cases loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful All interest accrued but not collected for loans that are placed on non accrual or charged-off is reversed against interest income The interest on these loans is accounted for on the cash-basis or cost-recovery method until qualifying for return to accrual Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured
Troubled debt restructurings A loan is classified as a troubled debt restructuring when a borrower is experiencing financial difficulties that leads to a restructuring of the loan and the Bank grants concessions to the borrower in the restructuring that it would not otherwise consider These concessions may include rate reductions principal forgiveness extension of maturity date and other actions intended to minimize potential losses Troubled debt restructurings are classified as impaired loans A loan that is modified at a market rate of interest may no longer be classified as a troubled debt restructuring and impaired in the calendar year subsequent to the restructuring if it is in compliance with the mod1f1ed terms Performance prior to the restructuring is considered when assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual at the time of the restructuring or after a shorter performance period
Allowance for loan losses The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to expense Loan losses are charged against the allowance when management believes that collectability of the principal is unlikely Subsequent recoveries if any are credited to the allowance
When establishing the allowance for loan losses management categorizes loans into risk categories generally based on the nature of the collateral and the basis of repayment These risk categories and the relevant risk characteristics are as follows
Commercial loans - Commercial loans are loans for corporate and business purposes including issuing letters of credit The Banks commercial business loan portfolio is comprised of loans for a variety of purposes and generally is secured by equipment machinery and other business assets Commercial business loans generally have terms of five years or less and interest rates that float in accordance with a designated published index Substantially all of such loans are secured and backed by the personal guarantees of the owners of the business
9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements -------------------------------middot middot-----------
Note 1 Summary of Significant Accounting Policies (Continued)
Commercial real estate loans - Commercial real estate loans are primarily secured by apartment buildings office and industrial buildings mixed-use properties small retail shopping centers and various special purpose properties including warehouses and restaurants Although terms vary commercial real estate loans generally have amortizations of 15 to 30 years as well as balloon payments of two to seven years and terms which provide that the interest rates thereon may be adjusted annually at the Banks discretion based on a designated index
Construction and land development loans - Construction land development loans consist of vacant land and property that is in the process of improvement Repayment of these loans can be dependent on the sale of the property to third parties or the successful completion of the improvements by the builder for the end user In the event a loan is made on property that is not yet approved for the planned development there is the risk that approvals will not be granted or will be delayed Construction and land development loans also run the risk that improvements will not be completed on time or in accordance with specifications and projected costs Construction and land development loans generally have terms of one year to 18 months during the construction period and interest rates based on a designated index
Residential real estate loans - Residential real estate loans include home equity lines of credit secured by a first or second mortgage and 1-4 family residential real estate loans Loans are generally smaller in size and are homogenous because they exhibit similar characteristics
Consumer installment loans - Consumer installment loans generally have higher interest rates than mortgage loans The risk involved in consumer loans is the type and nature of the collateral and in certain cases the absence of collateral These loans are secured by personal assets or may be unsecured and repayment is directly dependent on the borrowers income and the borrowers ability to service debt payments
The allowance for loan losses is evaluated on a regular basis by management and is based upon managements periodic review of the collectability of the loans in light of historical experience the nature and volume of the loan portfolio estimated value of any underlying collateral and prevailing economic conditions and adverse situations that may affect the borrowers ability to pay This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available In addition regulatory agencies as an integral part of their examination process periodically review the Banks allowance for loan losses and may require the Bank to make additions to the allowance based on their Judgment about information available to them at the time of their examinations
The allowance consists of specific and general components The specific component relates to loans that are classified as impaired and an allowance is established when the collateral value discounted cash flows or observable market price of the impaired loan is lower than the carrying value of that loan The general component covers non-impaired loans and is based on the Banks own loss experience adjusted for qualitative factors These qualitative factors consider local economic trends concentrations management experience and other elements of the Banks lending operations
10
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
A loan is impaired based on current information and events when it is probable the Bank will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Factors considered by management in determining impairment include payment status collateral value and the probability for collecting scheduled principal and interest payment when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on an individual-loan basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reason for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on an individual loan basis based on the fair value of the collateral if the loan is collateral dependent the present value of expected future cash flows discounted at the loans effective interest rate or the loans obtainable market price
Large groups of homogenous loans are collectively evaluated for impairment Accordingly the Bank does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Other real estate owned Assets acquired through or in lieu of loan foreclosure are held for sale and initially recorded at fair value less estimated costs to sell at the date of foreclosure establishing a new cost basis Subsequent to foreclosure valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less costs to sell Revenue and expenses from operations and changes in the valuation allowance are included in noninterest expenses-other real estate owned net
Premises and equipment Land is carried at cost Premises and equipment are stated at cost less accumulated depreciation (building 12-25 years leasehold improvements 3-15 years furniture and fixtures 3-20 years) Depreciation is provided principally by the straight-line method over the estimated useful lives of the assets Amortization of leasehold improvements is computed on the straight-line method over the lease term or the estimated useful lives of the improvements whichever 1s shorter
Transfers of financial assets Transfers of financial assets are accounted for as sales when control over the assets has been surrendered Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank - put presumptively beyond the reach of the transferor and its creditors even in bankruptcy or other receivership (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets
Income taxes Lakeside Bancorp Inc with the consent of its stockholders elected to be taxed as an S corporation under sections of the federal and state income tax laws which provide that in lieu of corporate income taxes the stockholder accounts for the Banks items of income deductions losses and credits As a wholly owned subsidiary the Banks income and expenses are included in the Lakeside Bancorp Inc consolidated tax returns As a result for the periods covered by this election no corporate income taxes will be recognized in the accompanying consolidated financial statements except for certain state income taxes
11
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
The Bank evaluates its tax positions to determine the appropriate level of tax reserves to maintain for uncertain tax positions The Bank has no uncertain tax positions as of December 3 1 2014 and 2013
The Bank would recognize interest and penalties on income taxes as a component of income tax expense
The Bank is generally no longer subject to US federal or state and local income tax examinations by tax authorities for years before 201 1
Comprehensive income Comprehensive income consists of net income changes in net unrealized gains and losses on securities available for sale reclassification adjustments for realized gains and losses on sales of AFS securities and changes in defined benefit pension obligation and is presented in the consolidated statements of stockholders equity
Recent accounting pronouncements In January 2014 the FASB (Financial Accounting Standards Board) issued guidance which requires an entity derecognize the loan receivable and recognize the real estate property when it has received physical possession of residential real estate property collateralizing a consumer mortgage loan upon either ( 1 ) 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 that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement Additionally the amendments require annual disclosures This guidance is effective for the Company for fiscal years beginning after December 15 2014 The adoption of this guidance is not expected to have a material impact on the consolidated financial statements
Subsequent events The Bank has evaluated subsequent events for potential recognition andor disclosure through April 30 2015 the date the consolidated financial statements were available to be issued
1 2
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 2 Restricted Cash and Due from Banks
The Bank is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank of Chicago The total of those reserve balances averaged $1 01 2000 and $935000 in 2014 and 2013 respectively The Bank maintains amounts due from banks which exceed federally insured limits The Bank has not experienced any losses in such accounts
Note 3 Securities Available for Sale
The amortized cost and fair value of securities with gross unrealized gains and losses follows
December 31 2014
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
December 31 2013
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
$
$
$
$
Amor1ized
Cost
15917000 $
23417000
6038000
5159000
50531000
250000
50781000 $
17835000 $
32338000
6590000
5928000
62691000
250000
62941000 $
Gross
Unrealized
Gains
41000 $
216000
22000
70000
349000
17000
366000 $
41000 $
190000
39000
26000
296000
11000
307000 s
Gross
Unrealized Fair
Losses Value
(53000) s 15905000
(243000) 23390000
(8000) 6052000
(41000) 5188000
(345000) 50535000
267000
(345000) $ 50802000
(255000) $ 17621000
(987000) 31541000
(32000) 6597000
(126000) 5828000
(1400000) 61587000
261000
(1400000) $ 61848000
Securities available for sale with a carrying value of $8339000 and $3848000 at December 31 2014 and 201 3 respectively were pledged on deposits of the United States Government and other public funds as required or permitted and other short-term borrowings
The amortized costs and fair values of debt securities available for sale as of December 3 1 2014 by contractual maturity are shown below Maturities may differ from contractual maturities in mortgageshybacked securities because the mortgages underlying the securities may be called or repaid without any penalties Therefore these securities are not included in the maturity categories in the following maturity summary
1 3
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements middot-
Note 3 Securities Available for Sale (Continued)
Amortized Fair
Cost Value
Due in one year or less $ 3049000 $ 3057000 Due after one year through five years 21 506000 21 507000
Due after five years through ten years 71 70000 7163000
Due after ten years 1 3647000 1 3620000
45372000 45347000
Residential mortgage-backed securities 5 159000 5188000 Totals $ 50531 000 $ 50535000
The following tables show the gross unrealized losses and fair value of investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 3 1 2 0 1 4 and 2 0 1 3
less than 12 Months 12 Months or More Total Fair Unrealized Fair Unreahzed Fair Unrealized
2014 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 498000 s (2000) $ 7695000 s (51000) $ 8193000 $ (53000) Obligations of states and
pol1ilca subd1v1sions 13671000 (243000) 13671000 (243000) Corporate debt obligations 1132000 (8000 1 132000 (8000) Residential mortgage-backed
obligations 2128000 (4100D) 2128000 (41000) Total temporary
impaired securities s 498000 s (2000) $ 24626000 $ (343000) s 25124000 s (345000)
Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized
2013 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 10867000 $ (232000) s 2632000 $ (23000) $ 13499000 s 255000) Obligations of states and
polillcal subdivisions 11195000 (365000) 11169000 (622000) 22364000 (987000) Corporate debt obligations 1179000 (32000) 1179000 (32000) Residential mortgage-backed
obligations 3977000 (126000) 3977000 (126000) Total temporary
impaired securities 26039000 s (723000) $ 14980000 s (677000) s 41019000 $ (1400000)
In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysis reports Since management does not intend to sell any temporarily impaired securities before recovery of their cost basis no declines are deemed other-than-temporary
On sale proceeds of $5637000 there were $57000 in realized gains and $146000 in realized losses on the sale of securities during the year ended December 3 1 2 0 1 4 On sale proceeds of $708000 there were no realized gains and $246000 realized losses on the sale of securities during the year ended December 3 1 2 0 1 3
1 4
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans
A summary of the balances of loans follows
Commercial $
Commercial real estate
Construction and land development
Residential real estate
Consumer installment
Less allowance for loan losses
Loans net $
December 3 1
2014 2013
62894000
658 153000
163 1 08000
1 43579000
743000
1 028477000
2658 1 000
1 001 896 000
$ 62642000
666095000
123519000
129905000
1 229000
983390000
27626000
$ 955764000
The following tables present the contractual aging of the recorded investment in loans by class of loans as of December 3 1 2014 and 2013
Loans Past 90 Days or 30-59 Days 60middot89 Days Due 90 Days More Past Due
December 31 2014 Current Past Due Past Due or More Total and Accruin
Commercial $ 62655000 $ 4000 $ 36000 $ 199000 s 62894000 $ 199000
Commercial real estate Relail properties 295610000 105000 1212000 296927000 199000
Multifamily 90507000 90507000
Mixed-use properties 93 116000 2455000 95571000
Industrial manufacturing warehouse 63660000 1353000 65013000
Other commerc1al real estate 106101000 4034000 110135000
Construction and land development 162512000 596000 163 108000
Residential real estate 140636000 208000 2735000 143579000
Consumer installment 743000 743000
Total $ 1 015 540000 $ 109 000 $ 244 000 12584 000 $ 1 028 477 000 s 398 000
15
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Loans Past 90 Days or 30-59 Days 60-89 Days Due 90 Days More Past Due
December 31 2013 Current Past Due Past Due or More Total and Accruing
Commercial $ 61588000 $ $ 755000 $ 299000 s 62642000 $ 33000 Commercial real estate
Retail properties 284 162000 1152000 1331000 15307000 301952000 44000 Mu11ifamily 78203000 1223000 450000 4526000 84402000 Mixed-use properties 93292000 262000 316000 3644000 97514000 Industrial manufacturing
warehouse 58947000 1696000 273000 60916000 Other commercial real
estate 109449000 282000 74000 11506000 121311000 Construction and land
development 121492000 2027000 123519000 Residential real estate 126229000 1062000 306000 2308000 129905000 89000 Consumer installment 1226000 1000 2000 1229000
Total $ 934 588000 $ 3982 000 s 4 930 000 39 890 000 983 390 000 $ 166 000
The following table presents the recorded investment in nonaccrual loans by class of loans as of December 31 2014 and 2013
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties
Industrial manufacturing warehouse Other commercial real estate
Construction and land development Residential real estate
Total
$
$
16
Nonaccrual Loans 2014 2013
168000 $ 266000
2470000 15263000
4526000
2728000 3644000
1353000 273000
4480000 11506000
1609000 2027000
2796000 2219000
15604000 $ 39724000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
As part of the on-going monitoring of the credit quality of the Banks loan portfolio management categorizes loans into rrsk categories based on relevant information about the ability of borrowers to service their debt and comply with various terms of their loan agreements The Bank considers current financial information historical payment experrence credit documentation public information and current economic trends Generally all sizeable credits receive a financial review no less than annually to monitor and adjust if necessary the credits risk profile Credits classified as watch generally receive a review more frequently than annually For substandard and doubtful credit classifications the frequency of review is increased to no less than quarterly in order to determine potential impact on credit loss estimates
The Bank categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt
Pass - A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors if any) or by the fair value less cost to acquire and sell of any underlying collateral in a timely manner Pass assets also include certain assets considered watch which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring
Special Mention - A special mention asset or risk rating of 6 has potential weaknesses that deserve managements close attention The asset may also be subject to a weak or speculative market or to economic conditions which may in the future adversely affect the obligor If left uncorrected these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Banks credit position at some future date Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification
Substandard - A substandard asset or risk rating of 7 is an asset with a well-defined weakness that jeopardizes repayment in whole or in part of the debt These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged These assets are characterized by the distinct possibility that the institution will sustain some loss of principal andor interest if the deficiencies are not corrected A loan does necessarily need to have an identifiable loss potential in order to receive this rating
Doubtful - An asset that has all the weaknesses or risk rating of 8 inherent in the substandard classification with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently known facts conditions and values highly questionable and improbable The possibility of loss is extremely likely but it is not identified at this point due to pending factors
Loss - An asset or portion thereof classified as loss is considered uncollectible and of such little value that its continuance on the Companys books as an asset is not warranted This classification does not necessarily mean that an asset has no recovery or salvage value but rather there is much doubt about whether how much or when the recovery would occur As such it is not practical or desirable to defer the write-off Therefore there is no loss balance to report at December 31 2014
Residential real estate and consumer installment loans are assessed for credit quality based on the contractual aging status of the loan and payment activity Such assessment is completed at the end of each reporting period
1 7
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present the risk category of loans evaluated by internal asset classification based on the most recent analysis performed and the contractual aging as of December 31 2014 and 2013
December 31 2014
Commercial Commercial real estate
Retail properties Multifamily
Mixed-use properties Industrial manufacturing warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
December 31 201 J
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties lndustnal manufactunng warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
Pass
$ 61710000 $
272359000 88002000 85430000 63660000
104525000
1531 14000
$ 828800000 $
$
$
Pass
s 62034000 $
250040000 76086000 85355000 60643000
108880000 1 1 7047000
s 760085000 $
$
$
1 8
Special Mention Substandard Doubtful Total
$ 1 016000 $ 168000 s 62894000
3701000 17384000 3483000 296927000 635000 1870000 90507000 238000 7175000 2728000 95571000
1353000 65013000 1 130000 4480000 110 135000
5937000 3461000 596000 163108000
10511 000 $ 32036000 $ 12808000 $ 884155000
Performing Non-periorming Total
140783000 s 2796000 $ 143579000
743000 743000
141 526000 s 2796000 $ 144322000
Special Mention Substandard Doubtful Total
$ 342000 $ 266000 s 62642000
10871000 25778000 15263000 301952000 1 885000 1905000 4526000 84402000 1 714000 6801000 3644000 97514000
273000 60916000 925000 11 506000 1213 1 1 000
381000 4064000 2027000 123519000
14851 000 $ 39815000 s 37505000 $ 852256000
Performing Non-performing Total
127597000 $ 2308000 $ 129905000
1 229000 1 229000
1 28826000 $ 2308000 $ 1 3 1 1 34000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables provide additional detail of the activity in the allowance for loan losses by portfolio segment for the years ended December 3 1 2014 and 2013
Construction
Commercial and land Rcs1dent1al Consumer
December 31 2014 Commercial Real Es1ate Develoement Real Estate lnsallment Total
Allowanco for loan lossos
Beg1nn1ng balance 1385000 20052000 3549000 2623000 17000 27626000
PrOV1Son for loan losses 2210000 2680000 2007000 3000 6900000
Loans chargedmiddotoff (179000) (8163000) 687000) (2140000) (11169000)
Recovenes of loans
previously charged-off 85000 2916000 223000 3224000
Ending balance s 1291000 1701 5000 5542000 271 3000 s 20000 s 26581000
Poriod-ondtd llmount allocatod to loans
lndMdually evaluated for
1mpa1rment 200000 445000 36000 52000 s 733000
Collec11vely evaluated
for 1mpa1rrnent 1091 000 16570000 5506000 2661000 20000 25648000
Ending balance 1291000 17015000 5542000 s 2713000 20000 26581000
Loans
lndMdually evaluated for
impairment 368000 17274000 3526000 4048000 25216000
Collecively evalua1ed
for 1mpa1rrnent 62526000 640879000 159582000 139531000 743000 1003261000
Ending balance 62894000 658 153000 163108000 143579000 743000 1028477000
Construct1on
Commercial and Land Residential Consumer
December 31 2013 Commeroal Real Estate Development Real Eslale Installment Total
Allowance for loan losses
Beginning balance 1040000 18719000 2484000 2248000 17000 24508000
Provision for loan losses 363000 6508000 867000 784000 28000 8550000
Loans chargedmiddot Off (59000) (5817000) (122000) (457000) (28000) (6483000)
Recoveries ol loans
previously charged-off 41 000 642000 320000 48000 1051000
Ending balance 1385000 20052000 3549000 s 2623000 17000 27626000
Period-ended amount allocated to loans
Individually evaluated for
impairment 3475000 239000 61000 3775000
Collectively evaluated
for impairment 1385000 16577000 3310000 2562000 17000 23851000
Ending balance 1385000 20052000 3549000 2623000 17000 27626000
Loans
Individually evaluated for
1mpa1rment 266000 42380000 5522000 s 3307000 51475000
Collectively evalua1ed
for impairment 62376000 623715000 1 17997000 126598000 1229000 931915000
Endrng balance 62642000 666095000 123519000 129905000 1229000 983390000
1 9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present additional detail of impaired loans segregated by class as of December 3 1 2014 and 2013 The unpaid principal balance represents the recorded balance prior to any partial charge-offs The recorded investment represents customer balances net of any partial charge-offs recognized on the loans The interest income recognized column represents all interest income reported either on a cash or accrued basis after the loan became impaired The cash basis income column represents only the interest income recognized on a cash basis after the loan was classified as impaired
December 31 2014
Wih no relaed allowance recorded
Commercial Commercial real estale
Reail properties Multifamily Mixed-use properties lndustnal manufacturing
warehouse Other commercial real estate
Construction and land developmen
Residential real estate Consumer installment
Wi1h an allowance recorded Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties Industrial manufacturing
warehouse Other commercial real estate
Construction and land development
Residential real estate Consumer installment
To1al
$
$
Unpaid Principal Balance
216000 $
7266000
3283000
2861000 6121000
3672000 6045000
200000
564000 2421000
1 62000 170000
Recorded Investment
168000 s
5543000
3119000
1353000 4480000
3400000 3878000
200000
564000 2215000
126000 170000
32981000 $ 25216000 $
20
Allowance for Loan Losses
Allocated
200000
42000 403000
36000 52000
733000
Average Recorded
Investment
$ 208000 $
1 1 474000 3514000 4354000
131 5000 5509000
4 183000 4673000
29000
677000 2270000
141 000 44000
$ 38391000 $
Interest Income
Recognized
109000 48000
161 000
125000 33000
38000
5000
519000
$
$
Cash Basis Interest Income
Recognized
108000 48000
1 57000
1 1 3000 32000
38000
5000
501000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Cash Basis Unpaid Allowance for Average Interest Interest
Principal Recorded Loan Losses Recorded Income Income December 31 2013 Balance Investment Allocated Investment Recognized Recognized
With no related allowance recordedmiddot
Commercial $ 266000 $ 266000 $ $ 326000 $ $ Commercial real estate
Retail properties 26699000 12500000 10635000 146000 139000 Multifamily 5542000 4526000 4838000 88000 88000 Mixed-use properties 3123000 2527000 2750000 103000 102000 Industrial manufacturing
warehouse 1 641000 273000 528000 Other commercial real estate 4056000 3497000 3617000
Construction and land development 8517000 3965000 4971000 1 1 4000 1 14000
Residenial rear estate 3769000 3203000 3203000 47000 43000 Consumer installment
With an allowance recorded Commercial Commercial real estate
Retarl properties 6138000 5239000 2045000 4759000 35000 35000 Multifamily 692000 682000 69000 687000 38000 38000 Mixed-use properties 5764000 5 127000 778000 4200000 92000 87000 Industrial manufacturing
warehouse Other commercial real estate 10001000 8009000 583000 8986000
Construction and land development 2770000 1 557000 239000 1 853000
Residential real estate 120000 104000 61000 1 04000 Consumer installment
Total $ 79298000 $ 51475000 $ 3775000 $ 51457000 $ 663000 $ 646000
21
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present troubled debt restructurings and the financial effects of troubled debt restructurings
Year Ended December 31 2014
Pre-Modification Post-Modification Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reserves
Commercial $ 288000 $ 168000 $
Commercial real estate
Retail properties 3 1790000 2060000
Multifamily 1 409000 672000 732000
Mixed-use properties 6 4660000 3 118000 974000
Industrial manufacturing warehouse Other commercial real estate 4682000 2864000 1 272000
Construction and land development 1 3924000 2930000 500000
Residential real estate 3 1288000 1 252000 52000
Consumer installment Total 16 $ 1 8041000 $ 13064000 $ 3530000
Year Ended December 3 1 2013
Pre-Modification Post-Modification
Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reseives
Commercial $ $ $
Commercial real estate
Retail properties 3 8596000 3651000 4363000
Multifamily 2 7026000 5090000 1598000
Mixed-use properties 7 6005000 4421000 1 612000
Industrial manufacturing warehouse
Other commercial real estate 5 14589000 10888000 2578000
Construction and land development 3 7409000 4493000 1 162000
Residential real estate 3 1515000 1 371000 117000
Consumer installment Total 23 $ 45 140000 $ 29914000 $ 11430000
Troubled debt restructurings that were accruing interest were $9520000 and $ 1 1 382000 respectively as of December 3 1 2014 and 2013 Troubled debt restructurings that were non-accruing were $3544000 and $ 1 8532000 respectively as of December 3 1 2014 and 201 3 Troubled debt restructurings included loans where the loan principal and corresponding interest rate was reduced and i n some instances the loan amortization period was extended During 2014 there were three troubled debt restructurings with outstanding balances at the time of re-default was $ 1 1 55000 and loan balances outstanding for these loans at December 3 1 2014 was $239000
22
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
McGladrey
To the Board of Directors Lakeside Bank and Subsidiary Chicago Illinois
Independent Auditors Report
Report on the Financial Statements
McGladry LLP
We have audited the accompanying consolidated financial statements of Lakeside Bank and Subsidiary (the Bank) which comprise the consolidated balance sheets as of December 31 2014 and 2013 and the related consolidated statements of income comprehensive income stockholders equity and cash flows for the years 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 audits We conducted our audits 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 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 reasonable 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 Lakeside Bank and Subsidiary as of December 31 2014 and 2013 and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America
Mbullmbor of 1he RSM fntemilltkgtnal nvtwork or lnndent ccounung tu and comulUng firm
Other Matter
We also have examined in accordance with attestation standards established by the American Institute of Certified Public Accountants the internal control over financial reporting of Lakeside Bank as of December 31 2014 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of Treadway Commission (COSO) in 2013 and our report dated April 30 2015 expressed an unmodified opinion
Chicago I llinois April 30 2015
2
Lakeside Bank and Subsidiary
Consolidated Balance Sheets
December 31 2014 and 2013
2014 2013
Assets
Cash and due from banks $ 112952000 $ 66775000
Interest-bearing deposits in banks 6938000 953000
Securities available for sale 50802000 61848000
Federal Home Loan Bank stock at cost 2403000 2403000
Loans net of allowance for loan losses of $26581000 in 2014 and
$27626000 in 2013 1001896000 955 764000
Premises and equipment net 22289000 16557000
Other real estate owned 4719000 11399000
Other assets 5266000 7697000
$ 1207265000 $ 1 123396000
Liabilities and Stockholders Equity
Deposits
Noninterest-bearing $ 286622000 $ 249247000
Savings and NOW 266307 000 289093000
Time certificates $250000 or more 73 116000 79453000
Other time certificates 375046000 324465000
1001091000 942258000
Short-term borrowings 4518000 1314000
Long-term borrowings 28000000 13000000
Accrued expenses and other liabilities 15597000 14834000
1049206000 971406000
Commitments Contingencies and Credit Risk (See Notes 6 and 12)
Stockholders Equity
Common stock $5 par value authorized 656907 shares
issued and outstanding 446062 shares 2230000 2230000
Surplus 39879000 39879000
Undivided profits 120032000 113181000
Accumulated other comprehensive loss (4082000) (3300000)
158059000 151990000
$ 1207265000 $ 1 123396000
See Notes to Consolidated Financial Statements
3
Lakeside Bank and Subsidiary
Consolidated Statements of Income
Years Ended December 31 2014 and 2013
Interest and dividend income
Loans including fees
Investment securities
Taxable
Tax-exempt
Federal funds sold
Other
Total interest and dividend income
Interest expense
Deposits
Borrowings
Total interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Noninterest income
Fees for banking services
Gain on sale of premises and equipment
Loss on sale of securities
Total noninterest income
Noninterest expenses
Salaries and employee benefits
Occupancy
Equipment
Data processing
Other real estate owned net
FDIC insurance
Other general and administrative
Total noninterest expenses
Net income before income taxes
Income taxes
Net income
See Notes to Consolidated Financial Statements
$
$
4
2014 2013
51751000 $ 51 176000
349000 375000
615000 792000
196000 212000
111000 133000
53022000 52688000
5097000 5789000
194000 139000
5291000 5928000
47731000 46760000
6900000 8550000
40831000 38210000
2258000 5 114000
9011000
(89000) (246000)
2 169000 13879000
10477000 9967000
2077000 2110000
1010000 957000
773000 728000
(319000) 1947000
1531000 1401000
2777000 4060000
18326000 21 170000
24674000 30919000
311000 230000
24363000 $ 30689000
Lakeside Bank and Subsidiary
Consolidated Statements of Comprehensive Income
Years Ended December 31 2014 and 2013
Net income
Other comprehensive loss
Unrealized holding gains (losses) arising during the year
Less reclassification adjustment for losses included in
net income
Change in net unrealized (losses) gains on defined benefit pension plan
Comprehensive income
See Notes to Consolidated Financial Statements
5
$
$
2014 2013
24363000 $ 30689000
1025000 (1939000)
89000 246000
(1896000) 1604000
(782000) (89000)
23581000 $ 30600000
Lakeside Bank and Subsidiary
Consolidated Statements of Stockholders Equity
Years Ended December 31 2014 and 2013
Accumulated
Other
Common Undivided Comprehensive
Stock Surplus Profits Loss Total
Balance at December 31 2012 $ 2230000 $ 39879000 $ 951 49000 $ (3 21 1 000) $ 1 34047000
Net income 30689000 30689000
Other comprehensive loss (89000) (89000)
Cash dividends on common stock (12657000) ( 12 657000)
Balance at December 31 2013 2230000 39879000 1131 8 1 000 (3300000) 151 990000
Net income 24363000 24363000
Other comprehensive loss (782000) (782000)
Cash dividends on common stock (1 7512000) ( 17 512000)
Balance at December 31 2 014 $ 2230000 $ 39879000 $ 120032000 $ (4082000) $ 158059000
See Notes to Consolidated Financial Statements
6
lakeside Bank and Subsidiary
Consolidated Statements of Cash Flows
Years Ended December 31 2014 and 2013
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses
Depreciation of premises and equipment
Arriortization of security prerniums and discounts net
Loss on sale of securities
Gain on sale of premises and equipment
(Gain) loss on sale and writedown of other real estate owned
Net change in
Other assets
Other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities
Net change in interest-bearing deposits in banks
Proceeds from maturities sales and calls of securities
available for sale
Purchase of securities available for sale
Net increase in loans
Additions to premises and equipment
Improvements in other real eatate owned
Proceeds from sale of premises and equipment
Proceeds from sale of other real estate owned
Net cash used in investing activities
Cash Flows from Financing Activities
Net increase in deposits
Net change in short-term borrowings
Net change in long-term borrowings
Cash dividends paid on common stock
Net cash provided by used in) financing activities
Net change in cash and due from banks
Cash and due from banks at beginning of year
Cash and due from banks at end of year
Supplementary cash flow information
Interest paid on deposits and borrowed funds
Income taxes paid
Supplementary schedule of noncash investing activities
Transfer of loans to other real estate owned Sales of other real estate owned financed bv the Bank
See Notes to Consolidated Financial Statements
7
$
$
$
$
2014 2013
24363000 $ 30689000
6900000 8550000
906000 1013000
730000 953000
89000 246000
(9011000)
(1066000) 1764000
535000 (1 108000)
763000 1115000
33220000 34211000
(5985000) 2497000
11841000 13944000
(500000) (10179000)
(49224000) (55 734000)
(6638000) (5604000)
(706000)
9600000
4644000 2225000
(46568000) (43251000)
58833000 6414000
3204000 (10487000)
15000000 4000000
(17512000) (12657000)
59525000 (12730000)
46177000 (21 770000)
66775000 88545000
112952 000 $ 66775000
5249000 $ 6050000
378000 130000
1881000 $ 1345000 5689000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies
Principles of consolidation The consolidated financial statements include the accounts of Lakeside Bank (the Bank) and its wholly owned subsidiary Lakeside Community Development LLC All intercompany transactions and balances have been eliminated The Bank is a wholly owned subsidiary of Lakeside Bancorp Inc
Nature of operations Lakeside Bank is a state chartered bank whose operations consist primarily of those financial activities common to the commercial banking industry The Bank serves northeastern Illinois and services are provided at six locations throughout Chicago The Banks wholly owned subsidiary Lakeside Community Development LLC invests in various community development activities
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 the reported amounts of revenue and expenses during the reporting period Actual results could differ from those estimates Material estimates that are susceptible to significant change in the near term relate to the determination of the allowance for loan losses valuation of other real estate owned the defined benefit plan liability and fair value of financial instruments
Presentation of cash flows For purposes of the consolidated statements of cash flows cash and due from banks include cash on hand and amounts due from banks (including cash items in process of clearing) Cash flows from interest-bearing deposits in banks loans deposits federal funds purchased and short-term and long-term borrowings are reported on a net basis
Interest-bearing deposits in banks Interest-bearing deposits in banks mature within one year and are carried at cost
Securities available for sale All securities are classified as available for sale as the Bank intends to hold the securities for an indefinite period of time but not necessarily to maturity Any decision to sell a security classified as available for sale would be based on various factors including significant movements in interest rates changes in the maturity mix of the Banks assets and liabil ities liquidity needs regulatory capital considerations and other similar factors Securities available for sale are carried at fair value U nrealized gains or losses are reported as increases or decreases in accumulated other comprehensive income Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities Realized gains or losses on sales of available for sale securities are recorded using the specific identification method
Management evaluates securities for other-than-temporary impairment (OTII) at least on a quarterly basis and more frequently when economic or market conditions warrant such evaluation Declines in the fair value of individual securities available for sale below their amortized cost that are determined to be other-than-temporary are reflected in earnings as realized losses In estimating other-than-temporary impairment losses management considers the length of time and the extent to which the fair value has been less than cost the financial condition and near-term prospects of the issuer and whether it is more likely than not to sell the security before recovery of its cost basis If they intend to sell an impaired security the Bank records an other-than-temporary loss in an amount equal to the entire difference between the fair value and amortized cost I f the Bank does not intend to sell the security only the credit portion of the estimated loss is recognized in earnings with the other portion recognized in accumulated other comprehensive income
8
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
Federal Home Loan Bank stock The Bank as a member of the Federal Home Loan Bank of Chicago (the FHLB) is required to maintain an investment in capital stock of the FHLB The stock does not have a readily determinable fair value as ownership is restricted and it lacks a ready market As a result this stock is carried at cost and evaluated periodically for impairment
Loans The Bank extends commercial mortgage and consumer loans to customers A substantial portion of the loan portfolio is represented by commercial loans in northeastern Illinois The ability of the Banks debtors to honor their contracts is dependent upon the general economic conditions in this area
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are generally reported at their outstanding unpaid principal balances adjusted for charge-offs and the allowance for loan losses I nterest income is accrued on the unpaid principal balance Loan balances include loan origination fees and direct loan origination costs that are being deferred and the net amount amortized as an adjustment of the related loans yield The Bank is amortizing these amounts over the contractual loan maturity
The accrual of interest on loans is typically discontinued at the time the loan is 90 days delinquent In al l cases loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful All interest accrued but not collected for loans that are placed on non accrual or charged-off is reversed against interest income The interest on these loans is accounted for on the cash-basis or cost-recovery method until qualifying for return to accrual Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured
Troubled debt restructurings A loan is classified as a troubled debt restructuring when a borrower is experiencing financial difficulties that leads to a restructuring of the loan and the Bank grants concessions to the borrower in the restructuring that it would not otherwise consider These concessions may include rate reductions principal forgiveness extension of maturity date and other actions intended to minimize potential losses Troubled debt restructurings are classified as impaired loans A loan that is modified at a market rate of interest may no longer be classified as a troubled debt restructuring and impaired in the calendar year subsequent to the restructuring if it is in compliance with the mod1f1ed terms Performance prior to the restructuring is considered when assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual at the time of the restructuring or after a shorter performance period
Allowance for loan losses The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to expense Loan losses are charged against the allowance when management believes that collectability of the principal is unlikely Subsequent recoveries if any are credited to the allowance
When establishing the allowance for loan losses management categorizes loans into risk categories generally based on the nature of the collateral and the basis of repayment These risk categories and the relevant risk characteristics are as follows
Commercial loans - Commercial loans are loans for corporate and business purposes including issuing letters of credit The Banks commercial business loan portfolio is comprised of loans for a variety of purposes and generally is secured by equipment machinery and other business assets Commercial business loans generally have terms of five years or less and interest rates that float in accordance with a designated published index Substantially all of such loans are secured and backed by the personal guarantees of the owners of the business
9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements -------------------------------middot middot-----------
Note 1 Summary of Significant Accounting Policies (Continued)
Commercial real estate loans - Commercial real estate loans are primarily secured by apartment buildings office and industrial buildings mixed-use properties small retail shopping centers and various special purpose properties including warehouses and restaurants Although terms vary commercial real estate loans generally have amortizations of 15 to 30 years as well as balloon payments of two to seven years and terms which provide that the interest rates thereon may be adjusted annually at the Banks discretion based on a designated index
Construction and land development loans - Construction land development loans consist of vacant land and property that is in the process of improvement Repayment of these loans can be dependent on the sale of the property to third parties or the successful completion of the improvements by the builder for the end user In the event a loan is made on property that is not yet approved for the planned development there is the risk that approvals will not be granted or will be delayed Construction and land development loans also run the risk that improvements will not be completed on time or in accordance with specifications and projected costs Construction and land development loans generally have terms of one year to 18 months during the construction period and interest rates based on a designated index
Residential real estate loans - Residential real estate loans include home equity lines of credit secured by a first or second mortgage and 1-4 family residential real estate loans Loans are generally smaller in size and are homogenous because they exhibit similar characteristics
Consumer installment loans - Consumer installment loans generally have higher interest rates than mortgage loans The risk involved in consumer loans is the type and nature of the collateral and in certain cases the absence of collateral These loans are secured by personal assets or may be unsecured and repayment is directly dependent on the borrowers income and the borrowers ability to service debt payments
The allowance for loan losses is evaluated on a regular basis by management and is based upon managements periodic review of the collectability of the loans in light of historical experience the nature and volume of the loan portfolio estimated value of any underlying collateral and prevailing economic conditions and adverse situations that may affect the borrowers ability to pay This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available In addition regulatory agencies as an integral part of their examination process periodically review the Banks allowance for loan losses and may require the Bank to make additions to the allowance based on their Judgment about information available to them at the time of their examinations
The allowance consists of specific and general components The specific component relates to loans that are classified as impaired and an allowance is established when the collateral value discounted cash flows or observable market price of the impaired loan is lower than the carrying value of that loan The general component covers non-impaired loans and is based on the Banks own loss experience adjusted for qualitative factors These qualitative factors consider local economic trends concentrations management experience and other elements of the Banks lending operations
10
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
A loan is impaired based on current information and events when it is probable the Bank will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Factors considered by management in determining impairment include payment status collateral value and the probability for collecting scheduled principal and interest payment when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on an individual-loan basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reason for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on an individual loan basis based on the fair value of the collateral if the loan is collateral dependent the present value of expected future cash flows discounted at the loans effective interest rate or the loans obtainable market price
Large groups of homogenous loans are collectively evaluated for impairment Accordingly the Bank does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Other real estate owned Assets acquired through or in lieu of loan foreclosure are held for sale and initially recorded at fair value less estimated costs to sell at the date of foreclosure establishing a new cost basis Subsequent to foreclosure valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less costs to sell Revenue and expenses from operations and changes in the valuation allowance are included in noninterest expenses-other real estate owned net
Premises and equipment Land is carried at cost Premises and equipment are stated at cost less accumulated depreciation (building 12-25 years leasehold improvements 3-15 years furniture and fixtures 3-20 years) Depreciation is provided principally by the straight-line method over the estimated useful lives of the assets Amortization of leasehold improvements is computed on the straight-line method over the lease term or the estimated useful lives of the improvements whichever 1s shorter
Transfers of financial assets Transfers of financial assets are accounted for as sales when control over the assets has been surrendered Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank - put presumptively beyond the reach of the transferor and its creditors even in bankruptcy or other receivership (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets
Income taxes Lakeside Bancorp Inc with the consent of its stockholders elected to be taxed as an S corporation under sections of the federal and state income tax laws which provide that in lieu of corporate income taxes the stockholder accounts for the Banks items of income deductions losses and credits As a wholly owned subsidiary the Banks income and expenses are included in the Lakeside Bancorp Inc consolidated tax returns As a result for the periods covered by this election no corporate income taxes will be recognized in the accompanying consolidated financial statements except for certain state income taxes
11
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
The Bank evaluates its tax positions to determine the appropriate level of tax reserves to maintain for uncertain tax positions The Bank has no uncertain tax positions as of December 3 1 2014 and 2013
The Bank would recognize interest and penalties on income taxes as a component of income tax expense
The Bank is generally no longer subject to US federal or state and local income tax examinations by tax authorities for years before 201 1
Comprehensive income Comprehensive income consists of net income changes in net unrealized gains and losses on securities available for sale reclassification adjustments for realized gains and losses on sales of AFS securities and changes in defined benefit pension obligation and is presented in the consolidated statements of stockholders equity
Recent accounting pronouncements In January 2014 the FASB (Financial Accounting Standards Board) issued guidance which requires an entity derecognize the loan receivable and recognize the real estate property when it has received physical possession of residential real estate property collateralizing a consumer mortgage loan upon either ( 1 ) 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 that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement Additionally the amendments require annual disclosures This guidance is effective for the Company for fiscal years beginning after December 15 2014 The adoption of this guidance is not expected to have a material impact on the consolidated financial statements
Subsequent events The Bank has evaluated subsequent events for potential recognition andor disclosure through April 30 2015 the date the consolidated financial statements were available to be issued
1 2
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 2 Restricted Cash and Due from Banks
The Bank is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank of Chicago The total of those reserve balances averaged $1 01 2000 and $935000 in 2014 and 2013 respectively The Bank maintains amounts due from banks which exceed federally insured limits The Bank has not experienced any losses in such accounts
Note 3 Securities Available for Sale
The amortized cost and fair value of securities with gross unrealized gains and losses follows
December 31 2014
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
December 31 2013
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
$
$
$
$
Amor1ized
Cost
15917000 $
23417000
6038000
5159000
50531000
250000
50781000 $
17835000 $
32338000
6590000
5928000
62691000
250000
62941000 $
Gross
Unrealized
Gains
41000 $
216000
22000
70000
349000
17000
366000 $
41000 $
190000
39000
26000
296000
11000
307000 s
Gross
Unrealized Fair
Losses Value
(53000) s 15905000
(243000) 23390000
(8000) 6052000
(41000) 5188000
(345000) 50535000
267000
(345000) $ 50802000
(255000) $ 17621000
(987000) 31541000
(32000) 6597000
(126000) 5828000
(1400000) 61587000
261000
(1400000) $ 61848000
Securities available for sale with a carrying value of $8339000 and $3848000 at December 31 2014 and 201 3 respectively were pledged on deposits of the United States Government and other public funds as required or permitted and other short-term borrowings
The amortized costs and fair values of debt securities available for sale as of December 3 1 2014 by contractual maturity are shown below Maturities may differ from contractual maturities in mortgageshybacked securities because the mortgages underlying the securities may be called or repaid without any penalties Therefore these securities are not included in the maturity categories in the following maturity summary
1 3
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements middot-
Note 3 Securities Available for Sale (Continued)
Amortized Fair
Cost Value
Due in one year or less $ 3049000 $ 3057000 Due after one year through five years 21 506000 21 507000
Due after five years through ten years 71 70000 7163000
Due after ten years 1 3647000 1 3620000
45372000 45347000
Residential mortgage-backed securities 5 159000 5188000 Totals $ 50531 000 $ 50535000
The following tables show the gross unrealized losses and fair value of investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 3 1 2 0 1 4 and 2 0 1 3
less than 12 Months 12 Months or More Total Fair Unrealized Fair Unreahzed Fair Unrealized
2014 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 498000 s (2000) $ 7695000 s (51000) $ 8193000 $ (53000) Obligations of states and
pol1ilca subd1v1sions 13671000 (243000) 13671000 (243000) Corporate debt obligations 1132000 (8000 1 132000 (8000) Residential mortgage-backed
obligations 2128000 (4100D) 2128000 (41000) Total temporary
impaired securities s 498000 s (2000) $ 24626000 $ (343000) s 25124000 s (345000)
Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized
2013 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 10867000 $ (232000) s 2632000 $ (23000) $ 13499000 s 255000) Obligations of states and
polillcal subdivisions 11195000 (365000) 11169000 (622000) 22364000 (987000) Corporate debt obligations 1179000 (32000) 1179000 (32000) Residential mortgage-backed
obligations 3977000 (126000) 3977000 (126000) Total temporary
impaired securities 26039000 s (723000) $ 14980000 s (677000) s 41019000 $ (1400000)
In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysis reports Since management does not intend to sell any temporarily impaired securities before recovery of their cost basis no declines are deemed other-than-temporary
On sale proceeds of $5637000 there were $57000 in realized gains and $146000 in realized losses on the sale of securities during the year ended December 3 1 2 0 1 4 On sale proceeds of $708000 there were no realized gains and $246000 realized losses on the sale of securities during the year ended December 3 1 2 0 1 3
1 4
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans
A summary of the balances of loans follows
Commercial $
Commercial real estate
Construction and land development
Residential real estate
Consumer installment
Less allowance for loan losses
Loans net $
December 3 1
2014 2013
62894000
658 153000
163 1 08000
1 43579000
743000
1 028477000
2658 1 000
1 001 896 000
$ 62642000
666095000
123519000
129905000
1 229000
983390000
27626000
$ 955764000
The following tables present the contractual aging of the recorded investment in loans by class of loans as of December 3 1 2014 and 2013
Loans Past 90 Days or 30-59 Days 60middot89 Days Due 90 Days More Past Due
December 31 2014 Current Past Due Past Due or More Total and Accruin
Commercial $ 62655000 $ 4000 $ 36000 $ 199000 s 62894000 $ 199000
Commercial real estate Relail properties 295610000 105000 1212000 296927000 199000
Multifamily 90507000 90507000
Mixed-use properties 93 116000 2455000 95571000
Industrial manufacturing warehouse 63660000 1353000 65013000
Other commerc1al real estate 106101000 4034000 110135000
Construction and land development 162512000 596000 163 108000
Residential real estate 140636000 208000 2735000 143579000
Consumer installment 743000 743000
Total $ 1 015 540000 $ 109 000 $ 244 000 12584 000 $ 1 028 477 000 s 398 000
15
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Loans Past 90 Days or 30-59 Days 60-89 Days Due 90 Days More Past Due
December 31 2013 Current Past Due Past Due or More Total and Accruing
Commercial $ 61588000 $ $ 755000 $ 299000 s 62642000 $ 33000 Commercial real estate
Retail properties 284 162000 1152000 1331000 15307000 301952000 44000 Mu11ifamily 78203000 1223000 450000 4526000 84402000 Mixed-use properties 93292000 262000 316000 3644000 97514000 Industrial manufacturing
warehouse 58947000 1696000 273000 60916000 Other commercial real
estate 109449000 282000 74000 11506000 121311000 Construction and land
development 121492000 2027000 123519000 Residential real estate 126229000 1062000 306000 2308000 129905000 89000 Consumer installment 1226000 1000 2000 1229000
Total $ 934 588000 $ 3982 000 s 4 930 000 39 890 000 983 390 000 $ 166 000
The following table presents the recorded investment in nonaccrual loans by class of loans as of December 31 2014 and 2013
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties
Industrial manufacturing warehouse Other commercial real estate
Construction and land development Residential real estate
Total
$
$
16
Nonaccrual Loans 2014 2013
168000 $ 266000
2470000 15263000
4526000
2728000 3644000
1353000 273000
4480000 11506000
1609000 2027000
2796000 2219000
15604000 $ 39724000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
As part of the on-going monitoring of the credit quality of the Banks loan portfolio management categorizes loans into rrsk categories based on relevant information about the ability of borrowers to service their debt and comply with various terms of their loan agreements The Bank considers current financial information historical payment experrence credit documentation public information and current economic trends Generally all sizeable credits receive a financial review no less than annually to monitor and adjust if necessary the credits risk profile Credits classified as watch generally receive a review more frequently than annually For substandard and doubtful credit classifications the frequency of review is increased to no less than quarterly in order to determine potential impact on credit loss estimates
The Bank categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt
Pass - A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors if any) or by the fair value less cost to acquire and sell of any underlying collateral in a timely manner Pass assets also include certain assets considered watch which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring
Special Mention - A special mention asset or risk rating of 6 has potential weaknesses that deserve managements close attention The asset may also be subject to a weak or speculative market or to economic conditions which may in the future adversely affect the obligor If left uncorrected these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Banks credit position at some future date Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification
Substandard - A substandard asset or risk rating of 7 is an asset with a well-defined weakness that jeopardizes repayment in whole or in part of the debt These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged These assets are characterized by the distinct possibility that the institution will sustain some loss of principal andor interest if the deficiencies are not corrected A loan does necessarily need to have an identifiable loss potential in order to receive this rating
Doubtful - An asset that has all the weaknesses or risk rating of 8 inherent in the substandard classification with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently known facts conditions and values highly questionable and improbable The possibility of loss is extremely likely but it is not identified at this point due to pending factors
Loss - An asset or portion thereof classified as loss is considered uncollectible and of such little value that its continuance on the Companys books as an asset is not warranted This classification does not necessarily mean that an asset has no recovery or salvage value but rather there is much doubt about whether how much or when the recovery would occur As such it is not practical or desirable to defer the write-off Therefore there is no loss balance to report at December 31 2014
Residential real estate and consumer installment loans are assessed for credit quality based on the contractual aging status of the loan and payment activity Such assessment is completed at the end of each reporting period
1 7
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present the risk category of loans evaluated by internal asset classification based on the most recent analysis performed and the contractual aging as of December 31 2014 and 2013
December 31 2014
Commercial Commercial real estate
Retail properties Multifamily
Mixed-use properties Industrial manufacturing warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
December 31 201 J
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties lndustnal manufactunng warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
Pass
$ 61710000 $
272359000 88002000 85430000 63660000
104525000
1531 14000
$ 828800000 $
$
$
Pass
s 62034000 $
250040000 76086000 85355000 60643000
108880000 1 1 7047000
s 760085000 $
$
$
1 8
Special Mention Substandard Doubtful Total
$ 1 016000 $ 168000 s 62894000
3701000 17384000 3483000 296927000 635000 1870000 90507000 238000 7175000 2728000 95571000
1353000 65013000 1 130000 4480000 110 135000
5937000 3461000 596000 163108000
10511 000 $ 32036000 $ 12808000 $ 884155000
Performing Non-periorming Total
140783000 s 2796000 $ 143579000
743000 743000
141 526000 s 2796000 $ 144322000
Special Mention Substandard Doubtful Total
$ 342000 $ 266000 s 62642000
10871000 25778000 15263000 301952000 1 885000 1905000 4526000 84402000 1 714000 6801000 3644000 97514000
273000 60916000 925000 11 506000 1213 1 1 000
381000 4064000 2027000 123519000
14851 000 $ 39815000 s 37505000 $ 852256000
Performing Non-performing Total
127597000 $ 2308000 $ 129905000
1 229000 1 229000
1 28826000 $ 2308000 $ 1 3 1 1 34000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables provide additional detail of the activity in the allowance for loan losses by portfolio segment for the years ended December 3 1 2014 and 2013
Construction
Commercial and land Rcs1dent1al Consumer
December 31 2014 Commercial Real Es1ate Develoement Real Estate lnsallment Total
Allowanco for loan lossos
Beg1nn1ng balance 1385000 20052000 3549000 2623000 17000 27626000
PrOV1Son for loan losses 2210000 2680000 2007000 3000 6900000
Loans chargedmiddotoff (179000) (8163000) 687000) (2140000) (11169000)
Recovenes of loans
previously charged-off 85000 2916000 223000 3224000
Ending balance s 1291000 1701 5000 5542000 271 3000 s 20000 s 26581000
Poriod-ondtd llmount allocatod to loans
lndMdually evaluated for
1mpa1rment 200000 445000 36000 52000 s 733000
Collec11vely evaluated
for 1mpa1rrnent 1091 000 16570000 5506000 2661000 20000 25648000
Ending balance 1291000 17015000 5542000 s 2713000 20000 26581000
Loans
lndMdually evaluated for
impairment 368000 17274000 3526000 4048000 25216000
Collecively evalua1ed
for 1mpa1rrnent 62526000 640879000 159582000 139531000 743000 1003261000
Ending balance 62894000 658 153000 163108000 143579000 743000 1028477000
Construct1on
Commercial and Land Residential Consumer
December 31 2013 Commeroal Real Estate Development Real Eslale Installment Total
Allowance for loan losses
Beginning balance 1040000 18719000 2484000 2248000 17000 24508000
Provision for loan losses 363000 6508000 867000 784000 28000 8550000
Loans chargedmiddot Off (59000) (5817000) (122000) (457000) (28000) (6483000)
Recoveries ol loans
previously charged-off 41 000 642000 320000 48000 1051000
Ending balance 1385000 20052000 3549000 s 2623000 17000 27626000
Period-ended amount allocated to loans
Individually evaluated for
impairment 3475000 239000 61000 3775000
Collectively evaluated
for impairment 1385000 16577000 3310000 2562000 17000 23851000
Ending balance 1385000 20052000 3549000 2623000 17000 27626000
Loans
Individually evaluated for
1mpa1rment 266000 42380000 5522000 s 3307000 51475000
Collectively evalua1ed
for impairment 62376000 623715000 1 17997000 126598000 1229000 931915000
Endrng balance 62642000 666095000 123519000 129905000 1229000 983390000
1 9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present additional detail of impaired loans segregated by class as of December 3 1 2014 and 2013 The unpaid principal balance represents the recorded balance prior to any partial charge-offs The recorded investment represents customer balances net of any partial charge-offs recognized on the loans The interest income recognized column represents all interest income reported either on a cash or accrued basis after the loan became impaired The cash basis income column represents only the interest income recognized on a cash basis after the loan was classified as impaired
December 31 2014
Wih no relaed allowance recorded
Commercial Commercial real estale
Reail properties Multifamily Mixed-use properties lndustnal manufacturing
warehouse Other commercial real estate
Construction and land developmen
Residential real estate Consumer installment
Wi1h an allowance recorded Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties Industrial manufacturing
warehouse Other commercial real estate
Construction and land development
Residential real estate Consumer installment
To1al
$
$
Unpaid Principal Balance
216000 $
7266000
3283000
2861000 6121000
3672000 6045000
200000
564000 2421000
1 62000 170000
Recorded Investment
168000 s
5543000
3119000
1353000 4480000
3400000 3878000
200000
564000 2215000
126000 170000
32981000 $ 25216000 $
20
Allowance for Loan Losses
Allocated
200000
42000 403000
36000 52000
733000
Average Recorded
Investment
$ 208000 $
1 1 474000 3514000 4354000
131 5000 5509000
4 183000 4673000
29000
677000 2270000
141 000 44000
$ 38391000 $
Interest Income
Recognized
109000 48000
161 000
125000 33000
38000
5000
519000
$
$
Cash Basis Interest Income
Recognized
108000 48000
1 57000
1 1 3000 32000
38000
5000
501000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Cash Basis Unpaid Allowance for Average Interest Interest
Principal Recorded Loan Losses Recorded Income Income December 31 2013 Balance Investment Allocated Investment Recognized Recognized
With no related allowance recordedmiddot
Commercial $ 266000 $ 266000 $ $ 326000 $ $ Commercial real estate
Retail properties 26699000 12500000 10635000 146000 139000 Multifamily 5542000 4526000 4838000 88000 88000 Mixed-use properties 3123000 2527000 2750000 103000 102000 Industrial manufacturing
warehouse 1 641000 273000 528000 Other commercial real estate 4056000 3497000 3617000
Construction and land development 8517000 3965000 4971000 1 1 4000 1 14000
Residenial rear estate 3769000 3203000 3203000 47000 43000 Consumer installment
With an allowance recorded Commercial Commercial real estate
Retarl properties 6138000 5239000 2045000 4759000 35000 35000 Multifamily 692000 682000 69000 687000 38000 38000 Mixed-use properties 5764000 5 127000 778000 4200000 92000 87000 Industrial manufacturing
warehouse Other commercial real estate 10001000 8009000 583000 8986000
Construction and land development 2770000 1 557000 239000 1 853000
Residential real estate 120000 104000 61000 1 04000 Consumer installment
Total $ 79298000 $ 51475000 $ 3775000 $ 51457000 $ 663000 $ 646000
21
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present troubled debt restructurings and the financial effects of troubled debt restructurings
Year Ended December 31 2014
Pre-Modification Post-Modification Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reserves
Commercial $ 288000 $ 168000 $
Commercial real estate
Retail properties 3 1790000 2060000
Multifamily 1 409000 672000 732000
Mixed-use properties 6 4660000 3 118000 974000
Industrial manufacturing warehouse Other commercial real estate 4682000 2864000 1 272000
Construction and land development 1 3924000 2930000 500000
Residential real estate 3 1288000 1 252000 52000
Consumer installment Total 16 $ 1 8041000 $ 13064000 $ 3530000
Year Ended December 3 1 2013
Pre-Modification Post-Modification
Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reseives
Commercial $ $ $
Commercial real estate
Retail properties 3 8596000 3651000 4363000
Multifamily 2 7026000 5090000 1598000
Mixed-use properties 7 6005000 4421000 1 612000
Industrial manufacturing warehouse
Other commercial real estate 5 14589000 10888000 2578000
Construction and land development 3 7409000 4493000 1 162000
Residential real estate 3 1515000 1 371000 117000
Consumer installment Total 23 $ 45 140000 $ 29914000 $ 11430000
Troubled debt restructurings that were accruing interest were $9520000 and $ 1 1 382000 respectively as of December 3 1 2014 and 2013 Troubled debt restructurings that were non-accruing were $3544000 and $ 1 8532000 respectively as of December 3 1 2014 and 201 3 Troubled debt restructurings included loans where the loan principal and corresponding interest rate was reduced and i n some instances the loan amortization period was extended During 2014 there were three troubled debt restructurings with outstanding balances at the time of re-default was $ 1 1 55000 and loan balances outstanding for these loans at December 3 1 2014 was $239000
22
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Other Matter
We also have examined in accordance with attestation standards established by the American Institute of Certified Public Accountants the internal control over financial reporting of Lakeside Bank as of December 31 2014 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of Treadway Commission (COSO) in 2013 and our report dated April 30 2015 expressed an unmodified opinion
Chicago I llinois April 30 2015
2
Lakeside Bank and Subsidiary
Consolidated Balance Sheets
December 31 2014 and 2013
2014 2013
Assets
Cash and due from banks $ 112952000 $ 66775000
Interest-bearing deposits in banks 6938000 953000
Securities available for sale 50802000 61848000
Federal Home Loan Bank stock at cost 2403000 2403000
Loans net of allowance for loan losses of $26581000 in 2014 and
$27626000 in 2013 1001896000 955 764000
Premises and equipment net 22289000 16557000
Other real estate owned 4719000 11399000
Other assets 5266000 7697000
$ 1207265000 $ 1 123396000
Liabilities and Stockholders Equity
Deposits
Noninterest-bearing $ 286622000 $ 249247000
Savings and NOW 266307 000 289093000
Time certificates $250000 or more 73 116000 79453000
Other time certificates 375046000 324465000
1001091000 942258000
Short-term borrowings 4518000 1314000
Long-term borrowings 28000000 13000000
Accrued expenses and other liabilities 15597000 14834000
1049206000 971406000
Commitments Contingencies and Credit Risk (See Notes 6 and 12)
Stockholders Equity
Common stock $5 par value authorized 656907 shares
issued and outstanding 446062 shares 2230000 2230000
Surplus 39879000 39879000
Undivided profits 120032000 113181000
Accumulated other comprehensive loss (4082000) (3300000)
158059000 151990000
$ 1207265000 $ 1 123396000
See Notes to Consolidated Financial Statements
3
Lakeside Bank and Subsidiary
Consolidated Statements of Income
Years Ended December 31 2014 and 2013
Interest and dividend income
Loans including fees
Investment securities
Taxable
Tax-exempt
Federal funds sold
Other
Total interest and dividend income
Interest expense
Deposits
Borrowings
Total interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Noninterest income
Fees for banking services
Gain on sale of premises and equipment
Loss on sale of securities
Total noninterest income
Noninterest expenses
Salaries and employee benefits
Occupancy
Equipment
Data processing
Other real estate owned net
FDIC insurance
Other general and administrative
Total noninterest expenses
Net income before income taxes
Income taxes
Net income
See Notes to Consolidated Financial Statements
$
$
4
2014 2013
51751000 $ 51 176000
349000 375000
615000 792000
196000 212000
111000 133000
53022000 52688000
5097000 5789000
194000 139000
5291000 5928000
47731000 46760000
6900000 8550000
40831000 38210000
2258000 5 114000
9011000
(89000) (246000)
2 169000 13879000
10477000 9967000
2077000 2110000
1010000 957000
773000 728000
(319000) 1947000
1531000 1401000
2777000 4060000
18326000 21 170000
24674000 30919000
311000 230000
24363000 $ 30689000
Lakeside Bank and Subsidiary
Consolidated Statements of Comprehensive Income
Years Ended December 31 2014 and 2013
Net income
Other comprehensive loss
Unrealized holding gains (losses) arising during the year
Less reclassification adjustment for losses included in
net income
Change in net unrealized (losses) gains on defined benefit pension plan
Comprehensive income
See Notes to Consolidated Financial Statements
5
$
$
2014 2013
24363000 $ 30689000
1025000 (1939000)
89000 246000
(1896000) 1604000
(782000) (89000)
23581000 $ 30600000
Lakeside Bank and Subsidiary
Consolidated Statements of Stockholders Equity
Years Ended December 31 2014 and 2013
Accumulated
Other
Common Undivided Comprehensive
Stock Surplus Profits Loss Total
Balance at December 31 2012 $ 2230000 $ 39879000 $ 951 49000 $ (3 21 1 000) $ 1 34047000
Net income 30689000 30689000
Other comprehensive loss (89000) (89000)
Cash dividends on common stock (12657000) ( 12 657000)
Balance at December 31 2013 2230000 39879000 1131 8 1 000 (3300000) 151 990000
Net income 24363000 24363000
Other comprehensive loss (782000) (782000)
Cash dividends on common stock (1 7512000) ( 17 512000)
Balance at December 31 2 014 $ 2230000 $ 39879000 $ 120032000 $ (4082000) $ 158059000
See Notes to Consolidated Financial Statements
6
lakeside Bank and Subsidiary
Consolidated Statements of Cash Flows
Years Ended December 31 2014 and 2013
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses
Depreciation of premises and equipment
Arriortization of security prerniums and discounts net
Loss on sale of securities
Gain on sale of premises and equipment
(Gain) loss on sale and writedown of other real estate owned
Net change in
Other assets
Other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities
Net change in interest-bearing deposits in banks
Proceeds from maturities sales and calls of securities
available for sale
Purchase of securities available for sale
Net increase in loans
Additions to premises and equipment
Improvements in other real eatate owned
Proceeds from sale of premises and equipment
Proceeds from sale of other real estate owned
Net cash used in investing activities
Cash Flows from Financing Activities
Net increase in deposits
Net change in short-term borrowings
Net change in long-term borrowings
Cash dividends paid on common stock
Net cash provided by used in) financing activities
Net change in cash and due from banks
Cash and due from banks at beginning of year
Cash and due from banks at end of year
Supplementary cash flow information
Interest paid on deposits and borrowed funds
Income taxes paid
Supplementary schedule of noncash investing activities
Transfer of loans to other real estate owned Sales of other real estate owned financed bv the Bank
See Notes to Consolidated Financial Statements
7
$
$
$
$
2014 2013
24363000 $ 30689000
6900000 8550000
906000 1013000
730000 953000
89000 246000
(9011000)
(1066000) 1764000
535000 (1 108000)
763000 1115000
33220000 34211000
(5985000) 2497000
11841000 13944000
(500000) (10179000)
(49224000) (55 734000)
(6638000) (5604000)
(706000)
9600000
4644000 2225000
(46568000) (43251000)
58833000 6414000
3204000 (10487000)
15000000 4000000
(17512000) (12657000)
59525000 (12730000)
46177000 (21 770000)
66775000 88545000
112952 000 $ 66775000
5249000 $ 6050000
378000 130000
1881000 $ 1345000 5689000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies
Principles of consolidation The consolidated financial statements include the accounts of Lakeside Bank (the Bank) and its wholly owned subsidiary Lakeside Community Development LLC All intercompany transactions and balances have been eliminated The Bank is a wholly owned subsidiary of Lakeside Bancorp Inc
Nature of operations Lakeside Bank is a state chartered bank whose operations consist primarily of those financial activities common to the commercial banking industry The Bank serves northeastern Illinois and services are provided at six locations throughout Chicago The Banks wholly owned subsidiary Lakeside Community Development LLC invests in various community development activities
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 the reported amounts of revenue and expenses during the reporting period Actual results could differ from those estimates Material estimates that are susceptible to significant change in the near term relate to the determination of the allowance for loan losses valuation of other real estate owned the defined benefit plan liability and fair value of financial instruments
Presentation of cash flows For purposes of the consolidated statements of cash flows cash and due from banks include cash on hand and amounts due from banks (including cash items in process of clearing) Cash flows from interest-bearing deposits in banks loans deposits federal funds purchased and short-term and long-term borrowings are reported on a net basis
Interest-bearing deposits in banks Interest-bearing deposits in banks mature within one year and are carried at cost
Securities available for sale All securities are classified as available for sale as the Bank intends to hold the securities for an indefinite period of time but not necessarily to maturity Any decision to sell a security classified as available for sale would be based on various factors including significant movements in interest rates changes in the maturity mix of the Banks assets and liabil ities liquidity needs regulatory capital considerations and other similar factors Securities available for sale are carried at fair value U nrealized gains or losses are reported as increases or decreases in accumulated other comprehensive income Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities Realized gains or losses on sales of available for sale securities are recorded using the specific identification method
Management evaluates securities for other-than-temporary impairment (OTII) at least on a quarterly basis and more frequently when economic or market conditions warrant such evaluation Declines in the fair value of individual securities available for sale below their amortized cost that are determined to be other-than-temporary are reflected in earnings as realized losses In estimating other-than-temporary impairment losses management considers the length of time and the extent to which the fair value has been less than cost the financial condition and near-term prospects of the issuer and whether it is more likely than not to sell the security before recovery of its cost basis If they intend to sell an impaired security the Bank records an other-than-temporary loss in an amount equal to the entire difference between the fair value and amortized cost I f the Bank does not intend to sell the security only the credit portion of the estimated loss is recognized in earnings with the other portion recognized in accumulated other comprehensive income
8
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
Federal Home Loan Bank stock The Bank as a member of the Federal Home Loan Bank of Chicago (the FHLB) is required to maintain an investment in capital stock of the FHLB The stock does not have a readily determinable fair value as ownership is restricted and it lacks a ready market As a result this stock is carried at cost and evaluated periodically for impairment
Loans The Bank extends commercial mortgage and consumer loans to customers A substantial portion of the loan portfolio is represented by commercial loans in northeastern Illinois The ability of the Banks debtors to honor their contracts is dependent upon the general economic conditions in this area
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are generally reported at their outstanding unpaid principal balances adjusted for charge-offs and the allowance for loan losses I nterest income is accrued on the unpaid principal balance Loan balances include loan origination fees and direct loan origination costs that are being deferred and the net amount amortized as an adjustment of the related loans yield The Bank is amortizing these amounts over the contractual loan maturity
The accrual of interest on loans is typically discontinued at the time the loan is 90 days delinquent In al l cases loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful All interest accrued but not collected for loans that are placed on non accrual or charged-off is reversed against interest income The interest on these loans is accounted for on the cash-basis or cost-recovery method until qualifying for return to accrual Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured
Troubled debt restructurings A loan is classified as a troubled debt restructuring when a borrower is experiencing financial difficulties that leads to a restructuring of the loan and the Bank grants concessions to the borrower in the restructuring that it would not otherwise consider These concessions may include rate reductions principal forgiveness extension of maturity date and other actions intended to minimize potential losses Troubled debt restructurings are classified as impaired loans A loan that is modified at a market rate of interest may no longer be classified as a troubled debt restructuring and impaired in the calendar year subsequent to the restructuring if it is in compliance with the mod1f1ed terms Performance prior to the restructuring is considered when assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual at the time of the restructuring or after a shorter performance period
Allowance for loan losses The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to expense Loan losses are charged against the allowance when management believes that collectability of the principal is unlikely Subsequent recoveries if any are credited to the allowance
When establishing the allowance for loan losses management categorizes loans into risk categories generally based on the nature of the collateral and the basis of repayment These risk categories and the relevant risk characteristics are as follows
Commercial loans - Commercial loans are loans for corporate and business purposes including issuing letters of credit The Banks commercial business loan portfolio is comprised of loans for a variety of purposes and generally is secured by equipment machinery and other business assets Commercial business loans generally have terms of five years or less and interest rates that float in accordance with a designated published index Substantially all of such loans are secured and backed by the personal guarantees of the owners of the business
9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements -------------------------------middot middot-----------
Note 1 Summary of Significant Accounting Policies (Continued)
Commercial real estate loans - Commercial real estate loans are primarily secured by apartment buildings office and industrial buildings mixed-use properties small retail shopping centers and various special purpose properties including warehouses and restaurants Although terms vary commercial real estate loans generally have amortizations of 15 to 30 years as well as balloon payments of two to seven years and terms which provide that the interest rates thereon may be adjusted annually at the Banks discretion based on a designated index
Construction and land development loans - Construction land development loans consist of vacant land and property that is in the process of improvement Repayment of these loans can be dependent on the sale of the property to third parties or the successful completion of the improvements by the builder for the end user In the event a loan is made on property that is not yet approved for the planned development there is the risk that approvals will not be granted or will be delayed Construction and land development loans also run the risk that improvements will not be completed on time or in accordance with specifications and projected costs Construction and land development loans generally have terms of one year to 18 months during the construction period and interest rates based on a designated index
Residential real estate loans - Residential real estate loans include home equity lines of credit secured by a first or second mortgage and 1-4 family residential real estate loans Loans are generally smaller in size and are homogenous because they exhibit similar characteristics
Consumer installment loans - Consumer installment loans generally have higher interest rates than mortgage loans The risk involved in consumer loans is the type and nature of the collateral and in certain cases the absence of collateral These loans are secured by personal assets or may be unsecured and repayment is directly dependent on the borrowers income and the borrowers ability to service debt payments
The allowance for loan losses is evaluated on a regular basis by management and is based upon managements periodic review of the collectability of the loans in light of historical experience the nature and volume of the loan portfolio estimated value of any underlying collateral and prevailing economic conditions and adverse situations that may affect the borrowers ability to pay This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available In addition regulatory agencies as an integral part of their examination process periodically review the Banks allowance for loan losses and may require the Bank to make additions to the allowance based on their Judgment about information available to them at the time of their examinations
The allowance consists of specific and general components The specific component relates to loans that are classified as impaired and an allowance is established when the collateral value discounted cash flows or observable market price of the impaired loan is lower than the carrying value of that loan The general component covers non-impaired loans and is based on the Banks own loss experience adjusted for qualitative factors These qualitative factors consider local economic trends concentrations management experience and other elements of the Banks lending operations
10
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
A loan is impaired based on current information and events when it is probable the Bank will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Factors considered by management in determining impairment include payment status collateral value and the probability for collecting scheduled principal and interest payment when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on an individual-loan basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reason for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on an individual loan basis based on the fair value of the collateral if the loan is collateral dependent the present value of expected future cash flows discounted at the loans effective interest rate or the loans obtainable market price
Large groups of homogenous loans are collectively evaluated for impairment Accordingly the Bank does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Other real estate owned Assets acquired through or in lieu of loan foreclosure are held for sale and initially recorded at fair value less estimated costs to sell at the date of foreclosure establishing a new cost basis Subsequent to foreclosure valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less costs to sell Revenue and expenses from operations and changes in the valuation allowance are included in noninterest expenses-other real estate owned net
Premises and equipment Land is carried at cost Premises and equipment are stated at cost less accumulated depreciation (building 12-25 years leasehold improvements 3-15 years furniture and fixtures 3-20 years) Depreciation is provided principally by the straight-line method over the estimated useful lives of the assets Amortization of leasehold improvements is computed on the straight-line method over the lease term or the estimated useful lives of the improvements whichever 1s shorter
Transfers of financial assets Transfers of financial assets are accounted for as sales when control over the assets has been surrendered Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank - put presumptively beyond the reach of the transferor and its creditors even in bankruptcy or other receivership (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets
Income taxes Lakeside Bancorp Inc with the consent of its stockholders elected to be taxed as an S corporation under sections of the federal and state income tax laws which provide that in lieu of corporate income taxes the stockholder accounts for the Banks items of income deductions losses and credits As a wholly owned subsidiary the Banks income and expenses are included in the Lakeside Bancorp Inc consolidated tax returns As a result for the periods covered by this election no corporate income taxes will be recognized in the accompanying consolidated financial statements except for certain state income taxes
11
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
The Bank evaluates its tax positions to determine the appropriate level of tax reserves to maintain for uncertain tax positions The Bank has no uncertain tax positions as of December 3 1 2014 and 2013
The Bank would recognize interest and penalties on income taxes as a component of income tax expense
The Bank is generally no longer subject to US federal or state and local income tax examinations by tax authorities for years before 201 1
Comprehensive income Comprehensive income consists of net income changes in net unrealized gains and losses on securities available for sale reclassification adjustments for realized gains and losses on sales of AFS securities and changes in defined benefit pension obligation and is presented in the consolidated statements of stockholders equity
Recent accounting pronouncements In January 2014 the FASB (Financial Accounting Standards Board) issued guidance which requires an entity derecognize the loan receivable and recognize the real estate property when it has received physical possession of residential real estate property collateralizing a consumer mortgage loan upon either ( 1 ) 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 that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement Additionally the amendments require annual disclosures This guidance is effective for the Company for fiscal years beginning after December 15 2014 The adoption of this guidance is not expected to have a material impact on the consolidated financial statements
Subsequent events The Bank has evaluated subsequent events for potential recognition andor disclosure through April 30 2015 the date the consolidated financial statements were available to be issued
1 2
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 2 Restricted Cash and Due from Banks
The Bank is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank of Chicago The total of those reserve balances averaged $1 01 2000 and $935000 in 2014 and 2013 respectively The Bank maintains amounts due from banks which exceed federally insured limits The Bank has not experienced any losses in such accounts
Note 3 Securities Available for Sale
The amortized cost and fair value of securities with gross unrealized gains and losses follows
December 31 2014
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
December 31 2013
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
$
$
$
$
Amor1ized
Cost
15917000 $
23417000
6038000
5159000
50531000
250000
50781000 $
17835000 $
32338000
6590000
5928000
62691000
250000
62941000 $
Gross
Unrealized
Gains
41000 $
216000
22000
70000
349000
17000
366000 $
41000 $
190000
39000
26000
296000
11000
307000 s
Gross
Unrealized Fair
Losses Value
(53000) s 15905000
(243000) 23390000
(8000) 6052000
(41000) 5188000
(345000) 50535000
267000
(345000) $ 50802000
(255000) $ 17621000
(987000) 31541000
(32000) 6597000
(126000) 5828000
(1400000) 61587000
261000
(1400000) $ 61848000
Securities available for sale with a carrying value of $8339000 and $3848000 at December 31 2014 and 201 3 respectively were pledged on deposits of the United States Government and other public funds as required or permitted and other short-term borrowings
The amortized costs and fair values of debt securities available for sale as of December 3 1 2014 by contractual maturity are shown below Maturities may differ from contractual maturities in mortgageshybacked securities because the mortgages underlying the securities may be called or repaid without any penalties Therefore these securities are not included in the maturity categories in the following maturity summary
1 3
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements middot-
Note 3 Securities Available for Sale (Continued)
Amortized Fair
Cost Value
Due in one year or less $ 3049000 $ 3057000 Due after one year through five years 21 506000 21 507000
Due after five years through ten years 71 70000 7163000
Due after ten years 1 3647000 1 3620000
45372000 45347000
Residential mortgage-backed securities 5 159000 5188000 Totals $ 50531 000 $ 50535000
The following tables show the gross unrealized losses and fair value of investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 3 1 2 0 1 4 and 2 0 1 3
less than 12 Months 12 Months or More Total Fair Unrealized Fair Unreahzed Fair Unrealized
2014 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 498000 s (2000) $ 7695000 s (51000) $ 8193000 $ (53000) Obligations of states and
pol1ilca subd1v1sions 13671000 (243000) 13671000 (243000) Corporate debt obligations 1132000 (8000 1 132000 (8000) Residential mortgage-backed
obligations 2128000 (4100D) 2128000 (41000) Total temporary
impaired securities s 498000 s (2000) $ 24626000 $ (343000) s 25124000 s (345000)
Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized
2013 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 10867000 $ (232000) s 2632000 $ (23000) $ 13499000 s 255000) Obligations of states and
polillcal subdivisions 11195000 (365000) 11169000 (622000) 22364000 (987000) Corporate debt obligations 1179000 (32000) 1179000 (32000) Residential mortgage-backed
obligations 3977000 (126000) 3977000 (126000) Total temporary
impaired securities 26039000 s (723000) $ 14980000 s (677000) s 41019000 $ (1400000)
In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysis reports Since management does not intend to sell any temporarily impaired securities before recovery of their cost basis no declines are deemed other-than-temporary
On sale proceeds of $5637000 there were $57000 in realized gains and $146000 in realized losses on the sale of securities during the year ended December 3 1 2 0 1 4 On sale proceeds of $708000 there were no realized gains and $246000 realized losses on the sale of securities during the year ended December 3 1 2 0 1 3
1 4
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans
A summary of the balances of loans follows
Commercial $
Commercial real estate
Construction and land development
Residential real estate
Consumer installment
Less allowance for loan losses
Loans net $
December 3 1
2014 2013
62894000
658 153000
163 1 08000
1 43579000
743000
1 028477000
2658 1 000
1 001 896 000
$ 62642000
666095000
123519000
129905000
1 229000
983390000
27626000
$ 955764000
The following tables present the contractual aging of the recorded investment in loans by class of loans as of December 3 1 2014 and 2013
Loans Past 90 Days or 30-59 Days 60middot89 Days Due 90 Days More Past Due
December 31 2014 Current Past Due Past Due or More Total and Accruin
Commercial $ 62655000 $ 4000 $ 36000 $ 199000 s 62894000 $ 199000
Commercial real estate Relail properties 295610000 105000 1212000 296927000 199000
Multifamily 90507000 90507000
Mixed-use properties 93 116000 2455000 95571000
Industrial manufacturing warehouse 63660000 1353000 65013000
Other commerc1al real estate 106101000 4034000 110135000
Construction and land development 162512000 596000 163 108000
Residential real estate 140636000 208000 2735000 143579000
Consumer installment 743000 743000
Total $ 1 015 540000 $ 109 000 $ 244 000 12584 000 $ 1 028 477 000 s 398 000
15
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Loans Past 90 Days or 30-59 Days 60-89 Days Due 90 Days More Past Due
December 31 2013 Current Past Due Past Due or More Total and Accruing
Commercial $ 61588000 $ $ 755000 $ 299000 s 62642000 $ 33000 Commercial real estate
Retail properties 284 162000 1152000 1331000 15307000 301952000 44000 Mu11ifamily 78203000 1223000 450000 4526000 84402000 Mixed-use properties 93292000 262000 316000 3644000 97514000 Industrial manufacturing
warehouse 58947000 1696000 273000 60916000 Other commercial real
estate 109449000 282000 74000 11506000 121311000 Construction and land
development 121492000 2027000 123519000 Residential real estate 126229000 1062000 306000 2308000 129905000 89000 Consumer installment 1226000 1000 2000 1229000
Total $ 934 588000 $ 3982 000 s 4 930 000 39 890 000 983 390 000 $ 166 000
The following table presents the recorded investment in nonaccrual loans by class of loans as of December 31 2014 and 2013
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties
Industrial manufacturing warehouse Other commercial real estate
Construction and land development Residential real estate
Total
$
$
16
Nonaccrual Loans 2014 2013
168000 $ 266000
2470000 15263000
4526000
2728000 3644000
1353000 273000
4480000 11506000
1609000 2027000
2796000 2219000
15604000 $ 39724000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
As part of the on-going monitoring of the credit quality of the Banks loan portfolio management categorizes loans into rrsk categories based on relevant information about the ability of borrowers to service their debt and comply with various terms of their loan agreements The Bank considers current financial information historical payment experrence credit documentation public information and current economic trends Generally all sizeable credits receive a financial review no less than annually to monitor and adjust if necessary the credits risk profile Credits classified as watch generally receive a review more frequently than annually For substandard and doubtful credit classifications the frequency of review is increased to no less than quarterly in order to determine potential impact on credit loss estimates
The Bank categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt
Pass - A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors if any) or by the fair value less cost to acquire and sell of any underlying collateral in a timely manner Pass assets also include certain assets considered watch which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring
Special Mention - A special mention asset or risk rating of 6 has potential weaknesses that deserve managements close attention The asset may also be subject to a weak or speculative market or to economic conditions which may in the future adversely affect the obligor If left uncorrected these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Banks credit position at some future date Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification
Substandard - A substandard asset or risk rating of 7 is an asset with a well-defined weakness that jeopardizes repayment in whole or in part of the debt These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged These assets are characterized by the distinct possibility that the institution will sustain some loss of principal andor interest if the deficiencies are not corrected A loan does necessarily need to have an identifiable loss potential in order to receive this rating
Doubtful - An asset that has all the weaknesses or risk rating of 8 inherent in the substandard classification with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently known facts conditions and values highly questionable and improbable The possibility of loss is extremely likely but it is not identified at this point due to pending factors
Loss - An asset or portion thereof classified as loss is considered uncollectible and of such little value that its continuance on the Companys books as an asset is not warranted This classification does not necessarily mean that an asset has no recovery or salvage value but rather there is much doubt about whether how much or when the recovery would occur As such it is not practical or desirable to defer the write-off Therefore there is no loss balance to report at December 31 2014
Residential real estate and consumer installment loans are assessed for credit quality based on the contractual aging status of the loan and payment activity Such assessment is completed at the end of each reporting period
1 7
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present the risk category of loans evaluated by internal asset classification based on the most recent analysis performed and the contractual aging as of December 31 2014 and 2013
December 31 2014
Commercial Commercial real estate
Retail properties Multifamily
Mixed-use properties Industrial manufacturing warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
December 31 201 J
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties lndustnal manufactunng warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
Pass
$ 61710000 $
272359000 88002000 85430000 63660000
104525000
1531 14000
$ 828800000 $
$
$
Pass
s 62034000 $
250040000 76086000 85355000 60643000
108880000 1 1 7047000
s 760085000 $
$
$
1 8
Special Mention Substandard Doubtful Total
$ 1 016000 $ 168000 s 62894000
3701000 17384000 3483000 296927000 635000 1870000 90507000 238000 7175000 2728000 95571000
1353000 65013000 1 130000 4480000 110 135000
5937000 3461000 596000 163108000
10511 000 $ 32036000 $ 12808000 $ 884155000
Performing Non-periorming Total
140783000 s 2796000 $ 143579000
743000 743000
141 526000 s 2796000 $ 144322000
Special Mention Substandard Doubtful Total
$ 342000 $ 266000 s 62642000
10871000 25778000 15263000 301952000 1 885000 1905000 4526000 84402000 1 714000 6801000 3644000 97514000
273000 60916000 925000 11 506000 1213 1 1 000
381000 4064000 2027000 123519000
14851 000 $ 39815000 s 37505000 $ 852256000
Performing Non-performing Total
127597000 $ 2308000 $ 129905000
1 229000 1 229000
1 28826000 $ 2308000 $ 1 3 1 1 34000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables provide additional detail of the activity in the allowance for loan losses by portfolio segment for the years ended December 3 1 2014 and 2013
Construction
Commercial and land Rcs1dent1al Consumer
December 31 2014 Commercial Real Es1ate Develoement Real Estate lnsallment Total
Allowanco for loan lossos
Beg1nn1ng balance 1385000 20052000 3549000 2623000 17000 27626000
PrOV1Son for loan losses 2210000 2680000 2007000 3000 6900000
Loans chargedmiddotoff (179000) (8163000) 687000) (2140000) (11169000)
Recovenes of loans
previously charged-off 85000 2916000 223000 3224000
Ending balance s 1291000 1701 5000 5542000 271 3000 s 20000 s 26581000
Poriod-ondtd llmount allocatod to loans
lndMdually evaluated for
1mpa1rment 200000 445000 36000 52000 s 733000
Collec11vely evaluated
for 1mpa1rrnent 1091 000 16570000 5506000 2661000 20000 25648000
Ending balance 1291000 17015000 5542000 s 2713000 20000 26581000
Loans
lndMdually evaluated for
impairment 368000 17274000 3526000 4048000 25216000
Collecively evalua1ed
for 1mpa1rrnent 62526000 640879000 159582000 139531000 743000 1003261000
Ending balance 62894000 658 153000 163108000 143579000 743000 1028477000
Construct1on
Commercial and Land Residential Consumer
December 31 2013 Commeroal Real Estate Development Real Eslale Installment Total
Allowance for loan losses
Beginning balance 1040000 18719000 2484000 2248000 17000 24508000
Provision for loan losses 363000 6508000 867000 784000 28000 8550000
Loans chargedmiddot Off (59000) (5817000) (122000) (457000) (28000) (6483000)
Recoveries ol loans
previously charged-off 41 000 642000 320000 48000 1051000
Ending balance 1385000 20052000 3549000 s 2623000 17000 27626000
Period-ended amount allocated to loans
Individually evaluated for
impairment 3475000 239000 61000 3775000
Collectively evaluated
for impairment 1385000 16577000 3310000 2562000 17000 23851000
Ending balance 1385000 20052000 3549000 2623000 17000 27626000
Loans
Individually evaluated for
1mpa1rment 266000 42380000 5522000 s 3307000 51475000
Collectively evalua1ed
for impairment 62376000 623715000 1 17997000 126598000 1229000 931915000
Endrng balance 62642000 666095000 123519000 129905000 1229000 983390000
1 9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present additional detail of impaired loans segregated by class as of December 3 1 2014 and 2013 The unpaid principal balance represents the recorded balance prior to any partial charge-offs The recorded investment represents customer balances net of any partial charge-offs recognized on the loans The interest income recognized column represents all interest income reported either on a cash or accrued basis after the loan became impaired The cash basis income column represents only the interest income recognized on a cash basis after the loan was classified as impaired
December 31 2014
Wih no relaed allowance recorded
Commercial Commercial real estale
Reail properties Multifamily Mixed-use properties lndustnal manufacturing
warehouse Other commercial real estate
Construction and land developmen
Residential real estate Consumer installment
Wi1h an allowance recorded Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties Industrial manufacturing
warehouse Other commercial real estate
Construction and land development
Residential real estate Consumer installment
To1al
$
$
Unpaid Principal Balance
216000 $
7266000
3283000
2861000 6121000
3672000 6045000
200000
564000 2421000
1 62000 170000
Recorded Investment
168000 s
5543000
3119000
1353000 4480000
3400000 3878000
200000
564000 2215000
126000 170000
32981000 $ 25216000 $
20
Allowance for Loan Losses
Allocated
200000
42000 403000
36000 52000
733000
Average Recorded
Investment
$ 208000 $
1 1 474000 3514000 4354000
131 5000 5509000
4 183000 4673000
29000
677000 2270000
141 000 44000
$ 38391000 $
Interest Income
Recognized
109000 48000
161 000
125000 33000
38000
5000
519000
$
$
Cash Basis Interest Income
Recognized
108000 48000
1 57000
1 1 3000 32000
38000
5000
501000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Cash Basis Unpaid Allowance for Average Interest Interest
Principal Recorded Loan Losses Recorded Income Income December 31 2013 Balance Investment Allocated Investment Recognized Recognized
With no related allowance recordedmiddot
Commercial $ 266000 $ 266000 $ $ 326000 $ $ Commercial real estate
Retail properties 26699000 12500000 10635000 146000 139000 Multifamily 5542000 4526000 4838000 88000 88000 Mixed-use properties 3123000 2527000 2750000 103000 102000 Industrial manufacturing
warehouse 1 641000 273000 528000 Other commercial real estate 4056000 3497000 3617000
Construction and land development 8517000 3965000 4971000 1 1 4000 1 14000
Residenial rear estate 3769000 3203000 3203000 47000 43000 Consumer installment
With an allowance recorded Commercial Commercial real estate
Retarl properties 6138000 5239000 2045000 4759000 35000 35000 Multifamily 692000 682000 69000 687000 38000 38000 Mixed-use properties 5764000 5 127000 778000 4200000 92000 87000 Industrial manufacturing
warehouse Other commercial real estate 10001000 8009000 583000 8986000
Construction and land development 2770000 1 557000 239000 1 853000
Residential real estate 120000 104000 61000 1 04000 Consumer installment
Total $ 79298000 $ 51475000 $ 3775000 $ 51457000 $ 663000 $ 646000
21
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present troubled debt restructurings and the financial effects of troubled debt restructurings
Year Ended December 31 2014
Pre-Modification Post-Modification Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reserves
Commercial $ 288000 $ 168000 $
Commercial real estate
Retail properties 3 1790000 2060000
Multifamily 1 409000 672000 732000
Mixed-use properties 6 4660000 3 118000 974000
Industrial manufacturing warehouse Other commercial real estate 4682000 2864000 1 272000
Construction and land development 1 3924000 2930000 500000
Residential real estate 3 1288000 1 252000 52000
Consumer installment Total 16 $ 1 8041000 $ 13064000 $ 3530000
Year Ended December 3 1 2013
Pre-Modification Post-Modification
Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reseives
Commercial $ $ $
Commercial real estate
Retail properties 3 8596000 3651000 4363000
Multifamily 2 7026000 5090000 1598000
Mixed-use properties 7 6005000 4421000 1 612000
Industrial manufacturing warehouse
Other commercial real estate 5 14589000 10888000 2578000
Construction and land development 3 7409000 4493000 1 162000
Residential real estate 3 1515000 1 371000 117000
Consumer installment Total 23 $ 45 140000 $ 29914000 $ 11430000
Troubled debt restructurings that were accruing interest were $9520000 and $ 1 1 382000 respectively as of December 3 1 2014 and 2013 Troubled debt restructurings that were non-accruing were $3544000 and $ 1 8532000 respectively as of December 3 1 2014 and 201 3 Troubled debt restructurings included loans where the loan principal and corresponding interest rate was reduced and i n some instances the loan amortization period was extended During 2014 there were three troubled debt restructurings with outstanding balances at the time of re-default was $ 1 1 55000 and loan balances outstanding for these loans at December 3 1 2014 was $239000
22
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
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OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
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6$919 8 LAKESIDE BANK 20183(
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248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Consolidated Balance Sheets
December 31 2014 and 2013
2014 2013
Assets
Cash and due from banks $ 112952000 $ 66775000
Interest-bearing deposits in banks 6938000 953000
Securities available for sale 50802000 61848000
Federal Home Loan Bank stock at cost 2403000 2403000
Loans net of allowance for loan losses of $26581000 in 2014 and
$27626000 in 2013 1001896000 955 764000
Premises and equipment net 22289000 16557000
Other real estate owned 4719000 11399000
Other assets 5266000 7697000
$ 1207265000 $ 1 123396000
Liabilities and Stockholders Equity
Deposits
Noninterest-bearing $ 286622000 $ 249247000
Savings and NOW 266307 000 289093000
Time certificates $250000 or more 73 116000 79453000
Other time certificates 375046000 324465000
1001091000 942258000
Short-term borrowings 4518000 1314000
Long-term borrowings 28000000 13000000
Accrued expenses and other liabilities 15597000 14834000
1049206000 971406000
Commitments Contingencies and Credit Risk (See Notes 6 and 12)
Stockholders Equity
Common stock $5 par value authorized 656907 shares
issued and outstanding 446062 shares 2230000 2230000
Surplus 39879000 39879000
Undivided profits 120032000 113181000
Accumulated other comprehensive loss (4082000) (3300000)
158059000 151990000
$ 1207265000 $ 1 123396000
See Notes to Consolidated Financial Statements
3
Lakeside Bank and Subsidiary
Consolidated Statements of Income
Years Ended December 31 2014 and 2013
Interest and dividend income
Loans including fees
Investment securities
Taxable
Tax-exempt
Federal funds sold
Other
Total interest and dividend income
Interest expense
Deposits
Borrowings
Total interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Noninterest income
Fees for banking services
Gain on sale of premises and equipment
Loss on sale of securities
Total noninterest income
Noninterest expenses
Salaries and employee benefits
Occupancy
Equipment
Data processing
Other real estate owned net
FDIC insurance
Other general and administrative
Total noninterest expenses
Net income before income taxes
Income taxes
Net income
See Notes to Consolidated Financial Statements
$
$
4
2014 2013
51751000 $ 51 176000
349000 375000
615000 792000
196000 212000
111000 133000
53022000 52688000
5097000 5789000
194000 139000
5291000 5928000
47731000 46760000
6900000 8550000
40831000 38210000
2258000 5 114000
9011000
(89000) (246000)
2 169000 13879000
10477000 9967000
2077000 2110000
1010000 957000
773000 728000
(319000) 1947000
1531000 1401000
2777000 4060000
18326000 21 170000
24674000 30919000
311000 230000
24363000 $ 30689000
Lakeside Bank and Subsidiary
Consolidated Statements of Comprehensive Income
Years Ended December 31 2014 and 2013
Net income
Other comprehensive loss
Unrealized holding gains (losses) arising during the year
Less reclassification adjustment for losses included in
net income
Change in net unrealized (losses) gains on defined benefit pension plan
Comprehensive income
See Notes to Consolidated Financial Statements
5
$
$
2014 2013
24363000 $ 30689000
1025000 (1939000)
89000 246000
(1896000) 1604000
(782000) (89000)
23581000 $ 30600000
Lakeside Bank and Subsidiary
Consolidated Statements of Stockholders Equity
Years Ended December 31 2014 and 2013
Accumulated
Other
Common Undivided Comprehensive
Stock Surplus Profits Loss Total
Balance at December 31 2012 $ 2230000 $ 39879000 $ 951 49000 $ (3 21 1 000) $ 1 34047000
Net income 30689000 30689000
Other comprehensive loss (89000) (89000)
Cash dividends on common stock (12657000) ( 12 657000)
Balance at December 31 2013 2230000 39879000 1131 8 1 000 (3300000) 151 990000
Net income 24363000 24363000
Other comprehensive loss (782000) (782000)
Cash dividends on common stock (1 7512000) ( 17 512000)
Balance at December 31 2 014 $ 2230000 $ 39879000 $ 120032000 $ (4082000) $ 158059000
See Notes to Consolidated Financial Statements
6
lakeside Bank and Subsidiary
Consolidated Statements of Cash Flows
Years Ended December 31 2014 and 2013
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses
Depreciation of premises and equipment
Arriortization of security prerniums and discounts net
Loss on sale of securities
Gain on sale of premises and equipment
(Gain) loss on sale and writedown of other real estate owned
Net change in
Other assets
Other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities
Net change in interest-bearing deposits in banks
Proceeds from maturities sales and calls of securities
available for sale
Purchase of securities available for sale
Net increase in loans
Additions to premises and equipment
Improvements in other real eatate owned
Proceeds from sale of premises and equipment
Proceeds from sale of other real estate owned
Net cash used in investing activities
Cash Flows from Financing Activities
Net increase in deposits
Net change in short-term borrowings
Net change in long-term borrowings
Cash dividends paid on common stock
Net cash provided by used in) financing activities
Net change in cash and due from banks
Cash and due from banks at beginning of year
Cash and due from banks at end of year
Supplementary cash flow information
Interest paid on deposits and borrowed funds
Income taxes paid
Supplementary schedule of noncash investing activities
Transfer of loans to other real estate owned Sales of other real estate owned financed bv the Bank
See Notes to Consolidated Financial Statements
7
$
$
$
$
2014 2013
24363000 $ 30689000
6900000 8550000
906000 1013000
730000 953000
89000 246000
(9011000)
(1066000) 1764000
535000 (1 108000)
763000 1115000
33220000 34211000
(5985000) 2497000
11841000 13944000
(500000) (10179000)
(49224000) (55 734000)
(6638000) (5604000)
(706000)
9600000
4644000 2225000
(46568000) (43251000)
58833000 6414000
3204000 (10487000)
15000000 4000000
(17512000) (12657000)
59525000 (12730000)
46177000 (21 770000)
66775000 88545000
112952 000 $ 66775000
5249000 $ 6050000
378000 130000
1881000 $ 1345000 5689000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies
Principles of consolidation The consolidated financial statements include the accounts of Lakeside Bank (the Bank) and its wholly owned subsidiary Lakeside Community Development LLC All intercompany transactions and balances have been eliminated The Bank is a wholly owned subsidiary of Lakeside Bancorp Inc
Nature of operations Lakeside Bank is a state chartered bank whose operations consist primarily of those financial activities common to the commercial banking industry The Bank serves northeastern Illinois and services are provided at six locations throughout Chicago The Banks wholly owned subsidiary Lakeside Community Development LLC invests in various community development activities
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 the reported amounts of revenue and expenses during the reporting period Actual results could differ from those estimates Material estimates that are susceptible to significant change in the near term relate to the determination of the allowance for loan losses valuation of other real estate owned the defined benefit plan liability and fair value of financial instruments
Presentation of cash flows For purposes of the consolidated statements of cash flows cash and due from banks include cash on hand and amounts due from banks (including cash items in process of clearing) Cash flows from interest-bearing deposits in banks loans deposits federal funds purchased and short-term and long-term borrowings are reported on a net basis
Interest-bearing deposits in banks Interest-bearing deposits in banks mature within one year and are carried at cost
Securities available for sale All securities are classified as available for sale as the Bank intends to hold the securities for an indefinite period of time but not necessarily to maturity Any decision to sell a security classified as available for sale would be based on various factors including significant movements in interest rates changes in the maturity mix of the Banks assets and liabil ities liquidity needs regulatory capital considerations and other similar factors Securities available for sale are carried at fair value U nrealized gains or losses are reported as increases or decreases in accumulated other comprehensive income Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities Realized gains or losses on sales of available for sale securities are recorded using the specific identification method
Management evaluates securities for other-than-temporary impairment (OTII) at least on a quarterly basis and more frequently when economic or market conditions warrant such evaluation Declines in the fair value of individual securities available for sale below their amortized cost that are determined to be other-than-temporary are reflected in earnings as realized losses In estimating other-than-temporary impairment losses management considers the length of time and the extent to which the fair value has been less than cost the financial condition and near-term prospects of the issuer and whether it is more likely than not to sell the security before recovery of its cost basis If they intend to sell an impaired security the Bank records an other-than-temporary loss in an amount equal to the entire difference between the fair value and amortized cost I f the Bank does not intend to sell the security only the credit portion of the estimated loss is recognized in earnings with the other portion recognized in accumulated other comprehensive income
8
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
Federal Home Loan Bank stock The Bank as a member of the Federal Home Loan Bank of Chicago (the FHLB) is required to maintain an investment in capital stock of the FHLB The stock does not have a readily determinable fair value as ownership is restricted and it lacks a ready market As a result this stock is carried at cost and evaluated periodically for impairment
Loans The Bank extends commercial mortgage and consumer loans to customers A substantial portion of the loan portfolio is represented by commercial loans in northeastern Illinois The ability of the Banks debtors to honor their contracts is dependent upon the general economic conditions in this area
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are generally reported at their outstanding unpaid principal balances adjusted for charge-offs and the allowance for loan losses I nterest income is accrued on the unpaid principal balance Loan balances include loan origination fees and direct loan origination costs that are being deferred and the net amount amortized as an adjustment of the related loans yield The Bank is amortizing these amounts over the contractual loan maturity
The accrual of interest on loans is typically discontinued at the time the loan is 90 days delinquent In al l cases loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful All interest accrued but not collected for loans that are placed on non accrual or charged-off is reversed against interest income The interest on these loans is accounted for on the cash-basis or cost-recovery method until qualifying for return to accrual Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured
Troubled debt restructurings A loan is classified as a troubled debt restructuring when a borrower is experiencing financial difficulties that leads to a restructuring of the loan and the Bank grants concessions to the borrower in the restructuring that it would not otherwise consider These concessions may include rate reductions principal forgiveness extension of maturity date and other actions intended to minimize potential losses Troubled debt restructurings are classified as impaired loans A loan that is modified at a market rate of interest may no longer be classified as a troubled debt restructuring and impaired in the calendar year subsequent to the restructuring if it is in compliance with the mod1f1ed terms Performance prior to the restructuring is considered when assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual at the time of the restructuring or after a shorter performance period
Allowance for loan losses The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to expense Loan losses are charged against the allowance when management believes that collectability of the principal is unlikely Subsequent recoveries if any are credited to the allowance
When establishing the allowance for loan losses management categorizes loans into risk categories generally based on the nature of the collateral and the basis of repayment These risk categories and the relevant risk characteristics are as follows
Commercial loans - Commercial loans are loans for corporate and business purposes including issuing letters of credit The Banks commercial business loan portfolio is comprised of loans for a variety of purposes and generally is secured by equipment machinery and other business assets Commercial business loans generally have terms of five years or less and interest rates that float in accordance with a designated published index Substantially all of such loans are secured and backed by the personal guarantees of the owners of the business
9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements -------------------------------middot middot-----------
Note 1 Summary of Significant Accounting Policies (Continued)
Commercial real estate loans - Commercial real estate loans are primarily secured by apartment buildings office and industrial buildings mixed-use properties small retail shopping centers and various special purpose properties including warehouses and restaurants Although terms vary commercial real estate loans generally have amortizations of 15 to 30 years as well as balloon payments of two to seven years and terms which provide that the interest rates thereon may be adjusted annually at the Banks discretion based on a designated index
Construction and land development loans - Construction land development loans consist of vacant land and property that is in the process of improvement Repayment of these loans can be dependent on the sale of the property to third parties or the successful completion of the improvements by the builder for the end user In the event a loan is made on property that is not yet approved for the planned development there is the risk that approvals will not be granted or will be delayed Construction and land development loans also run the risk that improvements will not be completed on time or in accordance with specifications and projected costs Construction and land development loans generally have terms of one year to 18 months during the construction period and interest rates based on a designated index
Residential real estate loans - Residential real estate loans include home equity lines of credit secured by a first or second mortgage and 1-4 family residential real estate loans Loans are generally smaller in size and are homogenous because they exhibit similar characteristics
Consumer installment loans - Consumer installment loans generally have higher interest rates than mortgage loans The risk involved in consumer loans is the type and nature of the collateral and in certain cases the absence of collateral These loans are secured by personal assets or may be unsecured and repayment is directly dependent on the borrowers income and the borrowers ability to service debt payments
The allowance for loan losses is evaluated on a regular basis by management and is based upon managements periodic review of the collectability of the loans in light of historical experience the nature and volume of the loan portfolio estimated value of any underlying collateral and prevailing economic conditions and adverse situations that may affect the borrowers ability to pay This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available In addition regulatory agencies as an integral part of their examination process periodically review the Banks allowance for loan losses and may require the Bank to make additions to the allowance based on their Judgment about information available to them at the time of their examinations
The allowance consists of specific and general components The specific component relates to loans that are classified as impaired and an allowance is established when the collateral value discounted cash flows or observable market price of the impaired loan is lower than the carrying value of that loan The general component covers non-impaired loans and is based on the Banks own loss experience adjusted for qualitative factors These qualitative factors consider local economic trends concentrations management experience and other elements of the Banks lending operations
10
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
A loan is impaired based on current information and events when it is probable the Bank will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Factors considered by management in determining impairment include payment status collateral value and the probability for collecting scheduled principal and interest payment when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on an individual-loan basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reason for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on an individual loan basis based on the fair value of the collateral if the loan is collateral dependent the present value of expected future cash flows discounted at the loans effective interest rate or the loans obtainable market price
Large groups of homogenous loans are collectively evaluated for impairment Accordingly the Bank does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Other real estate owned Assets acquired through or in lieu of loan foreclosure are held for sale and initially recorded at fair value less estimated costs to sell at the date of foreclosure establishing a new cost basis Subsequent to foreclosure valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less costs to sell Revenue and expenses from operations and changes in the valuation allowance are included in noninterest expenses-other real estate owned net
Premises and equipment Land is carried at cost Premises and equipment are stated at cost less accumulated depreciation (building 12-25 years leasehold improvements 3-15 years furniture and fixtures 3-20 years) Depreciation is provided principally by the straight-line method over the estimated useful lives of the assets Amortization of leasehold improvements is computed on the straight-line method over the lease term or the estimated useful lives of the improvements whichever 1s shorter
Transfers of financial assets Transfers of financial assets are accounted for as sales when control over the assets has been surrendered Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank - put presumptively beyond the reach of the transferor and its creditors even in bankruptcy or other receivership (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets
Income taxes Lakeside Bancorp Inc with the consent of its stockholders elected to be taxed as an S corporation under sections of the federal and state income tax laws which provide that in lieu of corporate income taxes the stockholder accounts for the Banks items of income deductions losses and credits As a wholly owned subsidiary the Banks income and expenses are included in the Lakeside Bancorp Inc consolidated tax returns As a result for the periods covered by this election no corporate income taxes will be recognized in the accompanying consolidated financial statements except for certain state income taxes
11
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
The Bank evaluates its tax positions to determine the appropriate level of tax reserves to maintain for uncertain tax positions The Bank has no uncertain tax positions as of December 3 1 2014 and 2013
The Bank would recognize interest and penalties on income taxes as a component of income tax expense
The Bank is generally no longer subject to US federal or state and local income tax examinations by tax authorities for years before 201 1
Comprehensive income Comprehensive income consists of net income changes in net unrealized gains and losses on securities available for sale reclassification adjustments for realized gains and losses on sales of AFS securities and changes in defined benefit pension obligation and is presented in the consolidated statements of stockholders equity
Recent accounting pronouncements In January 2014 the FASB (Financial Accounting Standards Board) issued guidance which requires an entity derecognize the loan receivable and recognize the real estate property when it has received physical possession of residential real estate property collateralizing a consumer mortgage loan upon either ( 1 ) 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 that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement Additionally the amendments require annual disclosures This guidance is effective for the Company for fiscal years beginning after December 15 2014 The adoption of this guidance is not expected to have a material impact on the consolidated financial statements
Subsequent events The Bank has evaluated subsequent events for potential recognition andor disclosure through April 30 2015 the date the consolidated financial statements were available to be issued
1 2
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 2 Restricted Cash and Due from Banks
The Bank is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank of Chicago The total of those reserve balances averaged $1 01 2000 and $935000 in 2014 and 2013 respectively The Bank maintains amounts due from banks which exceed federally insured limits The Bank has not experienced any losses in such accounts
Note 3 Securities Available for Sale
The amortized cost and fair value of securities with gross unrealized gains and losses follows
December 31 2014
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
December 31 2013
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
$
$
$
$
Amor1ized
Cost
15917000 $
23417000
6038000
5159000
50531000
250000
50781000 $
17835000 $
32338000
6590000
5928000
62691000
250000
62941000 $
Gross
Unrealized
Gains
41000 $
216000
22000
70000
349000
17000
366000 $
41000 $
190000
39000
26000
296000
11000
307000 s
Gross
Unrealized Fair
Losses Value
(53000) s 15905000
(243000) 23390000
(8000) 6052000
(41000) 5188000
(345000) 50535000
267000
(345000) $ 50802000
(255000) $ 17621000
(987000) 31541000
(32000) 6597000
(126000) 5828000
(1400000) 61587000
261000
(1400000) $ 61848000
Securities available for sale with a carrying value of $8339000 and $3848000 at December 31 2014 and 201 3 respectively were pledged on deposits of the United States Government and other public funds as required or permitted and other short-term borrowings
The amortized costs and fair values of debt securities available for sale as of December 3 1 2014 by contractual maturity are shown below Maturities may differ from contractual maturities in mortgageshybacked securities because the mortgages underlying the securities may be called or repaid without any penalties Therefore these securities are not included in the maturity categories in the following maturity summary
1 3
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements middot-
Note 3 Securities Available for Sale (Continued)
Amortized Fair
Cost Value
Due in one year or less $ 3049000 $ 3057000 Due after one year through five years 21 506000 21 507000
Due after five years through ten years 71 70000 7163000
Due after ten years 1 3647000 1 3620000
45372000 45347000
Residential mortgage-backed securities 5 159000 5188000 Totals $ 50531 000 $ 50535000
The following tables show the gross unrealized losses and fair value of investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 3 1 2 0 1 4 and 2 0 1 3
less than 12 Months 12 Months or More Total Fair Unrealized Fair Unreahzed Fair Unrealized
2014 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 498000 s (2000) $ 7695000 s (51000) $ 8193000 $ (53000) Obligations of states and
pol1ilca subd1v1sions 13671000 (243000) 13671000 (243000) Corporate debt obligations 1132000 (8000 1 132000 (8000) Residential mortgage-backed
obligations 2128000 (4100D) 2128000 (41000) Total temporary
impaired securities s 498000 s (2000) $ 24626000 $ (343000) s 25124000 s (345000)
Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized
2013 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 10867000 $ (232000) s 2632000 $ (23000) $ 13499000 s 255000) Obligations of states and
polillcal subdivisions 11195000 (365000) 11169000 (622000) 22364000 (987000) Corporate debt obligations 1179000 (32000) 1179000 (32000) Residential mortgage-backed
obligations 3977000 (126000) 3977000 (126000) Total temporary
impaired securities 26039000 s (723000) $ 14980000 s (677000) s 41019000 $ (1400000)
In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysis reports Since management does not intend to sell any temporarily impaired securities before recovery of their cost basis no declines are deemed other-than-temporary
On sale proceeds of $5637000 there were $57000 in realized gains and $146000 in realized losses on the sale of securities during the year ended December 3 1 2 0 1 4 On sale proceeds of $708000 there were no realized gains and $246000 realized losses on the sale of securities during the year ended December 3 1 2 0 1 3
1 4
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans
A summary of the balances of loans follows
Commercial $
Commercial real estate
Construction and land development
Residential real estate
Consumer installment
Less allowance for loan losses
Loans net $
December 3 1
2014 2013
62894000
658 153000
163 1 08000
1 43579000
743000
1 028477000
2658 1 000
1 001 896 000
$ 62642000
666095000
123519000
129905000
1 229000
983390000
27626000
$ 955764000
The following tables present the contractual aging of the recorded investment in loans by class of loans as of December 3 1 2014 and 2013
Loans Past 90 Days or 30-59 Days 60middot89 Days Due 90 Days More Past Due
December 31 2014 Current Past Due Past Due or More Total and Accruin
Commercial $ 62655000 $ 4000 $ 36000 $ 199000 s 62894000 $ 199000
Commercial real estate Relail properties 295610000 105000 1212000 296927000 199000
Multifamily 90507000 90507000
Mixed-use properties 93 116000 2455000 95571000
Industrial manufacturing warehouse 63660000 1353000 65013000
Other commerc1al real estate 106101000 4034000 110135000
Construction and land development 162512000 596000 163 108000
Residential real estate 140636000 208000 2735000 143579000
Consumer installment 743000 743000
Total $ 1 015 540000 $ 109 000 $ 244 000 12584 000 $ 1 028 477 000 s 398 000
15
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Loans Past 90 Days or 30-59 Days 60-89 Days Due 90 Days More Past Due
December 31 2013 Current Past Due Past Due or More Total and Accruing
Commercial $ 61588000 $ $ 755000 $ 299000 s 62642000 $ 33000 Commercial real estate
Retail properties 284 162000 1152000 1331000 15307000 301952000 44000 Mu11ifamily 78203000 1223000 450000 4526000 84402000 Mixed-use properties 93292000 262000 316000 3644000 97514000 Industrial manufacturing
warehouse 58947000 1696000 273000 60916000 Other commercial real
estate 109449000 282000 74000 11506000 121311000 Construction and land
development 121492000 2027000 123519000 Residential real estate 126229000 1062000 306000 2308000 129905000 89000 Consumer installment 1226000 1000 2000 1229000
Total $ 934 588000 $ 3982 000 s 4 930 000 39 890 000 983 390 000 $ 166 000
The following table presents the recorded investment in nonaccrual loans by class of loans as of December 31 2014 and 2013
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties
Industrial manufacturing warehouse Other commercial real estate
Construction and land development Residential real estate
Total
$
$
16
Nonaccrual Loans 2014 2013
168000 $ 266000
2470000 15263000
4526000
2728000 3644000
1353000 273000
4480000 11506000
1609000 2027000
2796000 2219000
15604000 $ 39724000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
As part of the on-going monitoring of the credit quality of the Banks loan portfolio management categorizes loans into rrsk categories based on relevant information about the ability of borrowers to service their debt and comply with various terms of their loan agreements The Bank considers current financial information historical payment experrence credit documentation public information and current economic trends Generally all sizeable credits receive a financial review no less than annually to monitor and adjust if necessary the credits risk profile Credits classified as watch generally receive a review more frequently than annually For substandard and doubtful credit classifications the frequency of review is increased to no less than quarterly in order to determine potential impact on credit loss estimates
The Bank categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt
Pass - A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors if any) or by the fair value less cost to acquire and sell of any underlying collateral in a timely manner Pass assets also include certain assets considered watch which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring
Special Mention - A special mention asset or risk rating of 6 has potential weaknesses that deserve managements close attention The asset may also be subject to a weak or speculative market or to economic conditions which may in the future adversely affect the obligor If left uncorrected these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Banks credit position at some future date Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification
Substandard - A substandard asset or risk rating of 7 is an asset with a well-defined weakness that jeopardizes repayment in whole or in part of the debt These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged These assets are characterized by the distinct possibility that the institution will sustain some loss of principal andor interest if the deficiencies are not corrected A loan does necessarily need to have an identifiable loss potential in order to receive this rating
Doubtful - An asset that has all the weaknesses or risk rating of 8 inherent in the substandard classification with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently known facts conditions and values highly questionable and improbable The possibility of loss is extremely likely but it is not identified at this point due to pending factors
Loss - An asset or portion thereof classified as loss is considered uncollectible and of such little value that its continuance on the Companys books as an asset is not warranted This classification does not necessarily mean that an asset has no recovery or salvage value but rather there is much doubt about whether how much or when the recovery would occur As such it is not practical or desirable to defer the write-off Therefore there is no loss balance to report at December 31 2014
Residential real estate and consumer installment loans are assessed for credit quality based on the contractual aging status of the loan and payment activity Such assessment is completed at the end of each reporting period
1 7
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present the risk category of loans evaluated by internal asset classification based on the most recent analysis performed and the contractual aging as of December 31 2014 and 2013
December 31 2014
Commercial Commercial real estate
Retail properties Multifamily
Mixed-use properties Industrial manufacturing warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
December 31 201 J
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties lndustnal manufactunng warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
Pass
$ 61710000 $
272359000 88002000 85430000 63660000
104525000
1531 14000
$ 828800000 $
$
$
Pass
s 62034000 $
250040000 76086000 85355000 60643000
108880000 1 1 7047000
s 760085000 $
$
$
1 8
Special Mention Substandard Doubtful Total
$ 1 016000 $ 168000 s 62894000
3701000 17384000 3483000 296927000 635000 1870000 90507000 238000 7175000 2728000 95571000
1353000 65013000 1 130000 4480000 110 135000
5937000 3461000 596000 163108000
10511 000 $ 32036000 $ 12808000 $ 884155000
Performing Non-periorming Total
140783000 s 2796000 $ 143579000
743000 743000
141 526000 s 2796000 $ 144322000
Special Mention Substandard Doubtful Total
$ 342000 $ 266000 s 62642000
10871000 25778000 15263000 301952000 1 885000 1905000 4526000 84402000 1 714000 6801000 3644000 97514000
273000 60916000 925000 11 506000 1213 1 1 000
381000 4064000 2027000 123519000
14851 000 $ 39815000 s 37505000 $ 852256000
Performing Non-performing Total
127597000 $ 2308000 $ 129905000
1 229000 1 229000
1 28826000 $ 2308000 $ 1 3 1 1 34000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables provide additional detail of the activity in the allowance for loan losses by portfolio segment for the years ended December 3 1 2014 and 2013
Construction
Commercial and land Rcs1dent1al Consumer
December 31 2014 Commercial Real Es1ate Develoement Real Estate lnsallment Total
Allowanco for loan lossos
Beg1nn1ng balance 1385000 20052000 3549000 2623000 17000 27626000
PrOV1Son for loan losses 2210000 2680000 2007000 3000 6900000
Loans chargedmiddotoff (179000) (8163000) 687000) (2140000) (11169000)
Recovenes of loans
previously charged-off 85000 2916000 223000 3224000
Ending balance s 1291000 1701 5000 5542000 271 3000 s 20000 s 26581000
Poriod-ondtd llmount allocatod to loans
lndMdually evaluated for
1mpa1rment 200000 445000 36000 52000 s 733000
Collec11vely evaluated
for 1mpa1rrnent 1091 000 16570000 5506000 2661000 20000 25648000
Ending balance 1291000 17015000 5542000 s 2713000 20000 26581000
Loans
lndMdually evaluated for
impairment 368000 17274000 3526000 4048000 25216000
Collecively evalua1ed
for 1mpa1rrnent 62526000 640879000 159582000 139531000 743000 1003261000
Ending balance 62894000 658 153000 163108000 143579000 743000 1028477000
Construct1on
Commercial and Land Residential Consumer
December 31 2013 Commeroal Real Estate Development Real Eslale Installment Total
Allowance for loan losses
Beginning balance 1040000 18719000 2484000 2248000 17000 24508000
Provision for loan losses 363000 6508000 867000 784000 28000 8550000
Loans chargedmiddot Off (59000) (5817000) (122000) (457000) (28000) (6483000)
Recoveries ol loans
previously charged-off 41 000 642000 320000 48000 1051000
Ending balance 1385000 20052000 3549000 s 2623000 17000 27626000
Period-ended amount allocated to loans
Individually evaluated for
impairment 3475000 239000 61000 3775000
Collectively evaluated
for impairment 1385000 16577000 3310000 2562000 17000 23851000
Ending balance 1385000 20052000 3549000 2623000 17000 27626000
Loans
Individually evaluated for
1mpa1rment 266000 42380000 5522000 s 3307000 51475000
Collectively evalua1ed
for impairment 62376000 623715000 1 17997000 126598000 1229000 931915000
Endrng balance 62642000 666095000 123519000 129905000 1229000 983390000
1 9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present additional detail of impaired loans segregated by class as of December 3 1 2014 and 2013 The unpaid principal balance represents the recorded balance prior to any partial charge-offs The recorded investment represents customer balances net of any partial charge-offs recognized on the loans The interest income recognized column represents all interest income reported either on a cash or accrued basis after the loan became impaired The cash basis income column represents only the interest income recognized on a cash basis after the loan was classified as impaired
December 31 2014
Wih no relaed allowance recorded
Commercial Commercial real estale
Reail properties Multifamily Mixed-use properties lndustnal manufacturing
warehouse Other commercial real estate
Construction and land developmen
Residential real estate Consumer installment
Wi1h an allowance recorded Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties Industrial manufacturing
warehouse Other commercial real estate
Construction and land development
Residential real estate Consumer installment
To1al
$
$
Unpaid Principal Balance
216000 $
7266000
3283000
2861000 6121000
3672000 6045000
200000
564000 2421000
1 62000 170000
Recorded Investment
168000 s
5543000
3119000
1353000 4480000
3400000 3878000
200000
564000 2215000
126000 170000
32981000 $ 25216000 $
20
Allowance for Loan Losses
Allocated
200000
42000 403000
36000 52000
733000
Average Recorded
Investment
$ 208000 $
1 1 474000 3514000 4354000
131 5000 5509000
4 183000 4673000
29000
677000 2270000
141 000 44000
$ 38391000 $
Interest Income
Recognized
109000 48000
161 000
125000 33000
38000
5000
519000
$
$
Cash Basis Interest Income
Recognized
108000 48000
1 57000
1 1 3000 32000
38000
5000
501000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Cash Basis Unpaid Allowance for Average Interest Interest
Principal Recorded Loan Losses Recorded Income Income December 31 2013 Balance Investment Allocated Investment Recognized Recognized
With no related allowance recordedmiddot
Commercial $ 266000 $ 266000 $ $ 326000 $ $ Commercial real estate
Retail properties 26699000 12500000 10635000 146000 139000 Multifamily 5542000 4526000 4838000 88000 88000 Mixed-use properties 3123000 2527000 2750000 103000 102000 Industrial manufacturing
warehouse 1 641000 273000 528000 Other commercial real estate 4056000 3497000 3617000
Construction and land development 8517000 3965000 4971000 1 1 4000 1 14000
Residenial rear estate 3769000 3203000 3203000 47000 43000 Consumer installment
With an allowance recorded Commercial Commercial real estate
Retarl properties 6138000 5239000 2045000 4759000 35000 35000 Multifamily 692000 682000 69000 687000 38000 38000 Mixed-use properties 5764000 5 127000 778000 4200000 92000 87000 Industrial manufacturing
warehouse Other commercial real estate 10001000 8009000 583000 8986000
Construction and land development 2770000 1 557000 239000 1 853000
Residential real estate 120000 104000 61000 1 04000 Consumer installment
Total $ 79298000 $ 51475000 $ 3775000 $ 51457000 $ 663000 $ 646000
21
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present troubled debt restructurings and the financial effects of troubled debt restructurings
Year Ended December 31 2014
Pre-Modification Post-Modification Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reserves
Commercial $ 288000 $ 168000 $
Commercial real estate
Retail properties 3 1790000 2060000
Multifamily 1 409000 672000 732000
Mixed-use properties 6 4660000 3 118000 974000
Industrial manufacturing warehouse Other commercial real estate 4682000 2864000 1 272000
Construction and land development 1 3924000 2930000 500000
Residential real estate 3 1288000 1 252000 52000
Consumer installment Total 16 $ 1 8041000 $ 13064000 $ 3530000
Year Ended December 3 1 2013
Pre-Modification Post-Modification
Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reseives
Commercial $ $ $
Commercial real estate
Retail properties 3 8596000 3651000 4363000
Multifamily 2 7026000 5090000 1598000
Mixed-use properties 7 6005000 4421000 1 612000
Industrial manufacturing warehouse
Other commercial real estate 5 14589000 10888000 2578000
Construction and land development 3 7409000 4493000 1 162000
Residential real estate 3 1515000 1 371000 117000
Consumer installment Total 23 $ 45 140000 $ 29914000 $ 11430000
Troubled debt restructurings that were accruing interest were $9520000 and $ 1 1 382000 respectively as of December 3 1 2014 and 2013 Troubled debt restructurings that were non-accruing were $3544000 and $ 1 8532000 respectively as of December 3 1 2014 and 201 3 Troubled debt restructurings included loans where the loan principal and corresponding interest rate was reduced and i n some instances the loan amortization period was extended During 2014 there were three troubled debt restructurings with outstanding balances at the time of re-default was $ 1 1 55000 and loan balances outstanding for these loans at December 3 1 2014 was $239000
22
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Consolidated Statements of Income
Years Ended December 31 2014 and 2013
Interest and dividend income
Loans including fees
Investment securities
Taxable
Tax-exempt
Federal funds sold
Other
Total interest and dividend income
Interest expense
Deposits
Borrowings
Total interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Noninterest income
Fees for banking services
Gain on sale of premises and equipment
Loss on sale of securities
Total noninterest income
Noninterest expenses
Salaries and employee benefits
Occupancy
Equipment
Data processing
Other real estate owned net
FDIC insurance
Other general and administrative
Total noninterest expenses
Net income before income taxes
Income taxes
Net income
See Notes to Consolidated Financial Statements
$
$
4
2014 2013
51751000 $ 51 176000
349000 375000
615000 792000
196000 212000
111000 133000
53022000 52688000
5097000 5789000
194000 139000
5291000 5928000
47731000 46760000
6900000 8550000
40831000 38210000
2258000 5 114000
9011000
(89000) (246000)
2 169000 13879000
10477000 9967000
2077000 2110000
1010000 957000
773000 728000
(319000) 1947000
1531000 1401000
2777000 4060000
18326000 21 170000
24674000 30919000
311000 230000
24363000 $ 30689000
Lakeside Bank and Subsidiary
Consolidated Statements of Comprehensive Income
Years Ended December 31 2014 and 2013
Net income
Other comprehensive loss
Unrealized holding gains (losses) arising during the year
Less reclassification adjustment for losses included in
net income
Change in net unrealized (losses) gains on defined benefit pension plan
Comprehensive income
See Notes to Consolidated Financial Statements
5
$
$
2014 2013
24363000 $ 30689000
1025000 (1939000)
89000 246000
(1896000) 1604000
(782000) (89000)
23581000 $ 30600000
Lakeside Bank and Subsidiary
Consolidated Statements of Stockholders Equity
Years Ended December 31 2014 and 2013
Accumulated
Other
Common Undivided Comprehensive
Stock Surplus Profits Loss Total
Balance at December 31 2012 $ 2230000 $ 39879000 $ 951 49000 $ (3 21 1 000) $ 1 34047000
Net income 30689000 30689000
Other comprehensive loss (89000) (89000)
Cash dividends on common stock (12657000) ( 12 657000)
Balance at December 31 2013 2230000 39879000 1131 8 1 000 (3300000) 151 990000
Net income 24363000 24363000
Other comprehensive loss (782000) (782000)
Cash dividends on common stock (1 7512000) ( 17 512000)
Balance at December 31 2 014 $ 2230000 $ 39879000 $ 120032000 $ (4082000) $ 158059000
See Notes to Consolidated Financial Statements
6
lakeside Bank and Subsidiary
Consolidated Statements of Cash Flows
Years Ended December 31 2014 and 2013
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses
Depreciation of premises and equipment
Arriortization of security prerniums and discounts net
Loss on sale of securities
Gain on sale of premises and equipment
(Gain) loss on sale and writedown of other real estate owned
Net change in
Other assets
Other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities
Net change in interest-bearing deposits in banks
Proceeds from maturities sales and calls of securities
available for sale
Purchase of securities available for sale
Net increase in loans
Additions to premises and equipment
Improvements in other real eatate owned
Proceeds from sale of premises and equipment
Proceeds from sale of other real estate owned
Net cash used in investing activities
Cash Flows from Financing Activities
Net increase in deposits
Net change in short-term borrowings
Net change in long-term borrowings
Cash dividends paid on common stock
Net cash provided by used in) financing activities
Net change in cash and due from banks
Cash and due from banks at beginning of year
Cash and due from banks at end of year
Supplementary cash flow information
Interest paid on deposits and borrowed funds
Income taxes paid
Supplementary schedule of noncash investing activities
Transfer of loans to other real estate owned Sales of other real estate owned financed bv the Bank
See Notes to Consolidated Financial Statements
7
$
$
$
$
2014 2013
24363000 $ 30689000
6900000 8550000
906000 1013000
730000 953000
89000 246000
(9011000)
(1066000) 1764000
535000 (1 108000)
763000 1115000
33220000 34211000
(5985000) 2497000
11841000 13944000
(500000) (10179000)
(49224000) (55 734000)
(6638000) (5604000)
(706000)
9600000
4644000 2225000
(46568000) (43251000)
58833000 6414000
3204000 (10487000)
15000000 4000000
(17512000) (12657000)
59525000 (12730000)
46177000 (21 770000)
66775000 88545000
112952 000 $ 66775000
5249000 $ 6050000
378000 130000
1881000 $ 1345000 5689000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies
Principles of consolidation The consolidated financial statements include the accounts of Lakeside Bank (the Bank) and its wholly owned subsidiary Lakeside Community Development LLC All intercompany transactions and balances have been eliminated The Bank is a wholly owned subsidiary of Lakeside Bancorp Inc
Nature of operations Lakeside Bank is a state chartered bank whose operations consist primarily of those financial activities common to the commercial banking industry The Bank serves northeastern Illinois and services are provided at six locations throughout Chicago The Banks wholly owned subsidiary Lakeside Community Development LLC invests in various community development activities
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 the reported amounts of revenue and expenses during the reporting period Actual results could differ from those estimates Material estimates that are susceptible to significant change in the near term relate to the determination of the allowance for loan losses valuation of other real estate owned the defined benefit plan liability and fair value of financial instruments
Presentation of cash flows For purposes of the consolidated statements of cash flows cash and due from banks include cash on hand and amounts due from banks (including cash items in process of clearing) Cash flows from interest-bearing deposits in banks loans deposits federal funds purchased and short-term and long-term borrowings are reported on a net basis
Interest-bearing deposits in banks Interest-bearing deposits in banks mature within one year and are carried at cost
Securities available for sale All securities are classified as available for sale as the Bank intends to hold the securities for an indefinite period of time but not necessarily to maturity Any decision to sell a security classified as available for sale would be based on various factors including significant movements in interest rates changes in the maturity mix of the Banks assets and liabil ities liquidity needs regulatory capital considerations and other similar factors Securities available for sale are carried at fair value U nrealized gains or losses are reported as increases or decreases in accumulated other comprehensive income Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities Realized gains or losses on sales of available for sale securities are recorded using the specific identification method
Management evaluates securities for other-than-temporary impairment (OTII) at least on a quarterly basis and more frequently when economic or market conditions warrant such evaluation Declines in the fair value of individual securities available for sale below their amortized cost that are determined to be other-than-temporary are reflected in earnings as realized losses In estimating other-than-temporary impairment losses management considers the length of time and the extent to which the fair value has been less than cost the financial condition and near-term prospects of the issuer and whether it is more likely than not to sell the security before recovery of its cost basis If they intend to sell an impaired security the Bank records an other-than-temporary loss in an amount equal to the entire difference between the fair value and amortized cost I f the Bank does not intend to sell the security only the credit portion of the estimated loss is recognized in earnings with the other portion recognized in accumulated other comprehensive income
8
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
Federal Home Loan Bank stock The Bank as a member of the Federal Home Loan Bank of Chicago (the FHLB) is required to maintain an investment in capital stock of the FHLB The stock does not have a readily determinable fair value as ownership is restricted and it lacks a ready market As a result this stock is carried at cost and evaluated periodically for impairment
Loans The Bank extends commercial mortgage and consumer loans to customers A substantial portion of the loan portfolio is represented by commercial loans in northeastern Illinois The ability of the Banks debtors to honor their contracts is dependent upon the general economic conditions in this area
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are generally reported at their outstanding unpaid principal balances adjusted for charge-offs and the allowance for loan losses I nterest income is accrued on the unpaid principal balance Loan balances include loan origination fees and direct loan origination costs that are being deferred and the net amount amortized as an adjustment of the related loans yield The Bank is amortizing these amounts over the contractual loan maturity
The accrual of interest on loans is typically discontinued at the time the loan is 90 days delinquent In al l cases loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful All interest accrued but not collected for loans that are placed on non accrual or charged-off is reversed against interest income The interest on these loans is accounted for on the cash-basis or cost-recovery method until qualifying for return to accrual Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured
Troubled debt restructurings A loan is classified as a troubled debt restructuring when a borrower is experiencing financial difficulties that leads to a restructuring of the loan and the Bank grants concessions to the borrower in the restructuring that it would not otherwise consider These concessions may include rate reductions principal forgiveness extension of maturity date and other actions intended to minimize potential losses Troubled debt restructurings are classified as impaired loans A loan that is modified at a market rate of interest may no longer be classified as a troubled debt restructuring and impaired in the calendar year subsequent to the restructuring if it is in compliance with the mod1f1ed terms Performance prior to the restructuring is considered when assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual at the time of the restructuring or after a shorter performance period
Allowance for loan losses The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to expense Loan losses are charged against the allowance when management believes that collectability of the principal is unlikely Subsequent recoveries if any are credited to the allowance
When establishing the allowance for loan losses management categorizes loans into risk categories generally based on the nature of the collateral and the basis of repayment These risk categories and the relevant risk characteristics are as follows
Commercial loans - Commercial loans are loans for corporate and business purposes including issuing letters of credit The Banks commercial business loan portfolio is comprised of loans for a variety of purposes and generally is secured by equipment machinery and other business assets Commercial business loans generally have terms of five years or less and interest rates that float in accordance with a designated published index Substantially all of such loans are secured and backed by the personal guarantees of the owners of the business
9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements -------------------------------middot middot-----------
Note 1 Summary of Significant Accounting Policies (Continued)
Commercial real estate loans - Commercial real estate loans are primarily secured by apartment buildings office and industrial buildings mixed-use properties small retail shopping centers and various special purpose properties including warehouses and restaurants Although terms vary commercial real estate loans generally have amortizations of 15 to 30 years as well as balloon payments of two to seven years and terms which provide that the interest rates thereon may be adjusted annually at the Banks discretion based on a designated index
Construction and land development loans - Construction land development loans consist of vacant land and property that is in the process of improvement Repayment of these loans can be dependent on the sale of the property to third parties or the successful completion of the improvements by the builder for the end user In the event a loan is made on property that is not yet approved for the planned development there is the risk that approvals will not be granted or will be delayed Construction and land development loans also run the risk that improvements will not be completed on time or in accordance with specifications and projected costs Construction and land development loans generally have terms of one year to 18 months during the construction period and interest rates based on a designated index
Residential real estate loans - Residential real estate loans include home equity lines of credit secured by a first or second mortgage and 1-4 family residential real estate loans Loans are generally smaller in size and are homogenous because they exhibit similar characteristics
Consumer installment loans - Consumer installment loans generally have higher interest rates than mortgage loans The risk involved in consumer loans is the type and nature of the collateral and in certain cases the absence of collateral These loans are secured by personal assets or may be unsecured and repayment is directly dependent on the borrowers income and the borrowers ability to service debt payments
The allowance for loan losses is evaluated on a regular basis by management and is based upon managements periodic review of the collectability of the loans in light of historical experience the nature and volume of the loan portfolio estimated value of any underlying collateral and prevailing economic conditions and adverse situations that may affect the borrowers ability to pay This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available In addition regulatory agencies as an integral part of their examination process periodically review the Banks allowance for loan losses and may require the Bank to make additions to the allowance based on their Judgment about information available to them at the time of their examinations
The allowance consists of specific and general components The specific component relates to loans that are classified as impaired and an allowance is established when the collateral value discounted cash flows or observable market price of the impaired loan is lower than the carrying value of that loan The general component covers non-impaired loans and is based on the Banks own loss experience adjusted for qualitative factors These qualitative factors consider local economic trends concentrations management experience and other elements of the Banks lending operations
10
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
A loan is impaired based on current information and events when it is probable the Bank will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Factors considered by management in determining impairment include payment status collateral value and the probability for collecting scheduled principal and interest payment when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on an individual-loan basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reason for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on an individual loan basis based on the fair value of the collateral if the loan is collateral dependent the present value of expected future cash flows discounted at the loans effective interest rate or the loans obtainable market price
Large groups of homogenous loans are collectively evaluated for impairment Accordingly the Bank does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Other real estate owned Assets acquired through or in lieu of loan foreclosure are held for sale and initially recorded at fair value less estimated costs to sell at the date of foreclosure establishing a new cost basis Subsequent to foreclosure valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less costs to sell Revenue and expenses from operations and changes in the valuation allowance are included in noninterest expenses-other real estate owned net
Premises and equipment Land is carried at cost Premises and equipment are stated at cost less accumulated depreciation (building 12-25 years leasehold improvements 3-15 years furniture and fixtures 3-20 years) Depreciation is provided principally by the straight-line method over the estimated useful lives of the assets Amortization of leasehold improvements is computed on the straight-line method over the lease term or the estimated useful lives of the improvements whichever 1s shorter
Transfers of financial assets Transfers of financial assets are accounted for as sales when control over the assets has been surrendered Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank - put presumptively beyond the reach of the transferor and its creditors even in bankruptcy or other receivership (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets
Income taxes Lakeside Bancorp Inc with the consent of its stockholders elected to be taxed as an S corporation under sections of the federal and state income tax laws which provide that in lieu of corporate income taxes the stockholder accounts for the Banks items of income deductions losses and credits As a wholly owned subsidiary the Banks income and expenses are included in the Lakeside Bancorp Inc consolidated tax returns As a result for the periods covered by this election no corporate income taxes will be recognized in the accompanying consolidated financial statements except for certain state income taxes
11
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
The Bank evaluates its tax positions to determine the appropriate level of tax reserves to maintain for uncertain tax positions The Bank has no uncertain tax positions as of December 3 1 2014 and 2013
The Bank would recognize interest and penalties on income taxes as a component of income tax expense
The Bank is generally no longer subject to US federal or state and local income tax examinations by tax authorities for years before 201 1
Comprehensive income Comprehensive income consists of net income changes in net unrealized gains and losses on securities available for sale reclassification adjustments for realized gains and losses on sales of AFS securities and changes in defined benefit pension obligation and is presented in the consolidated statements of stockholders equity
Recent accounting pronouncements In January 2014 the FASB (Financial Accounting Standards Board) issued guidance which requires an entity derecognize the loan receivable and recognize the real estate property when it has received physical possession of residential real estate property collateralizing a consumer mortgage loan upon either ( 1 ) 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 that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement Additionally the amendments require annual disclosures This guidance is effective for the Company for fiscal years beginning after December 15 2014 The adoption of this guidance is not expected to have a material impact on the consolidated financial statements
Subsequent events The Bank has evaluated subsequent events for potential recognition andor disclosure through April 30 2015 the date the consolidated financial statements were available to be issued
1 2
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 2 Restricted Cash and Due from Banks
The Bank is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank of Chicago The total of those reserve balances averaged $1 01 2000 and $935000 in 2014 and 2013 respectively The Bank maintains amounts due from banks which exceed federally insured limits The Bank has not experienced any losses in such accounts
Note 3 Securities Available for Sale
The amortized cost and fair value of securities with gross unrealized gains and losses follows
December 31 2014
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
December 31 2013
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
$
$
$
$
Amor1ized
Cost
15917000 $
23417000
6038000
5159000
50531000
250000
50781000 $
17835000 $
32338000
6590000
5928000
62691000
250000
62941000 $
Gross
Unrealized
Gains
41000 $
216000
22000
70000
349000
17000
366000 $
41000 $
190000
39000
26000
296000
11000
307000 s
Gross
Unrealized Fair
Losses Value
(53000) s 15905000
(243000) 23390000
(8000) 6052000
(41000) 5188000
(345000) 50535000
267000
(345000) $ 50802000
(255000) $ 17621000
(987000) 31541000
(32000) 6597000
(126000) 5828000
(1400000) 61587000
261000
(1400000) $ 61848000
Securities available for sale with a carrying value of $8339000 and $3848000 at December 31 2014 and 201 3 respectively were pledged on deposits of the United States Government and other public funds as required or permitted and other short-term borrowings
The amortized costs and fair values of debt securities available for sale as of December 3 1 2014 by contractual maturity are shown below Maturities may differ from contractual maturities in mortgageshybacked securities because the mortgages underlying the securities may be called or repaid without any penalties Therefore these securities are not included in the maturity categories in the following maturity summary
1 3
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements middot-
Note 3 Securities Available for Sale (Continued)
Amortized Fair
Cost Value
Due in one year or less $ 3049000 $ 3057000 Due after one year through five years 21 506000 21 507000
Due after five years through ten years 71 70000 7163000
Due after ten years 1 3647000 1 3620000
45372000 45347000
Residential mortgage-backed securities 5 159000 5188000 Totals $ 50531 000 $ 50535000
The following tables show the gross unrealized losses and fair value of investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 3 1 2 0 1 4 and 2 0 1 3
less than 12 Months 12 Months or More Total Fair Unrealized Fair Unreahzed Fair Unrealized
2014 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 498000 s (2000) $ 7695000 s (51000) $ 8193000 $ (53000) Obligations of states and
pol1ilca subd1v1sions 13671000 (243000) 13671000 (243000) Corporate debt obligations 1132000 (8000 1 132000 (8000) Residential mortgage-backed
obligations 2128000 (4100D) 2128000 (41000) Total temporary
impaired securities s 498000 s (2000) $ 24626000 $ (343000) s 25124000 s (345000)
Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized
2013 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 10867000 $ (232000) s 2632000 $ (23000) $ 13499000 s 255000) Obligations of states and
polillcal subdivisions 11195000 (365000) 11169000 (622000) 22364000 (987000) Corporate debt obligations 1179000 (32000) 1179000 (32000) Residential mortgage-backed
obligations 3977000 (126000) 3977000 (126000) Total temporary
impaired securities 26039000 s (723000) $ 14980000 s (677000) s 41019000 $ (1400000)
In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysis reports Since management does not intend to sell any temporarily impaired securities before recovery of their cost basis no declines are deemed other-than-temporary
On sale proceeds of $5637000 there were $57000 in realized gains and $146000 in realized losses on the sale of securities during the year ended December 3 1 2 0 1 4 On sale proceeds of $708000 there were no realized gains and $246000 realized losses on the sale of securities during the year ended December 3 1 2 0 1 3
1 4
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans
A summary of the balances of loans follows
Commercial $
Commercial real estate
Construction and land development
Residential real estate
Consumer installment
Less allowance for loan losses
Loans net $
December 3 1
2014 2013
62894000
658 153000
163 1 08000
1 43579000
743000
1 028477000
2658 1 000
1 001 896 000
$ 62642000
666095000
123519000
129905000
1 229000
983390000
27626000
$ 955764000
The following tables present the contractual aging of the recorded investment in loans by class of loans as of December 3 1 2014 and 2013
Loans Past 90 Days or 30-59 Days 60middot89 Days Due 90 Days More Past Due
December 31 2014 Current Past Due Past Due or More Total and Accruin
Commercial $ 62655000 $ 4000 $ 36000 $ 199000 s 62894000 $ 199000
Commercial real estate Relail properties 295610000 105000 1212000 296927000 199000
Multifamily 90507000 90507000
Mixed-use properties 93 116000 2455000 95571000
Industrial manufacturing warehouse 63660000 1353000 65013000
Other commerc1al real estate 106101000 4034000 110135000
Construction and land development 162512000 596000 163 108000
Residential real estate 140636000 208000 2735000 143579000
Consumer installment 743000 743000
Total $ 1 015 540000 $ 109 000 $ 244 000 12584 000 $ 1 028 477 000 s 398 000
15
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Loans Past 90 Days or 30-59 Days 60-89 Days Due 90 Days More Past Due
December 31 2013 Current Past Due Past Due or More Total and Accruing
Commercial $ 61588000 $ $ 755000 $ 299000 s 62642000 $ 33000 Commercial real estate
Retail properties 284 162000 1152000 1331000 15307000 301952000 44000 Mu11ifamily 78203000 1223000 450000 4526000 84402000 Mixed-use properties 93292000 262000 316000 3644000 97514000 Industrial manufacturing
warehouse 58947000 1696000 273000 60916000 Other commercial real
estate 109449000 282000 74000 11506000 121311000 Construction and land
development 121492000 2027000 123519000 Residential real estate 126229000 1062000 306000 2308000 129905000 89000 Consumer installment 1226000 1000 2000 1229000
Total $ 934 588000 $ 3982 000 s 4 930 000 39 890 000 983 390 000 $ 166 000
The following table presents the recorded investment in nonaccrual loans by class of loans as of December 31 2014 and 2013
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties
Industrial manufacturing warehouse Other commercial real estate
Construction and land development Residential real estate
Total
$
$
16
Nonaccrual Loans 2014 2013
168000 $ 266000
2470000 15263000
4526000
2728000 3644000
1353000 273000
4480000 11506000
1609000 2027000
2796000 2219000
15604000 $ 39724000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
As part of the on-going monitoring of the credit quality of the Banks loan portfolio management categorizes loans into rrsk categories based on relevant information about the ability of borrowers to service their debt and comply with various terms of their loan agreements The Bank considers current financial information historical payment experrence credit documentation public information and current economic trends Generally all sizeable credits receive a financial review no less than annually to monitor and adjust if necessary the credits risk profile Credits classified as watch generally receive a review more frequently than annually For substandard and doubtful credit classifications the frequency of review is increased to no less than quarterly in order to determine potential impact on credit loss estimates
The Bank categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt
Pass - A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors if any) or by the fair value less cost to acquire and sell of any underlying collateral in a timely manner Pass assets also include certain assets considered watch which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring
Special Mention - A special mention asset or risk rating of 6 has potential weaknesses that deserve managements close attention The asset may also be subject to a weak or speculative market or to economic conditions which may in the future adversely affect the obligor If left uncorrected these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Banks credit position at some future date Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification
Substandard - A substandard asset or risk rating of 7 is an asset with a well-defined weakness that jeopardizes repayment in whole or in part of the debt These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged These assets are characterized by the distinct possibility that the institution will sustain some loss of principal andor interest if the deficiencies are not corrected A loan does necessarily need to have an identifiable loss potential in order to receive this rating
Doubtful - An asset that has all the weaknesses or risk rating of 8 inherent in the substandard classification with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently known facts conditions and values highly questionable and improbable The possibility of loss is extremely likely but it is not identified at this point due to pending factors
Loss - An asset or portion thereof classified as loss is considered uncollectible and of such little value that its continuance on the Companys books as an asset is not warranted This classification does not necessarily mean that an asset has no recovery or salvage value but rather there is much doubt about whether how much or when the recovery would occur As such it is not practical or desirable to defer the write-off Therefore there is no loss balance to report at December 31 2014
Residential real estate and consumer installment loans are assessed for credit quality based on the contractual aging status of the loan and payment activity Such assessment is completed at the end of each reporting period
1 7
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present the risk category of loans evaluated by internal asset classification based on the most recent analysis performed and the contractual aging as of December 31 2014 and 2013
December 31 2014
Commercial Commercial real estate
Retail properties Multifamily
Mixed-use properties Industrial manufacturing warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
December 31 201 J
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties lndustnal manufactunng warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
Pass
$ 61710000 $
272359000 88002000 85430000 63660000
104525000
1531 14000
$ 828800000 $
$
$
Pass
s 62034000 $
250040000 76086000 85355000 60643000
108880000 1 1 7047000
s 760085000 $
$
$
1 8
Special Mention Substandard Doubtful Total
$ 1 016000 $ 168000 s 62894000
3701000 17384000 3483000 296927000 635000 1870000 90507000 238000 7175000 2728000 95571000
1353000 65013000 1 130000 4480000 110 135000
5937000 3461000 596000 163108000
10511 000 $ 32036000 $ 12808000 $ 884155000
Performing Non-periorming Total
140783000 s 2796000 $ 143579000
743000 743000
141 526000 s 2796000 $ 144322000
Special Mention Substandard Doubtful Total
$ 342000 $ 266000 s 62642000
10871000 25778000 15263000 301952000 1 885000 1905000 4526000 84402000 1 714000 6801000 3644000 97514000
273000 60916000 925000 11 506000 1213 1 1 000
381000 4064000 2027000 123519000
14851 000 $ 39815000 s 37505000 $ 852256000
Performing Non-performing Total
127597000 $ 2308000 $ 129905000
1 229000 1 229000
1 28826000 $ 2308000 $ 1 3 1 1 34000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables provide additional detail of the activity in the allowance for loan losses by portfolio segment for the years ended December 3 1 2014 and 2013
Construction
Commercial and land Rcs1dent1al Consumer
December 31 2014 Commercial Real Es1ate Develoement Real Estate lnsallment Total
Allowanco for loan lossos
Beg1nn1ng balance 1385000 20052000 3549000 2623000 17000 27626000
PrOV1Son for loan losses 2210000 2680000 2007000 3000 6900000
Loans chargedmiddotoff (179000) (8163000) 687000) (2140000) (11169000)
Recovenes of loans
previously charged-off 85000 2916000 223000 3224000
Ending balance s 1291000 1701 5000 5542000 271 3000 s 20000 s 26581000
Poriod-ondtd llmount allocatod to loans
lndMdually evaluated for
1mpa1rment 200000 445000 36000 52000 s 733000
Collec11vely evaluated
for 1mpa1rrnent 1091 000 16570000 5506000 2661000 20000 25648000
Ending balance 1291000 17015000 5542000 s 2713000 20000 26581000
Loans
lndMdually evaluated for
impairment 368000 17274000 3526000 4048000 25216000
Collecively evalua1ed
for 1mpa1rrnent 62526000 640879000 159582000 139531000 743000 1003261000
Ending balance 62894000 658 153000 163108000 143579000 743000 1028477000
Construct1on
Commercial and Land Residential Consumer
December 31 2013 Commeroal Real Estate Development Real Eslale Installment Total
Allowance for loan losses
Beginning balance 1040000 18719000 2484000 2248000 17000 24508000
Provision for loan losses 363000 6508000 867000 784000 28000 8550000
Loans chargedmiddot Off (59000) (5817000) (122000) (457000) (28000) (6483000)
Recoveries ol loans
previously charged-off 41 000 642000 320000 48000 1051000
Ending balance 1385000 20052000 3549000 s 2623000 17000 27626000
Period-ended amount allocated to loans
Individually evaluated for
impairment 3475000 239000 61000 3775000
Collectively evaluated
for impairment 1385000 16577000 3310000 2562000 17000 23851000
Ending balance 1385000 20052000 3549000 2623000 17000 27626000
Loans
Individually evaluated for
1mpa1rment 266000 42380000 5522000 s 3307000 51475000
Collectively evalua1ed
for impairment 62376000 623715000 1 17997000 126598000 1229000 931915000
Endrng balance 62642000 666095000 123519000 129905000 1229000 983390000
1 9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present additional detail of impaired loans segregated by class as of December 3 1 2014 and 2013 The unpaid principal balance represents the recorded balance prior to any partial charge-offs The recorded investment represents customer balances net of any partial charge-offs recognized on the loans The interest income recognized column represents all interest income reported either on a cash or accrued basis after the loan became impaired The cash basis income column represents only the interest income recognized on a cash basis after the loan was classified as impaired
December 31 2014
Wih no relaed allowance recorded
Commercial Commercial real estale
Reail properties Multifamily Mixed-use properties lndustnal manufacturing
warehouse Other commercial real estate
Construction and land developmen
Residential real estate Consumer installment
Wi1h an allowance recorded Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties Industrial manufacturing
warehouse Other commercial real estate
Construction and land development
Residential real estate Consumer installment
To1al
$
$
Unpaid Principal Balance
216000 $
7266000
3283000
2861000 6121000
3672000 6045000
200000
564000 2421000
1 62000 170000
Recorded Investment
168000 s
5543000
3119000
1353000 4480000
3400000 3878000
200000
564000 2215000
126000 170000
32981000 $ 25216000 $
20
Allowance for Loan Losses
Allocated
200000
42000 403000
36000 52000
733000
Average Recorded
Investment
$ 208000 $
1 1 474000 3514000 4354000
131 5000 5509000
4 183000 4673000
29000
677000 2270000
141 000 44000
$ 38391000 $
Interest Income
Recognized
109000 48000
161 000
125000 33000
38000
5000
519000
$
$
Cash Basis Interest Income
Recognized
108000 48000
1 57000
1 1 3000 32000
38000
5000
501000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Cash Basis Unpaid Allowance for Average Interest Interest
Principal Recorded Loan Losses Recorded Income Income December 31 2013 Balance Investment Allocated Investment Recognized Recognized
With no related allowance recordedmiddot
Commercial $ 266000 $ 266000 $ $ 326000 $ $ Commercial real estate
Retail properties 26699000 12500000 10635000 146000 139000 Multifamily 5542000 4526000 4838000 88000 88000 Mixed-use properties 3123000 2527000 2750000 103000 102000 Industrial manufacturing
warehouse 1 641000 273000 528000 Other commercial real estate 4056000 3497000 3617000
Construction and land development 8517000 3965000 4971000 1 1 4000 1 14000
Residenial rear estate 3769000 3203000 3203000 47000 43000 Consumer installment
With an allowance recorded Commercial Commercial real estate
Retarl properties 6138000 5239000 2045000 4759000 35000 35000 Multifamily 692000 682000 69000 687000 38000 38000 Mixed-use properties 5764000 5 127000 778000 4200000 92000 87000 Industrial manufacturing
warehouse Other commercial real estate 10001000 8009000 583000 8986000
Construction and land development 2770000 1 557000 239000 1 853000
Residential real estate 120000 104000 61000 1 04000 Consumer installment
Total $ 79298000 $ 51475000 $ 3775000 $ 51457000 $ 663000 $ 646000
21
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present troubled debt restructurings and the financial effects of troubled debt restructurings
Year Ended December 31 2014
Pre-Modification Post-Modification Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reserves
Commercial $ 288000 $ 168000 $
Commercial real estate
Retail properties 3 1790000 2060000
Multifamily 1 409000 672000 732000
Mixed-use properties 6 4660000 3 118000 974000
Industrial manufacturing warehouse Other commercial real estate 4682000 2864000 1 272000
Construction and land development 1 3924000 2930000 500000
Residential real estate 3 1288000 1 252000 52000
Consumer installment Total 16 $ 1 8041000 $ 13064000 $ 3530000
Year Ended December 3 1 2013
Pre-Modification Post-Modification
Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reseives
Commercial $ $ $
Commercial real estate
Retail properties 3 8596000 3651000 4363000
Multifamily 2 7026000 5090000 1598000
Mixed-use properties 7 6005000 4421000 1 612000
Industrial manufacturing warehouse
Other commercial real estate 5 14589000 10888000 2578000
Construction and land development 3 7409000 4493000 1 162000
Residential real estate 3 1515000 1 371000 117000
Consumer installment Total 23 $ 45 140000 $ 29914000 $ 11430000
Troubled debt restructurings that were accruing interest were $9520000 and $ 1 1 382000 respectively as of December 3 1 2014 and 2013 Troubled debt restructurings that were non-accruing were $3544000 and $ 1 8532000 respectively as of December 3 1 2014 and 201 3 Troubled debt restructurings included loans where the loan principal and corresponding interest rate was reduced and i n some instances the loan amortization period was extended During 2014 there were three troubled debt restructurings with outstanding balances at the time of re-default was $ 1 1 55000 and loan balances outstanding for these loans at December 3 1 2014 was $239000
22
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Consolidated Statements of Comprehensive Income
Years Ended December 31 2014 and 2013
Net income
Other comprehensive loss
Unrealized holding gains (losses) arising during the year
Less reclassification adjustment for losses included in
net income
Change in net unrealized (losses) gains on defined benefit pension plan
Comprehensive income
See Notes to Consolidated Financial Statements
5
$
$
2014 2013
24363000 $ 30689000
1025000 (1939000)
89000 246000
(1896000) 1604000
(782000) (89000)
23581000 $ 30600000
Lakeside Bank and Subsidiary
Consolidated Statements of Stockholders Equity
Years Ended December 31 2014 and 2013
Accumulated
Other
Common Undivided Comprehensive
Stock Surplus Profits Loss Total
Balance at December 31 2012 $ 2230000 $ 39879000 $ 951 49000 $ (3 21 1 000) $ 1 34047000
Net income 30689000 30689000
Other comprehensive loss (89000) (89000)
Cash dividends on common stock (12657000) ( 12 657000)
Balance at December 31 2013 2230000 39879000 1131 8 1 000 (3300000) 151 990000
Net income 24363000 24363000
Other comprehensive loss (782000) (782000)
Cash dividends on common stock (1 7512000) ( 17 512000)
Balance at December 31 2 014 $ 2230000 $ 39879000 $ 120032000 $ (4082000) $ 158059000
See Notes to Consolidated Financial Statements
6
lakeside Bank and Subsidiary
Consolidated Statements of Cash Flows
Years Ended December 31 2014 and 2013
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses
Depreciation of premises and equipment
Arriortization of security prerniums and discounts net
Loss on sale of securities
Gain on sale of premises and equipment
(Gain) loss on sale and writedown of other real estate owned
Net change in
Other assets
Other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities
Net change in interest-bearing deposits in banks
Proceeds from maturities sales and calls of securities
available for sale
Purchase of securities available for sale
Net increase in loans
Additions to premises and equipment
Improvements in other real eatate owned
Proceeds from sale of premises and equipment
Proceeds from sale of other real estate owned
Net cash used in investing activities
Cash Flows from Financing Activities
Net increase in deposits
Net change in short-term borrowings
Net change in long-term borrowings
Cash dividends paid on common stock
Net cash provided by used in) financing activities
Net change in cash and due from banks
Cash and due from banks at beginning of year
Cash and due from banks at end of year
Supplementary cash flow information
Interest paid on deposits and borrowed funds
Income taxes paid
Supplementary schedule of noncash investing activities
Transfer of loans to other real estate owned Sales of other real estate owned financed bv the Bank
See Notes to Consolidated Financial Statements
7
$
$
$
$
2014 2013
24363000 $ 30689000
6900000 8550000
906000 1013000
730000 953000
89000 246000
(9011000)
(1066000) 1764000
535000 (1 108000)
763000 1115000
33220000 34211000
(5985000) 2497000
11841000 13944000
(500000) (10179000)
(49224000) (55 734000)
(6638000) (5604000)
(706000)
9600000
4644000 2225000
(46568000) (43251000)
58833000 6414000
3204000 (10487000)
15000000 4000000
(17512000) (12657000)
59525000 (12730000)
46177000 (21 770000)
66775000 88545000
112952 000 $ 66775000
5249000 $ 6050000
378000 130000
1881000 $ 1345000 5689000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies
Principles of consolidation The consolidated financial statements include the accounts of Lakeside Bank (the Bank) and its wholly owned subsidiary Lakeside Community Development LLC All intercompany transactions and balances have been eliminated The Bank is a wholly owned subsidiary of Lakeside Bancorp Inc
Nature of operations Lakeside Bank is a state chartered bank whose operations consist primarily of those financial activities common to the commercial banking industry The Bank serves northeastern Illinois and services are provided at six locations throughout Chicago The Banks wholly owned subsidiary Lakeside Community Development LLC invests in various community development activities
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 the reported amounts of revenue and expenses during the reporting period Actual results could differ from those estimates Material estimates that are susceptible to significant change in the near term relate to the determination of the allowance for loan losses valuation of other real estate owned the defined benefit plan liability and fair value of financial instruments
Presentation of cash flows For purposes of the consolidated statements of cash flows cash and due from banks include cash on hand and amounts due from banks (including cash items in process of clearing) Cash flows from interest-bearing deposits in banks loans deposits federal funds purchased and short-term and long-term borrowings are reported on a net basis
Interest-bearing deposits in banks Interest-bearing deposits in banks mature within one year and are carried at cost
Securities available for sale All securities are classified as available for sale as the Bank intends to hold the securities for an indefinite period of time but not necessarily to maturity Any decision to sell a security classified as available for sale would be based on various factors including significant movements in interest rates changes in the maturity mix of the Banks assets and liabil ities liquidity needs regulatory capital considerations and other similar factors Securities available for sale are carried at fair value U nrealized gains or losses are reported as increases or decreases in accumulated other comprehensive income Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities Realized gains or losses on sales of available for sale securities are recorded using the specific identification method
Management evaluates securities for other-than-temporary impairment (OTII) at least on a quarterly basis and more frequently when economic or market conditions warrant such evaluation Declines in the fair value of individual securities available for sale below their amortized cost that are determined to be other-than-temporary are reflected in earnings as realized losses In estimating other-than-temporary impairment losses management considers the length of time and the extent to which the fair value has been less than cost the financial condition and near-term prospects of the issuer and whether it is more likely than not to sell the security before recovery of its cost basis If they intend to sell an impaired security the Bank records an other-than-temporary loss in an amount equal to the entire difference between the fair value and amortized cost I f the Bank does not intend to sell the security only the credit portion of the estimated loss is recognized in earnings with the other portion recognized in accumulated other comprehensive income
8
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
Federal Home Loan Bank stock The Bank as a member of the Federal Home Loan Bank of Chicago (the FHLB) is required to maintain an investment in capital stock of the FHLB The stock does not have a readily determinable fair value as ownership is restricted and it lacks a ready market As a result this stock is carried at cost and evaluated periodically for impairment
Loans The Bank extends commercial mortgage and consumer loans to customers A substantial portion of the loan portfolio is represented by commercial loans in northeastern Illinois The ability of the Banks debtors to honor their contracts is dependent upon the general economic conditions in this area
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are generally reported at their outstanding unpaid principal balances adjusted for charge-offs and the allowance for loan losses I nterest income is accrued on the unpaid principal balance Loan balances include loan origination fees and direct loan origination costs that are being deferred and the net amount amortized as an adjustment of the related loans yield The Bank is amortizing these amounts over the contractual loan maturity
The accrual of interest on loans is typically discontinued at the time the loan is 90 days delinquent In al l cases loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful All interest accrued but not collected for loans that are placed on non accrual or charged-off is reversed against interest income The interest on these loans is accounted for on the cash-basis or cost-recovery method until qualifying for return to accrual Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured
Troubled debt restructurings A loan is classified as a troubled debt restructuring when a borrower is experiencing financial difficulties that leads to a restructuring of the loan and the Bank grants concessions to the borrower in the restructuring that it would not otherwise consider These concessions may include rate reductions principal forgiveness extension of maturity date and other actions intended to minimize potential losses Troubled debt restructurings are classified as impaired loans A loan that is modified at a market rate of interest may no longer be classified as a troubled debt restructuring and impaired in the calendar year subsequent to the restructuring if it is in compliance with the mod1f1ed terms Performance prior to the restructuring is considered when assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual at the time of the restructuring or after a shorter performance period
Allowance for loan losses The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to expense Loan losses are charged against the allowance when management believes that collectability of the principal is unlikely Subsequent recoveries if any are credited to the allowance
When establishing the allowance for loan losses management categorizes loans into risk categories generally based on the nature of the collateral and the basis of repayment These risk categories and the relevant risk characteristics are as follows
Commercial loans - Commercial loans are loans for corporate and business purposes including issuing letters of credit The Banks commercial business loan portfolio is comprised of loans for a variety of purposes and generally is secured by equipment machinery and other business assets Commercial business loans generally have terms of five years or less and interest rates that float in accordance with a designated published index Substantially all of such loans are secured and backed by the personal guarantees of the owners of the business
9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements -------------------------------middot middot-----------
Note 1 Summary of Significant Accounting Policies (Continued)
Commercial real estate loans - Commercial real estate loans are primarily secured by apartment buildings office and industrial buildings mixed-use properties small retail shopping centers and various special purpose properties including warehouses and restaurants Although terms vary commercial real estate loans generally have amortizations of 15 to 30 years as well as balloon payments of two to seven years and terms which provide that the interest rates thereon may be adjusted annually at the Banks discretion based on a designated index
Construction and land development loans - Construction land development loans consist of vacant land and property that is in the process of improvement Repayment of these loans can be dependent on the sale of the property to third parties or the successful completion of the improvements by the builder for the end user In the event a loan is made on property that is not yet approved for the planned development there is the risk that approvals will not be granted or will be delayed Construction and land development loans also run the risk that improvements will not be completed on time or in accordance with specifications and projected costs Construction and land development loans generally have terms of one year to 18 months during the construction period and interest rates based on a designated index
Residential real estate loans - Residential real estate loans include home equity lines of credit secured by a first or second mortgage and 1-4 family residential real estate loans Loans are generally smaller in size and are homogenous because they exhibit similar characteristics
Consumer installment loans - Consumer installment loans generally have higher interest rates than mortgage loans The risk involved in consumer loans is the type and nature of the collateral and in certain cases the absence of collateral These loans are secured by personal assets or may be unsecured and repayment is directly dependent on the borrowers income and the borrowers ability to service debt payments
The allowance for loan losses is evaluated on a regular basis by management and is based upon managements periodic review of the collectability of the loans in light of historical experience the nature and volume of the loan portfolio estimated value of any underlying collateral and prevailing economic conditions and adverse situations that may affect the borrowers ability to pay This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available In addition regulatory agencies as an integral part of their examination process periodically review the Banks allowance for loan losses and may require the Bank to make additions to the allowance based on their Judgment about information available to them at the time of their examinations
The allowance consists of specific and general components The specific component relates to loans that are classified as impaired and an allowance is established when the collateral value discounted cash flows or observable market price of the impaired loan is lower than the carrying value of that loan The general component covers non-impaired loans and is based on the Banks own loss experience adjusted for qualitative factors These qualitative factors consider local economic trends concentrations management experience and other elements of the Banks lending operations
10
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
A loan is impaired based on current information and events when it is probable the Bank will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Factors considered by management in determining impairment include payment status collateral value and the probability for collecting scheduled principal and interest payment when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on an individual-loan basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reason for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on an individual loan basis based on the fair value of the collateral if the loan is collateral dependent the present value of expected future cash flows discounted at the loans effective interest rate or the loans obtainable market price
Large groups of homogenous loans are collectively evaluated for impairment Accordingly the Bank does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Other real estate owned Assets acquired through or in lieu of loan foreclosure are held for sale and initially recorded at fair value less estimated costs to sell at the date of foreclosure establishing a new cost basis Subsequent to foreclosure valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less costs to sell Revenue and expenses from operations and changes in the valuation allowance are included in noninterest expenses-other real estate owned net
Premises and equipment Land is carried at cost Premises and equipment are stated at cost less accumulated depreciation (building 12-25 years leasehold improvements 3-15 years furniture and fixtures 3-20 years) Depreciation is provided principally by the straight-line method over the estimated useful lives of the assets Amortization of leasehold improvements is computed on the straight-line method over the lease term or the estimated useful lives of the improvements whichever 1s shorter
Transfers of financial assets Transfers of financial assets are accounted for as sales when control over the assets has been surrendered Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank - put presumptively beyond the reach of the transferor and its creditors even in bankruptcy or other receivership (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets
Income taxes Lakeside Bancorp Inc with the consent of its stockholders elected to be taxed as an S corporation under sections of the federal and state income tax laws which provide that in lieu of corporate income taxes the stockholder accounts for the Banks items of income deductions losses and credits As a wholly owned subsidiary the Banks income and expenses are included in the Lakeside Bancorp Inc consolidated tax returns As a result for the periods covered by this election no corporate income taxes will be recognized in the accompanying consolidated financial statements except for certain state income taxes
11
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
The Bank evaluates its tax positions to determine the appropriate level of tax reserves to maintain for uncertain tax positions The Bank has no uncertain tax positions as of December 3 1 2014 and 2013
The Bank would recognize interest and penalties on income taxes as a component of income tax expense
The Bank is generally no longer subject to US federal or state and local income tax examinations by tax authorities for years before 201 1
Comprehensive income Comprehensive income consists of net income changes in net unrealized gains and losses on securities available for sale reclassification adjustments for realized gains and losses on sales of AFS securities and changes in defined benefit pension obligation and is presented in the consolidated statements of stockholders equity
Recent accounting pronouncements In January 2014 the FASB (Financial Accounting Standards Board) issued guidance which requires an entity derecognize the loan receivable and recognize the real estate property when it has received physical possession of residential real estate property collateralizing a consumer mortgage loan upon either ( 1 ) 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 that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement Additionally the amendments require annual disclosures This guidance is effective for the Company for fiscal years beginning after December 15 2014 The adoption of this guidance is not expected to have a material impact on the consolidated financial statements
Subsequent events The Bank has evaluated subsequent events for potential recognition andor disclosure through April 30 2015 the date the consolidated financial statements were available to be issued
1 2
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 2 Restricted Cash and Due from Banks
The Bank is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank of Chicago The total of those reserve balances averaged $1 01 2000 and $935000 in 2014 and 2013 respectively The Bank maintains amounts due from banks which exceed federally insured limits The Bank has not experienced any losses in such accounts
Note 3 Securities Available for Sale
The amortized cost and fair value of securities with gross unrealized gains and losses follows
December 31 2014
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
December 31 2013
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
$
$
$
$
Amor1ized
Cost
15917000 $
23417000
6038000
5159000
50531000
250000
50781000 $
17835000 $
32338000
6590000
5928000
62691000
250000
62941000 $
Gross
Unrealized
Gains
41000 $
216000
22000
70000
349000
17000
366000 $
41000 $
190000
39000
26000
296000
11000
307000 s
Gross
Unrealized Fair
Losses Value
(53000) s 15905000
(243000) 23390000
(8000) 6052000
(41000) 5188000
(345000) 50535000
267000
(345000) $ 50802000
(255000) $ 17621000
(987000) 31541000
(32000) 6597000
(126000) 5828000
(1400000) 61587000
261000
(1400000) $ 61848000
Securities available for sale with a carrying value of $8339000 and $3848000 at December 31 2014 and 201 3 respectively were pledged on deposits of the United States Government and other public funds as required or permitted and other short-term borrowings
The amortized costs and fair values of debt securities available for sale as of December 3 1 2014 by contractual maturity are shown below Maturities may differ from contractual maturities in mortgageshybacked securities because the mortgages underlying the securities may be called or repaid without any penalties Therefore these securities are not included in the maturity categories in the following maturity summary
1 3
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements middot-
Note 3 Securities Available for Sale (Continued)
Amortized Fair
Cost Value
Due in one year or less $ 3049000 $ 3057000 Due after one year through five years 21 506000 21 507000
Due after five years through ten years 71 70000 7163000
Due after ten years 1 3647000 1 3620000
45372000 45347000
Residential mortgage-backed securities 5 159000 5188000 Totals $ 50531 000 $ 50535000
The following tables show the gross unrealized losses and fair value of investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 3 1 2 0 1 4 and 2 0 1 3
less than 12 Months 12 Months or More Total Fair Unrealized Fair Unreahzed Fair Unrealized
2014 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 498000 s (2000) $ 7695000 s (51000) $ 8193000 $ (53000) Obligations of states and
pol1ilca subd1v1sions 13671000 (243000) 13671000 (243000) Corporate debt obligations 1132000 (8000 1 132000 (8000) Residential mortgage-backed
obligations 2128000 (4100D) 2128000 (41000) Total temporary
impaired securities s 498000 s (2000) $ 24626000 $ (343000) s 25124000 s (345000)
Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized
2013 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 10867000 $ (232000) s 2632000 $ (23000) $ 13499000 s 255000) Obligations of states and
polillcal subdivisions 11195000 (365000) 11169000 (622000) 22364000 (987000) Corporate debt obligations 1179000 (32000) 1179000 (32000) Residential mortgage-backed
obligations 3977000 (126000) 3977000 (126000) Total temporary
impaired securities 26039000 s (723000) $ 14980000 s (677000) s 41019000 $ (1400000)
In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysis reports Since management does not intend to sell any temporarily impaired securities before recovery of their cost basis no declines are deemed other-than-temporary
On sale proceeds of $5637000 there were $57000 in realized gains and $146000 in realized losses on the sale of securities during the year ended December 3 1 2 0 1 4 On sale proceeds of $708000 there were no realized gains and $246000 realized losses on the sale of securities during the year ended December 3 1 2 0 1 3
1 4
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans
A summary of the balances of loans follows
Commercial $
Commercial real estate
Construction and land development
Residential real estate
Consumer installment
Less allowance for loan losses
Loans net $
December 3 1
2014 2013
62894000
658 153000
163 1 08000
1 43579000
743000
1 028477000
2658 1 000
1 001 896 000
$ 62642000
666095000
123519000
129905000
1 229000
983390000
27626000
$ 955764000
The following tables present the contractual aging of the recorded investment in loans by class of loans as of December 3 1 2014 and 2013
Loans Past 90 Days or 30-59 Days 60middot89 Days Due 90 Days More Past Due
December 31 2014 Current Past Due Past Due or More Total and Accruin
Commercial $ 62655000 $ 4000 $ 36000 $ 199000 s 62894000 $ 199000
Commercial real estate Relail properties 295610000 105000 1212000 296927000 199000
Multifamily 90507000 90507000
Mixed-use properties 93 116000 2455000 95571000
Industrial manufacturing warehouse 63660000 1353000 65013000
Other commerc1al real estate 106101000 4034000 110135000
Construction and land development 162512000 596000 163 108000
Residential real estate 140636000 208000 2735000 143579000
Consumer installment 743000 743000
Total $ 1 015 540000 $ 109 000 $ 244 000 12584 000 $ 1 028 477 000 s 398 000
15
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Loans Past 90 Days or 30-59 Days 60-89 Days Due 90 Days More Past Due
December 31 2013 Current Past Due Past Due or More Total and Accruing
Commercial $ 61588000 $ $ 755000 $ 299000 s 62642000 $ 33000 Commercial real estate
Retail properties 284 162000 1152000 1331000 15307000 301952000 44000 Mu11ifamily 78203000 1223000 450000 4526000 84402000 Mixed-use properties 93292000 262000 316000 3644000 97514000 Industrial manufacturing
warehouse 58947000 1696000 273000 60916000 Other commercial real
estate 109449000 282000 74000 11506000 121311000 Construction and land
development 121492000 2027000 123519000 Residential real estate 126229000 1062000 306000 2308000 129905000 89000 Consumer installment 1226000 1000 2000 1229000
Total $ 934 588000 $ 3982 000 s 4 930 000 39 890 000 983 390 000 $ 166 000
The following table presents the recorded investment in nonaccrual loans by class of loans as of December 31 2014 and 2013
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties
Industrial manufacturing warehouse Other commercial real estate
Construction and land development Residential real estate
Total
$
$
16
Nonaccrual Loans 2014 2013
168000 $ 266000
2470000 15263000
4526000
2728000 3644000
1353000 273000
4480000 11506000
1609000 2027000
2796000 2219000
15604000 $ 39724000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
As part of the on-going monitoring of the credit quality of the Banks loan portfolio management categorizes loans into rrsk categories based on relevant information about the ability of borrowers to service their debt and comply with various terms of their loan agreements The Bank considers current financial information historical payment experrence credit documentation public information and current economic trends Generally all sizeable credits receive a financial review no less than annually to monitor and adjust if necessary the credits risk profile Credits classified as watch generally receive a review more frequently than annually For substandard and doubtful credit classifications the frequency of review is increased to no less than quarterly in order to determine potential impact on credit loss estimates
The Bank categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt
Pass - A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors if any) or by the fair value less cost to acquire and sell of any underlying collateral in a timely manner Pass assets also include certain assets considered watch which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring
Special Mention - A special mention asset or risk rating of 6 has potential weaknesses that deserve managements close attention The asset may also be subject to a weak or speculative market or to economic conditions which may in the future adversely affect the obligor If left uncorrected these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Banks credit position at some future date Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification
Substandard - A substandard asset or risk rating of 7 is an asset with a well-defined weakness that jeopardizes repayment in whole or in part of the debt These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged These assets are characterized by the distinct possibility that the institution will sustain some loss of principal andor interest if the deficiencies are not corrected A loan does necessarily need to have an identifiable loss potential in order to receive this rating
Doubtful - An asset that has all the weaknesses or risk rating of 8 inherent in the substandard classification with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently known facts conditions and values highly questionable and improbable The possibility of loss is extremely likely but it is not identified at this point due to pending factors
Loss - An asset or portion thereof classified as loss is considered uncollectible and of such little value that its continuance on the Companys books as an asset is not warranted This classification does not necessarily mean that an asset has no recovery or salvage value but rather there is much doubt about whether how much or when the recovery would occur As such it is not practical or desirable to defer the write-off Therefore there is no loss balance to report at December 31 2014
Residential real estate and consumer installment loans are assessed for credit quality based on the contractual aging status of the loan and payment activity Such assessment is completed at the end of each reporting period
1 7
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present the risk category of loans evaluated by internal asset classification based on the most recent analysis performed and the contractual aging as of December 31 2014 and 2013
December 31 2014
Commercial Commercial real estate
Retail properties Multifamily
Mixed-use properties Industrial manufacturing warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
December 31 201 J
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties lndustnal manufactunng warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
Pass
$ 61710000 $
272359000 88002000 85430000 63660000
104525000
1531 14000
$ 828800000 $
$
$
Pass
s 62034000 $
250040000 76086000 85355000 60643000
108880000 1 1 7047000
s 760085000 $
$
$
1 8
Special Mention Substandard Doubtful Total
$ 1 016000 $ 168000 s 62894000
3701000 17384000 3483000 296927000 635000 1870000 90507000 238000 7175000 2728000 95571000
1353000 65013000 1 130000 4480000 110 135000
5937000 3461000 596000 163108000
10511 000 $ 32036000 $ 12808000 $ 884155000
Performing Non-periorming Total
140783000 s 2796000 $ 143579000
743000 743000
141 526000 s 2796000 $ 144322000
Special Mention Substandard Doubtful Total
$ 342000 $ 266000 s 62642000
10871000 25778000 15263000 301952000 1 885000 1905000 4526000 84402000 1 714000 6801000 3644000 97514000
273000 60916000 925000 11 506000 1213 1 1 000
381000 4064000 2027000 123519000
14851 000 $ 39815000 s 37505000 $ 852256000
Performing Non-performing Total
127597000 $ 2308000 $ 129905000
1 229000 1 229000
1 28826000 $ 2308000 $ 1 3 1 1 34000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables provide additional detail of the activity in the allowance for loan losses by portfolio segment for the years ended December 3 1 2014 and 2013
Construction
Commercial and land Rcs1dent1al Consumer
December 31 2014 Commercial Real Es1ate Develoement Real Estate lnsallment Total
Allowanco for loan lossos
Beg1nn1ng balance 1385000 20052000 3549000 2623000 17000 27626000
PrOV1Son for loan losses 2210000 2680000 2007000 3000 6900000
Loans chargedmiddotoff (179000) (8163000) 687000) (2140000) (11169000)
Recovenes of loans
previously charged-off 85000 2916000 223000 3224000
Ending balance s 1291000 1701 5000 5542000 271 3000 s 20000 s 26581000
Poriod-ondtd llmount allocatod to loans
lndMdually evaluated for
1mpa1rment 200000 445000 36000 52000 s 733000
Collec11vely evaluated
for 1mpa1rrnent 1091 000 16570000 5506000 2661000 20000 25648000
Ending balance 1291000 17015000 5542000 s 2713000 20000 26581000
Loans
lndMdually evaluated for
impairment 368000 17274000 3526000 4048000 25216000
Collecively evalua1ed
for 1mpa1rrnent 62526000 640879000 159582000 139531000 743000 1003261000
Ending balance 62894000 658 153000 163108000 143579000 743000 1028477000
Construct1on
Commercial and Land Residential Consumer
December 31 2013 Commeroal Real Estate Development Real Eslale Installment Total
Allowance for loan losses
Beginning balance 1040000 18719000 2484000 2248000 17000 24508000
Provision for loan losses 363000 6508000 867000 784000 28000 8550000
Loans chargedmiddot Off (59000) (5817000) (122000) (457000) (28000) (6483000)
Recoveries ol loans
previously charged-off 41 000 642000 320000 48000 1051000
Ending balance 1385000 20052000 3549000 s 2623000 17000 27626000
Period-ended amount allocated to loans
Individually evaluated for
impairment 3475000 239000 61000 3775000
Collectively evaluated
for impairment 1385000 16577000 3310000 2562000 17000 23851000
Ending balance 1385000 20052000 3549000 2623000 17000 27626000
Loans
Individually evaluated for
1mpa1rment 266000 42380000 5522000 s 3307000 51475000
Collectively evalua1ed
for impairment 62376000 623715000 1 17997000 126598000 1229000 931915000
Endrng balance 62642000 666095000 123519000 129905000 1229000 983390000
1 9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present additional detail of impaired loans segregated by class as of December 3 1 2014 and 2013 The unpaid principal balance represents the recorded balance prior to any partial charge-offs The recorded investment represents customer balances net of any partial charge-offs recognized on the loans The interest income recognized column represents all interest income reported either on a cash or accrued basis after the loan became impaired The cash basis income column represents only the interest income recognized on a cash basis after the loan was classified as impaired
December 31 2014
Wih no relaed allowance recorded
Commercial Commercial real estale
Reail properties Multifamily Mixed-use properties lndustnal manufacturing
warehouse Other commercial real estate
Construction and land developmen
Residential real estate Consumer installment
Wi1h an allowance recorded Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties Industrial manufacturing
warehouse Other commercial real estate
Construction and land development
Residential real estate Consumer installment
To1al
$
$
Unpaid Principal Balance
216000 $
7266000
3283000
2861000 6121000
3672000 6045000
200000
564000 2421000
1 62000 170000
Recorded Investment
168000 s
5543000
3119000
1353000 4480000
3400000 3878000
200000
564000 2215000
126000 170000
32981000 $ 25216000 $
20
Allowance for Loan Losses
Allocated
200000
42000 403000
36000 52000
733000
Average Recorded
Investment
$ 208000 $
1 1 474000 3514000 4354000
131 5000 5509000
4 183000 4673000
29000
677000 2270000
141 000 44000
$ 38391000 $
Interest Income
Recognized
109000 48000
161 000
125000 33000
38000
5000
519000
$
$
Cash Basis Interest Income
Recognized
108000 48000
1 57000
1 1 3000 32000
38000
5000
501000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Cash Basis Unpaid Allowance for Average Interest Interest
Principal Recorded Loan Losses Recorded Income Income December 31 2013 Balance Investment Allocated Investment Recognized Recognized
With no related allowance recordedmiddot
Commercial $ 266000 $ 266000 $ $ 326000 $ $ Commercial real estate
Retail properties 26699000 12500000 10635000 146000 139000 Multifamily 5542000 4526000 4838000 88000 88000 Mixed-use properties 3123000 2527000 2750000 103000 102000 Industrial manufacturing
warehouse 1 641000 273000 528000 Other commercial real estate 4056000 3497000 3617000
Construction and land development 8517000 3965000 4971000 1 1 4000 1 14000
Residenial rear estate 3769000 3203000 3203000 47000 43000 Consumer installment
With an allowance recorded Commercial Commercial real estate
Retarl properties 6138000 5239000 2045000 4759000 35000 35000 Multifamily 692000 682000 69000 687000 38000 38000 Mixed-use properties 5764000 5 127000 778000 4200000 92000 87000 Industrial manufacturing
warehouse Other commercial real estate 10001000 8009000 583000 8986000
Construction and land development 2770000 1 557000 239000 1 853000
Residential real estate 120000 104000 61000 1 04000 Consumer installment
Total $ 79298000 $ 51475000 $ 3775000 $ 51457000 $ 663000 $ 646000
21
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present troubled debt restructurings and the financial effects of troubled debt restructurings
Year Ended December 31 2014
Pre-Modification Post-Modification Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reserves
Commercial $ 288000 $ 168000 $
Commercial real estate
Retail properties 3 1790000 2060000
Multifamily 1 409000 672000 732000
Mixed-use properties 6 4660000 3 118000 974000
Industrial manufacturing warehouse Other commercial real estate 4682000 2864000 1 272000
Construction and land development 1 3924000 2930000 500000
Residential real estate 3 1288000 1 252000 52000
Consumer installment Total 16 $ 1 8041000 $ 13064000 $ 3530000
Year Ended December 3 1 2013
Pre-Modification Post-Modification
Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reseives
Commercial $ $ $
Commercial real estate
Retail properties 3 8596000 3651000 4363000
Multifamily 2 7026000 5090000 1598000
Mixed-use properties 7 6005000 4421000 1 612000
Industrial manufacturing warehouse
Other commercial real estate 5 14589000 10888000 2578000
Construction and land development 3 7409000 4493000 1 162000
Residential real estate 3 1515000 1 371000 117000
Consumer installment Total 23 $ 45 140000 $ 29914000 $ 11430000
Troubled debt restructurings that were accruing interest were $9520000 and $ 1 1 382000 respectively as of December 3 1 2014 and 2013 Troubled debt restructurings that were non-accruing were $3544000 and $ 1 8532000 respectively as of December 3 1 2014 and 201 3 Troubled debt restructurings included loans where the loan principal and corresponding interest rate was reduced and i n some instances the loan amortization period was extended During 2014 there were three troubled debt restructurings with outstanding balances at the time of re-default was $ 1 1 55000 and loan balances outstanding for these loans at December 3 1 2014 was $239000
22
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Consolidated Statements of Stockholders Equity
Years Ended December 31 2014 and 2013
Accumulated
Other
Common Undivided Comprehensive
Stock Surplus Profits Loss Total
Balance at December 31 2012 $ 2230000 $ 39879000 $ 951 49000 $ (3 21 1 000) $ 1 34047000
Net income 30689000 30689000
Other comprehensive loss (89000) (89000)
Cash dividends on common stock (12657000) ( 12 657000)
Balance at December 31 2013 2230000 39879000 1131 8 1 000 (3300000) 151 990000
Net income 24363000 24363000
Other comprehensive loss (782000) (782000)
Cash dividends on common stock (1 7512000) ( 17 512000)
Balance at December 31 2 014 $ 2230000 $ 39879000 $ 120032000 $ (4082000) $ 158059000
See Notes to Consolidated Financial Statements
6
lakeside Bank and Subsidiary
Consolidated Statements of Cash Flows
Years Ended December 31 2014 and 2013
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses
Depreciation of premises and equipment
Arriortization of security prerniums and discounts net
Loss on sale of securities
Gain on sale of premises and equipment
(Gain) loss on sale and writedown of other real estate owned
Net change in
Other assets
Other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities
Net change in interest-bearing deposits in banks
Proceeds from maturities sales and calls of securities
available for sale
Purchase of securities available for sale
Net increase in loans
Additions to premises and equipment
Improvements in other real eatate owned
Proceeds from sale of premises and equipment
Proceeds from sale of other real estate owned
Net cash used in investing activities
Cash Flows from Financing Activities
Net increase in deposits
Net change in short-term borrowings
Net change in long-term borrowings
Cash dividends paid on common stock
Net cash provided by used in) financing activities
Net change in cash and due from banks
Cash and due from banks at beginning of year
Cash and due from banks at end of year
Supplementary cash flow information
Interest paid on deposits and borrowed funds
Income taxes paid
Supplementary schedule of noncash investing activities
Transfer of loans to other real estate owned Sales of other real estate owned financed bv the Bank
See Notes to Consolidated Financial Statements
7
$
$
$
$
2014 2013
24363000 $ 30689000
6900000 8550000
906000 1013000
730000 953000
89000 246000
(9011000)
(1066000) 1764000
535000 (1 108000)
763000 1115000
33220000 34211000
(5985000) 2497000
11841000 13944000
(500000) (10179000)
(49224000) (55 734000)
(6638000) (5604000)
(706000)
9600000
4644000 2225000
(46568000) (43251000)
58833000 6414000
3204000 (10487000)
15000000 4000000
(17512000) (12657000)
59525000 (12730000)
46177000 (21 770000)
66775000 88545000
112952 000 $ 66775000
5249000 $ 6050000
378000 130000
1881000 $ 1345000 5689000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies
Principles of consolidation The consolidated financial statements include the accounts of Lakeside Bank (the Bank) and its wholly owned subsidiary Lakeside Community Development LLC All intercompany transactions and balances have been eliminated The Bank is a wholly owned subsidiary of Lakeside Bancorp Inc
Nature of operations Lakeside Bank is a state chartered bank whose operations consist primarily of those financial activities common to the commercial banking industry The Bank serves northeastern Illinois and services are provided at six locations throughout Chicago The Banks wholly owned subsidiary Lakeside Community Development LLC invests in various community development activities
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 the reported amounts of revenue and expenses during the reporting period Actual results could differ from those estimates Material estimates that are susceptible to significant change in the near term relate to the determination of the allowance for loan losses valuation of other real estate owned the defined benefit plan liability and fair value of financial instruments
Presentation of cash flows For purposes of the consolidated statements of cash flows cash and due from banks include cash on hand and amounts due from banks (including cash items in process of clearing) Cash flows from interest-bearing deposits in banks loans deposits federal funds purchased and short-term and long-term borrowings are reported on a net basis
Interest-bearing deposits in banks Interest-bearing deposits in banks mature within one year and are carried at cost
Securities available for sale All securities are classified as available for sale as the Bank intends to hold the securities for an indefinite period of time but not necessarily to maturity Any decision to sell a security classified as available for sale would be based on various factors including significant movements in interest rates changes in the maturity mix of the Banks assets and liabil ities liquidity needs regulatory capital considerations and other similar factors Securities available for sale are carried at fair value U nrealized gains or losses are reported as increases or decreases in accumulated other comprehensive income Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities Realized gains or losses on sales of available for sale securities are recorded using the specific identification method
Management evaluates securities for other-than-temporary impairment (OTII) at least on a quarterly basis and more frequently when economic or market conditions warrant such evaluation Declines in the fair value of individual securities available for sale below their amortized cost that are determined to be other-than-temporary are reflected in earnings as realized losses In estimating other-than-temporary impairment losses management considers the length of time and the extent to which the fair value has been less than cost the financial condition and near-term prospects of the issuer and whether it is more likely than not to sell the security before recovery of its cost basis If they intend to sell an impaired security the Bank records an other-than-temporary loss in an amount equal to the entire difference between the fair value and amortized cost I f the Bank does not intend to sell the security only the credit portion of the estimated loss is recognized in earnings with the other portion recognized in accumulated other comprehensive income
8
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
Federal Home Loan Bank stock The Bank as a member of the Federal Home Loan Bank of Chicago (the FHLB) is required to maintain an investment in capital stock of the FHLB The stock does not have a readily determinable fair value as ownership is restricted and it lacks a ready market As a result this stock is carried at cost and evaluated periodically for impairment
Loans The Bank extends commercial mortgage and consumer loans to customers A substantial portion of the loan portfolio is represented by commercial loans in northeastern Illinois The ability of the Banks debtors to honor their contracts is dependent upon the general economic conditions in this area
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are generally reported at their outstanding unpaid principal balances adjusted for charge-offs and the allowance for loan losses I nterest income is accrued on the unpaid principal balance Loan balances include loan origination fees and direct loan origination costs that are being deferred and the net amount amortized as an adjustment of the related loans yield The Bank is amortizing these amounts over the contractual loan maturity
The accrual of interest on loans is typically discontinued at the time the loan is 90 days delinquent In al l cases loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful All interest accrued but not collected for loans that are placed on non accrual or charged-off is reversed against interest income The interest on these loans is accounted for on the cash-basis or cost-recovery method until qualifying for return to accrual Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured
Troubled debt restructurings A loan is classified as a troubled debt restructuring when a borrower is experiencing financial difficulties that leads to a restructuring of the loan and the Bank grants concessions to the borrower in the restructuring that it would not otherwise consider These concessions may include rate reductions principal forgiveness extension of maturity date and other actions intended to minimize potential losses Troubled debt restructurings are classified as impaired loans A loan that is modified at a market rate of interest may no longer be classified as a troubled debt restructuring and impaired in the calendar year subsequent to the restructuring if it is in compliance with the mod1f1ed terms Performance prior to the restructuring is considered when assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual at the time of the restructuring or after a shorter performance period
Allowance for loan losses The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to expense Loan losses are charged against the allowance when management believes that collectability of the principal is unlikely Subsequent recoveries if any are credited to the allowance
When establishing the allowance for loan losses management categorizes loans into risk categories generally based on the nature of the collateral and the basis of repayment These risk categories and the relevant risk characteristics are as follows
Commercial loans - Commercial loans are loans for corporate and business purposes including issuing letters of credit The Banks commercial business loan portfolio is comprised of loans for a variety of purposes and generally is secured by equipment machinery and other business assets Commercial business loans generally have terms of five years or less and interest rates that float in accordance with a designated published index Substantially all of such loans are secured and backed by the personal guarantees of the owners of the business
9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements -------------------------------middot middot-----------
Note 1 Summary of Significant Accounting Policies (Continued)
Commercial real estate loans - Commercial real estate loans are primarily secured by apartment buildings office and industrial buildings mixed-use properties small retail shopping centers and various special purpose properties including warehouses and restaurants Although terms vary commercial real estate loans generally have amortizations of 15 to 30 years as well as balloon payments of two to seven years and terms which provide that the interest rates thereon may be adjusted annually at the Banks discretion based on a designated index
Construction and land development loans - Construction land development loans consist of vacant land and property that is in the process of improvement Repayment of these loans can be dependent on the sale of the property to third parties or the successful completion of the improvements by the builder for the end user In the event a loan is made on property that is not yet approved for the planned development there is the risk that approvals will not be granted or will be delayed Construction and land development loans also run the risk that improvements will not be completed on time or in accordance with specifications and projected costs Construction and land development loans generally have terms of one year to 18 months during the construction period and interest rates based on a designated index
Residential real estate loans - Residential real estate loans include home equity lines of credit secured by a first or second mortgage and 1-4 family residential real estate loans Loans are generally smaller in size and are homogenous because they exhibit similar characteristics
Consumer installment loans - Consumer installment loans generally have higher interest rates than mortgage loans The risk involved in consumer loans is the type and nature of the collateral and in certain cases the absence of collateral These loans are secured by personal assets or may be unsecured and repayment is directly dependent on the borrowers income and the borrowers ability to service debt payments
The allowance for loan losses is evaluated on a regular basis by management and is based upon managements periodic review of the collectability of the loans in light of historical experience the nature and volume of the loan portfolio estimated value of any underlying collateral and prevailing economic conditions and adverse situations that may affect the borrowers ability to pay This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available In addition regulatory agencies as an integral part of their examination process periodically review the Banks allowance for loan losses and may require the Bank to make additions to the allowance based on their Judgment about information available to them at the time of their examinations
The allowance consists of specific and general components The specific component relates to loans that are classified as impaired and an allowance is established when the collateral value discounted cash flows or observable market price of the impaired loan is lower than the carrying value of that loan The general component covers non-impaired loans and is based on the Banks own loss experience adjusted for qualitative factors These qualitative factors consider local economic trends concentrations management experience and other elements of the Banks lending operations
10
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
A loan is impaired based on current information and events when it is probable the Bank will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Factors considered by management in determining impairment include payment status collateral value and the probability for collecting scheduled principal and interest payment when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on an individual-loan basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reason for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on an individual loan basis based on the fair value of the collateral if the loan is collateral dependent the present value of expected future cash flows discounted at the loans effective interest rate or the loans obtainable market price
Large groups of homogenous loans are collectively evaluated for impairment Accordingly the Bank does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Other real estate owned Assets acquired through or in lieu of loan foreclosure are held for sale and initially recorded at fair value less estimated costs to sell at the date of foreclosure establishing a new cost basis Subsequent to foreclosure valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less costs to sell Revenue and expenses from operations and changes in the valuation allowance are included in noninterest expenses-other real estate owned net
Premises and equipment Land is carried at cost Premises and equipment are stated at cost less accumulated depreciation (building 12-25 years leasehold improvements 3-15 years furniture and fixtures 3-20 years) Depreciation is provided principally by the straight-line method over the estimated useful lives of the assets Amortization of leasehold improvements is computed on the straight-line method over the lease term or the estimated useful lives of the improvements whichever 1s shorter
Transfers of financial assets Transfers of financial assets are accounted for as sales when control over the assets has been surrendered Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank - put presumptively beyond the reach of the transferor and its creditors even in bankruptcy or other receivership (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets
Income taxes Lakeside Bancorp Inc with the consent of its stockholders elected to be taxed as an S corporation under sections of the federal and state income tax laws which provide that in lieu of corporate income taxes the stockholder accounts for the Banks items of income deductions losses and credits As a wholly owned subsidiary the Banks income and expenses are included in the Lakeside Bancorp Inc consolidated tax returns As a result for the periods covered by this election no corporate income taxes will be recognized in the accompanying consolidated financial statements except for certain state income taxes
11
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
The Bank evaluates its tax positions to determine the appropriate level of tax reserves to maintain for uncertain tax positions The Bank has no uncertain tax positions as of December 3 1 2014 and 2013
The Bank would recognize interest and penalties on income taxes as a component of income tax expense
The Bank is generally no longer subject to US federal or state and local income tax examinations by tax authorities for years before 201 1
Comprehensive income Comprehensive income consists of net income changes in net unrealized gains and losses on securities available for sale reclassification adjustments for realized gains and losses on sales of AFS securities and changes in defined benefit pension obligation and is presented in the consolidated statements of stockholders equity
Recent accounting pronouncements In January 2014 the FASB (Financial Accounting Standards Board) issued guidance which requires an entity derecognize the loan receivable and recognize the real estate property when it has received physical possession of residential real estate property collateralizing a consumer mortgage loan upon either ( 1 ) 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 that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement Additionally the amendments require annual disclosures This guidance is effective for the Company for fiscal years beginning after December 15 2014 The adoption of this guidance is not expected to have a material impact on the consolidated financial statements
Subsequent events The Bank has evaluated subsequent events for potential recognition andor disclosure through April 30 2015 the date the consolidated financial statements were available to be issued
1 2
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 2 Restricted Cash and Due from Banks
The Bank is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank of Chicago The total of those reserve balances averaged $1 01 2000 and $935000 in 2014 and 2013 respectively The Bank maintains amounts due from banks which exceed federally insured limits The Bank has not experienced any losses in such accounts
Note 3 Securities Available for Sale
The amortized cost and fair value of securities with gross unrealized gains and losses follows
December 31 2014
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
December 31 2013
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
$
$
$
$
Amor1ized
Cost
15917000 $
23417000
6038000
5159000
50531000
250000
50781000 $
17835000 $
32338000
6590000
5928000
62691000
250000
62941000 $
Gross
Unrealized
Gains
41000 $
216000
22000
70000
349000
17000
366000 $
41000 $
190000
39000
26000
296000
11000
307000 s
Gross
Unrealized Fair
Losses Value
(53000) s 15905000
(243000) 23390000
(8000) 6052000
(41000) 5188000
(345000) 50535000
267000
(345000) $ 50802000
(255000) $ 17621000
(987000) 31541000
(32000) 6597000
(126000) 5828000
(1400000) 61587000
261000
(1400000) $ 61848000
Securities available for sale with a carrying value of $8339000 and $3848000 at December 31 2014 and 201 3 respectively were pledged on deposits of the United States Government and other public funds as required or permitted and other short-term borrowings
The amortized costs and fair values of debt securities available for sale as of December 3 1 2014 by contractual maturity are shown below Maturities may differ from contractual maturities in mortgageshybacked securities because the mortgages underlying the securities may be called or repaid without any penalties Therefore these securities are not included in the maturity categories in the following maturity summary
1 3
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements middot-
Note 3 Securities Available for Sale (Continued)
Amortized Fair
Cost Value
Due in one year or less $ 3049000 $ 3057000 Due after one year through five years 21 506000 21 507000
Due after five years through ten years 71 70000 7163000
Due after ten years 1 3647000 1 3620000
45372000 45347000
Residential mortgage-backed securities 5 159000 5188000 Totals $ 50531 000 $ 50535000
The following tables show the gross unrealized losses and fair value of investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 3 1 2 0 1 4 and 2 0 1 3
less than 12 Months 12 Months or More Total Fair Unrealized Fair Unreahzed Fair Unrealized
2014 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 498000 s (2000) $ 7695000 s (51000) $ 8193000 $ (53000) Obligations of states and
pol1ilca subd1v1sions 13671000 (243000) 13671000 (243000) Corporate debt obligations 1132000 (8000 1 132000 (8000) Residential mortgage-backed
obligations 2128000 (4100D) 2128000 (41000) Total temporary
impaired securities s 498000 s (2000) $ 24626000 $ (343000) s 25124000 s (345000)
Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized
2013 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 10867000 $ (232000) s 2632000 $ (23000) $ 13499000 s 255000) Obligations of states and
polillcal subdivisions 11195000 (365000) 11169000 (622000) 22364000 (987000) Corporate debt obligations 1179000 (32000) 1179000 (32000) Residential mortgage-backed
obligations 3977000 (126000) 3977000 (126000) Total temporary
impaired securities 26039000 s (723000) $ 14980000 s (677000) s 41019000 $ (1400000)
In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysis reports Since management does not intend to sell any temporarily impaired securities before recovery of their cost basis no declines are deemed other-than-temporary
On sale proceeds of $5637000 there were $57000 in realized gains and $146000 in realized losses on the sale of securities during the year ended December 3 1 2 0 1 4 On sale proceeds of $708000 there were no realized gains and $246000 realized losses on the sale of securities during the year ended December 3 1 2 0 1 3
1 4
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans
A summary of the balances of loans follows
Commercial $
Commercial real estate
Construction and land development
Residential real estate
Consumer installment
Less allowance for loan losses
Loans net $
December 3 1
2014 2013
62894000
658 153000
163 1 08000
1 43579000
743000
1 028477000
2658 1 000
1 001 896 000
$ 62642000
666095000
123519000
129905000
1 229000
983390000
27626000
$ 955764000
The following tables present the contractual aging of the recorded investment in loans by class of loans as of December 3 1 2014 and 2013
Loans Past 90 Days or 30-59 Days 60middot89 Days Due 90 Days More Past Due
December 31 2014 Current Past Due Past Due or More Total and Accruin
Commercial $ 62655000 $ 4000 $ 36000 $ 199000 s 62894000 $ 199000
Commercial real estate Relail properties 295610000 105000 1212000 296927000 199000
Multifamily 90507000 90507000
Mixed-use properties 93 116000 2455000 95571000
Industrial manufacturing warehouse 63660000 1353000 65013000
Other commerc1al real estate 106101000 4034000 110135000
Construction and land development 162512000 596000 163 108000
Residential real estate 140636000 208000 2735000 143579000
Consumer installment 743000 743000
Total $ 1 015 540000 $ 109 000 $ 244 000 12584 000 $ 1 028 477 000 s 398 000
15
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Loans Past 90 Days or 30-59 Days 60-89 Days Due 90 Days More Past Due
December 31 2013 Current Past Due Past Due or More Total and Accruing
Commercial $ 61588000 $ $ 755000 $ 299000 s 62642000 $ 33000 Commercial real estate
Retail properties 284 162000 1152000 1331000 15307000 301952000 44000 Mu11ifamily 78203000 1223000 450000 4526000 84402000 Mixed-use properties 93292000 262000 316000 3644000 97514000 Industrial manufacturing
warehouse 58947000 1696000 273000 60916000 Other commercial real
estate 109449000 282000 74000 11506000 121311000 Construction and land
development 121492000 2027000 123519000 Residential real estate 126229000 1062000 306000 2308000 129905000 89000 Consumer installment 1226000 1000 2000 1229000
Total $ 934 588000 $ 3982 000 s 4 930 000 39 890 000 983 390 000 $ 166 000
The following table presents the recorded investment in nonaccrual loans by class of loans as of December 31 2014 and 2013
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties
Industrial manufacturing warehouse Other commercial real estate
Construction and land development Residential real estate
Total
$
$
16
Nonaccrual Loans 2014 2013
168000 $ 266000
2470000 15263000
4526000
2728000 3644000
1353000 273000
4480000 11506000
1609000 2027000
2796000 2219000
15604000 $ 39724000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
As part of the on-going monitoring of the credit quality of the Banks loan portfolio management categorizes loans into rrsk categories based on relevant information about the ability of borrowers to service their debt and comply with various terms of their loan agreements The Bank considers current financial information historical payment experrence credit documentation public information and current economic trends Generally all sizeable credits receive a financial review no less than annually to monitor and adjust if necessary the credits risk profile Credits classified as watch generally receive a review more frequently than annually For substandard and doubtful credit classifications the frequency of review is increased to no less than quarterly in order to determine potential impact on credit loss estimates
The Bank categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt
Pass - A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors if any) or by the fair value less cost to acquire and sell of any underlying collateral in a timely manner Pass assets also include certain assets considered watch which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring
Special Mention - A special mention asset or risk rating of 6 has potential weaknesses that deserve managements close attention The asset may also be subject to a weak or speculative market or to economic conditions which may in the future adversely affect the obligor If left uncorrected these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Banks credit position at some future date Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification
Substandard - A substandard asset or risk rating of 7 is an asset with a well-defined weakness that jeopardizes repayment in whole or in part of the debt These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged These assets are characterized by the distinct possibility that the institution will sustain some loss of principal andor interest if the deficiencies are not corrected A loan does necessarily need to have an identifiable loss potential in order to receive this rating
Doubtful - An asset that has all the weaknesses or risk rating of 8 inherent in the substandard classification with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently known facts conditions and values highly questionable and improbable The possibility of loss is extremely likely but it is not identified at this point due to pending factors
Loss - An asset or portion thereof classified as loss is considered uncollectible and of such little value that its continuance on the Companys books as an asset is not warranted This classification does not necessarily mean that an asset has no recovery or salvage value but rather there is much doubt about whether how much or when the recovery would occur As such it is not practical or desirable to defer the write-off Therefore there is no loss balance to report at December 31 2014
Residential real estate and consumer installment loans are assessed for credit quality based on the contractual aging status of the loan and payment activity Such assessment is completed at the end of each reporting period
1 7
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present the risk category of loans evaluated by internal asset classification based on the most recent analysis performed and the contractual aging as of December 31 2014 and 2013
December 31 2014
Commercial Commercial real estate
Retail properties Multifamily
Mixed-use properties Industrial manufacturing warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
December 31 201 J
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties lndustnal manufactunng warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
Pass
$ 61710000 $
272359000 88002000 85430000 63660000
104525000
1531 14000
$ 828800000 $
$
$
Pass
s 62034000 $
250040000 76086000 85355000 60643000
108880000 1 1 7047000
s 760085000 $
$
$
1 8
Special Mention Substandard Doubtful Total
$ 1 016000 $ 168000 s 62894000
3701000 17384000 3483000 296927000 635000 1870000 90507000 238000 7175000 2728000 95571000
1353000 65013000 1 130000 4480000 110 135000
5937000 3461000 596000 163108000
10511 000 $ 32036000 $ 12808000 $ 884155000
Performing Non-periorming Total
140783000 s 2796000 $ 143579000
743000 743000
141 526000 s 2796000 $ 144322000
Special Mention Substandard Doubtful Total
$ 342000 $ 266000 s 62642000
10871000 25778000 15263000 301952000 1 885000 1905000 4526000 84402000 1 714000 6801000 3644000 97514000
273000 60916000 925000 11 506000 1213 1 1 000
381000 4064000 2027000 123519000
14851 000 $ 39815000 s 37505000 $ 852256000
Performing Non-performing Total
127597000 $ 2308000 $ 129905000
1 229000 1 229000
1 28826000 $ 2308000 $ 1 3 1 1 34000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables provide additional detail of the activity in the allowance for loan losses by portfolio segment for the years ended December 3 1 2014 and 2013
Construction
Commercial and land Rcs1dent1al Consumer
December 31 2014 Commercial Real Es1ate Develoement Real Estate lnsallment Total
Allowanco for loan lossos
Beg1nn1ng balance 1385000 20052000 3549000 2623000 17000 27626000
PrOV1Son for loan losses 2210000 2680000 2007000 3000 6900000
Loans chargedmiddotoff (179000) (8163000) 687000) (2140000) (11169000)
Recovenes of loans
previously charged-off 85000 2916000 223000 3224000
Ending balance s 1291000 1701 5000 5542000 271 3000 s 20000 s 26581000
Poriod-ondtd llmount allocatod to loans
lndMdually evaluated for
1mpa1rment 200000 445000 36000 52000 s 733000
Collec11vely evaluated
for 1mpa1rrnent 1091 000 16570000 5506000 2661000 20000 25648000
Ending balance 1291000 17015000 5542000 s 2713000 20000 26581000
Loans
lndMdually evaluated for
impairment 368000 17274000 3526000 4048000 25216000
Collecively evalua1ed
for 1mpa1rrnent 62526000 640879000 159582000 139531000 743000 1003261000
Ending balance 62894000 658 153000 163108000 143579000 743000 1028477000
Construct1on
Commercial and Land Residential Consumer
December 31 2013 Commeroal Real Estate Development Real Eslale Installment Total
Allowance for loan losses
Beginning balance 1040000 18719000 2484000 2248000 17000 24508000
Provision for loan losses 363000 6508000 867000 784000 28000 8550000
Loans chargedmiddot Off (59000) (5817000) (122000) (457000) (28000) (6483000)
Recoveries ol loans
previously charged-off 41 000 642000 320000 48000 1051000
Ending balance 1385000 20052000 3549000 s 2623000 17000 27626000
Period-ended amount allocated to loans
Individually evaluated for
impairment 3475000 239000 61000 3775000
Collectively evaluated
for impairment 1385000 16577000 3310000 2562000 17000 23851000
Ending balance 1385000 20052000 3549000 2623000 17000 27626000
Loans
Individually evaluated for
1mpa1rment 266000 42380000 5522000 s 3307000 51475000
Collectively evalua1ed
for impairment 62376000 623715000 1 17997000 126598000 1229000 931915000
Endrng balance 62642000 666095000 123519000 129905000 1229000 983390000
1 9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present additional detail of impaired loans segregated by class as of December 3 1 2014 and 2013 The unpaid principal balance represents the recorded balance prior to any partial charge-offs The recorded investment represents customer balances net of any partial charge-offs recognized on the loans The interest income recognized column represents all interest income reported either on a cash or accrued basis after the loan became impaired The cash basis income column represents only the interest income recognized on a cash basis after the loan was classified as impaired
December 31 2014
Wih no relaed allowance recorded
Commercial Commercial real estale
Reail properties Multifamily Mixed-use properties lndustnal manufacturing
warehouse Other commercial real estate
Construction and land developmen
Residential real estate Consumer installment
Wi1h an allowance recorded Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties Industrial manufacturing
warehouse Other commercial real estate
Construction and land development
Residential real estate Consumer installment
To1al
$
$
Unpaid Principal Balance
216000 $
7266000
3283000
2861000 6121000
3672000 6045000
200000
564000 2421000
1 62000 170000
Recorded Investment
168000 s
5543000
3119000
1353000 4480000
3400000 3878000
200000
564000 2215000
126000 170000
32981000 $ 25216000 $
20
Allowance for Loan Losses
Allocated
200000
42000 403000
36000 52000
733000
Average Recorded
Investment
$ 208000 $
1 1 474000 3514000 4354000
131 5000 5509000
4 183000 4673000
29000
677000 2270000
141 000 44000
$ 38391000 $
Interest Income
Recognized
109000 48000
161 000
125000 33000
38000
5000
519000
$
$
Cash Basis Interest Income
Recognized
108000 48000
1 57000
1 1 3000 32000
38000
5000
501000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Cash Basis Unpaid Allowance for Average Interest Interest
Principal Recorded Loan Losses Recorded Income Income December 31 2013 Balance Investment Allocated Investment Recognized Recognized
With no related allowance recordedmiddot
Commercial $ 266000 $ 266000 $ $ 326000 $ $ Commercial real estate
Retail properties 26699000 12500000 10635000 146000 139000 Multifamily 5542000 4526000 4838000 88000 88000 Mixed-use properties 3123000 2527000 2750000 103000 102000 Industrial manufacturing
warehouse 1 641000 273000 528000 Other commercial real estate 4056000 3497000 3617000
Construction and land development 8517000 3965000 4971000 1 1 4000 1 14000
Residenial rear estate 3769000 3203000 3203000 47000 43000 Consumer installment
With an allowance recorded Commercial Commercial real estate
Retarl properties 6138000 5239000 2045000 4759000 35000 35000 Multifamily 692000 682000 69000 687000 38000 38000 Mixed-use properties 5764000 5 127000 778000 4200000 92000 87000 Industrial manufacturing
warehouse Other commercial real estate 10001000 8009000 583000 8986000
Construction and land development 2770000 1 557000 239000 1 853000
Residential real estate 120000 104000 61000 1 04000 Consumer installment
Total $ 79298000 $ 51475000 $ 3775000 $ 51457000 $ 663000 $ 646000
21
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present troubled debt restructurings and the financial effects of troubled debt restructurings
Year Ended December 31 2014
Pre-Modification Post-Modification Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reserves
Commercial $ 288000 $ 168000 $
Commercial real estate
Retail properties 3 1790000 2060000
Multifamily 1 409000 672000 732000
Mixed-use properties 6 4660000 3 118000 974000
Industrial manufacturing warehouse Other commercial real estate 4682000 2864000 1 272000
Construction and land development 1 3924000 2930000 500000
Residential real estate 3 1288000 1 252000 52000
Consumer installment Total 16 $ 1 8041000 $ 13064000 $ 3530000
Year Ended December 3 1 2013
Pre-Modification Post-Modification
Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reseives
Commercial $ $ $
Commercial real estate
Retail properties 3 8596000 3651000 4363000
Multifamily 2 7026000 5090000 1598000
Mixed-use properties 7 6005000 4421000 1 612000
Industrial manufacturing warehouse
Other commercial real estate 5 14589000 10888000 2578000
Construction and land development 3 7409000 4493000 1 162000
Residential real estate 3 1515000 1 371000 117000
Consumer installment Total 23 $ 45 140000 $ 29914000 $ 11430000
Troubled debt restructurings that were accruing interest were $9520000 and $ 1 1 382000 respectively as of December 3 1 2014 and 2013 Troubled debt restructurings that were non-accruing were $3544000 and $ 1 8532000 respectively as of December 3 1 2014 and 201 3 Troubled debt restructurings included loans where the loan principal and corresponding interest rate was reduced and i n some instances the loan amortization period was extended During 2014 there were three troubled debt restructurings with outstanding balances at the time of re-default was $ 1 1 55000 and loan balances outstanding for these loans at December 3 1 2014 was $239000
22
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
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COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
lakeside Bank and Subsidiary
Consolidated Statements of Cash Flows
Years Ended December 31 2014 and 2013
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses
Depreciation of premises and equipment
Arriortization of security prerniums and discounts net
Loss on sale of securities
Gain on sale of premises and equipment
(Gain) loss on sale and writedown of other real estate owned
Net change in
Other assets
Other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities
Net change in interest-bearing deposits in banks
Proceeds from maturities sales and calls of securities
available for sale
Purchase of securities available for sale
Net increase in loans
Additions to premises and equipment
Improvements in other real eatate owned
Proceeds from sale of premises and equipment
Proceeds from sale of other real estate owned
Net cash used in investing activities
Cash Flows from Financing Activities
Net increase in deposits
Net change in short-term borrowings
Net change in long-term borrowings
Cash dividends paid on common stock
Net cash provided by used in) financing activities
Net change in cash and due from banks
Cash and due from banks at beginning of year
Cash and due from banks at end of year
Supplementary cash flow information
Interest paid on deposits and borrowed funds
Income taxes paid
Supplementary schedule of noncash investing activities
Transfer of loans to other real estate owned Sales of other real estate owned financed bv the Bank
See Notes to Consolidated Financial Statements
7
$
$
$
$
2014 2013
24363000 $ 30689000
6900000 8550000
906000 1013000
730000 953000
89000 246000
(9011000)
(1066000) 1764000
535000 (1 108000)
763000 1115000
33220000 34211000
(5985000) 2497000
11841000 13944000
(500000) (10179000)
(49224000) (55 734000)
(6638000) (5604000)
(706000)
9600000
4644000 2225000
(46568000) (43251000)
58833000 6414000
3204000 (10487000)
15000000 4000000
(17512000) (12657000)
59525000 (12730000)
46177000 (21 770000)
66775000 88545000
112952 000 $ 66775000
5249000 $ 6050000
378000 130000
1881000 $ 1345000 5689000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies
Principles of consolidation The consolidated financial statements include the accounts of Lakeside Bank (the Bank) and its wholly owned subsidiary Lakeside Community Development LLC All intercompany transactions and balances have been eliminated The Bank is a wholly owned subsidiary of Lakeside Bancorp Inc
Nature of operations Lakeside Bank is a state chartered bank whose operations consist primarily of those financial activities common to the commercial banking industry The Bank serves northeastern Illinois and services are provided at six locations throughout Chicago The Banks wholly owned subsidiary Lakeside Community Development LLC invests in various community development activities
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 the reported amounts of revenue and expenses during the reporting period Actual results could differ from those estimates Material estimates that are susceptible to significant change in the near term relate to the determination of the allowance for loan losses valuation of other real estate owned the defined benefit plan liability and fair value of financial instruments
Presentation of cash flows For purposes of the consolidated statements of cash flows cash and due from banks include cash on hand and amounts due from banks (including cash items in process of clearing) Cash flows from interest-bearing deposits in banks loans deposits federal funds purchased and short-term and long-term borrowings are reported on a net basis
Interest-bearing deposits in banks Interest-bearing deposits in banks mature within one year and are carried at cost
Securities available for sale All securities are classified as available for sale as the Bank intends to hold the securities for an indefinite period of time but not necessarily to maturity Any decision to sell a security classified as available for sale would be based on various factors including significant movements in interest rates changes in the maturity mix of the Banks assets and liabil ities liquidity needs regulatory capital considerations and other similar factors Securities available for sale are carried at fair value U nrealized gains or losses are reported as increases or decreases in accumulated other comprehensive income Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities Realized gains or losses on sales of available for sale securities are recorded using the specific identification method
Management evaluates securities for other-than-temporary impairment (OTII) at least on a quarterly basis and more frequently when economic or market conditions warrant such evaluation Declines in the fair value of individual securities available for sale below their amortized cost that are determined to be other-than-temporary are reflected in earnings as realized losses In estimating other-than-temporary impairment losses management considers the length of time and the extent to which the fair value has been less than cost the financial condition and near-term prospects of the issuer and whether it is more likely than not to sell the security before recovery of its cost basis If they intend to sell an impaired security the Bank records an other-than-temporary loss in an amount equal to the entire difference between the fair value and amortized cost I f the Bank does not intend to sell the security only the credit portion of the estimated loss is recognized in earnings with the other portion recognized in accumulated other comprehensive income
8
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
Federal Home Loan Bank stock The Bank as a member of the Federal Home Loan Bank of Chicago (the FHLB) is required to maintain an investment in capital stock of the FHLB The stock does not have a readily determinable fair value as ownership is restricted and it lacks a ready market As a result this stock is carried at cost and evaluated periodically for impairment
Loans The Bank extends commercial mortgage and consumer loans to customers A substantial portion of the loan portfolio is represented by commercial loans in northeastern Illinois The ability of the Banks debtors to honor their contracts is dependent upon the general economic conditions in this area
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are generally reported at their outstanding unpaid principal balances adjusted for charge-offs and the allowance for loan losses I nterest income is accrued on the unpaid principal balance Loan balances include loan origination fees and direct loan origination costs that are being deferred and the net amount amortized as an adjustment of the related loans yield The Bank is amortizing these amounts over the contractual loan maturity
The accrual of interest on loans is typically discontinued at the time the loan is 90 days delinquent In al l cases loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful All interest accrued but not collected for loans that are placed on non accrual or charged-off is reversed against interest income The interest on these loans is accounted for on the cash-basis or cost-recovery method until qualifying for return to accrual Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured
Troubled debt restructurings A loan is classified as a troubled debt restructuring when a borrower is experiencing financial difficulties that leads to a restructuring of the loan and the Bank grants concessions to the borrower in the restructuring that it would not otherwise consider These concessions may include rate reductions principal forgiveness extension of maturity date and other actions intended to minimize potential losses Troubled debt restructurings are classified as impaired loans A loan that is modified at a market rate of interest may no longer be classified as a troubled debt restructuring and impaired in the calendar year subsequent to the restructuring if it is in compliance with the mod1f1ed terms Performance prior to the restructuring is considered when assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual at the time of the restructuring or after a shorter performance period
Allowance for loan losses The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to expense Loan losses are charged against the allowance when management believes that collectability of the principal is unlikely Subsequent recoveries if any are credited to the allowance
When establishing the allowance for loan losses management categorizes loans into risk categories generally based on the nature of the collateral and the basis of repayment These risk categories and the relevant risk characteristics are as follows
Commercial loans - Commercial loans are loans for corporate and business purposes including issuing letters of credit The Banks commercial business loan portfolio is comprised of loans for a variety of purposes and generally is secured by equipment machinery and other business assets Commercial business loans generally have terms of five years or less and interest rates that float in accordance with a designated published index Substantially all of such loans are secured and backed by the personal guarantees of the owners of the business
9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements -------------------------------middot middot-----------
Note 1 Summary of Significant Accounting Policies (Continued)
Commercial real estate loans - Commercial real estate loans are primarily secured by apartment buildings office and industrial buildings mixed-use properties small retail shopping centers and various special purpose properties including warehouses and restaurants Although terms vary commercial real estate loans generally have amortizations of 15 to 30 years as well as balloon payments of two to seven years and terms which provide that the interest rates thereon may be adjusted annually at the Banks discretion based on a designated index
Construction and land development loans - Construction land development loans consist of vacant land and property that is in the process of improvement Repayment of these loans can be dependent on the sale of the property to third parties or the successful completion of the improvements by the builder for the end user In the event a loan is made on property that is not yet approved for the planned development there is the risk that approvals will not be granted or will be delayed Construction and land development loans also run the risk that improvements will not be completed on time or in accordance with specifications and projected costs Construction and land development loans generally have terms of one year to 18 months during the construction period and interest rates based on a designated index
Residential real estate loans - Residential real estate loans include home equity lines of credit secured by a first or second mortgage and 1-4 family residential real estate loans Loans are generally smaller in size and are homogenous because they exhibit similar characteristics
Consumer installment loans - Consumer installment loans generally have higher interest rates than mortgage loans The risk involved in consumer loans is the type and nature of the collateral and in certain cases the absence of collateral These loans are secured by personal assets or may be unsecured and repayment is directly dependent on the borrowers income and the borrowers ability to service debt payments
The allowance for loan losses is evaluated on a regular basis by management and is based upon managements periodic review of the collectability of the loans in light of historical experience the nature and volume of the loan portfolio estimated value of any underlying collateral and prevailing economic conditions and adverse situations that may affect the borrowers ability to pay This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available In addition regulatory agencies as an integral part of their examination process periodically review the Banks allowance for loan losses and may require the Bank to make additions to the allowance based on their Judgment about information available to them at the time of their examinations
The allowance consists of specific and general components The specific component relates to loans that are classified as impaired and an allowance is established when the collateral value discounted cash flows or observable market price of the impaired loan is lower than the carrying value of that loan The general component covers non-impaired loans and is based on the Banks own loss experience adjusted for qualitative factors These qualitative factors consider local economic trends concentrations management experience and other elements of the Banks lending operations
10
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
A loan is impaired based on current information and events when it is probable the Bank will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Factors considered by management in determining impairment include payment status collateral value and the probability for collecting scheduled principal and interest payment when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on an individual-loan basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reason for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on an individual loan basis based on the fair value of the collateral if the loan is collateral dependent the present value of expected future cash flows discounted at the loans effective interest rate or the loans obtainable market price
Large groups of homogenous loans are collectively evaluated for impairment Accordingly the Bank does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Other real estate owned Assets acquired through or in lieu of loan foreclosure are held for sale and initially recorded at fair value less estimated costs to sell at the date of foreclosure establishing a new cost basis Subsequent to foreclosure valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less costs to sell Revenue and expenses from operations and changes in the valuation allowance are included in noninterest expenses-other real estate owned net
Premises and equipment Land is carried at cost Premises and equipment are stated at cost less accumulated depreciation (building 12-25 years leasehold improvements 3-15 years furniture and fixtures 3-20 years) Depreciation is provided principally by the straight-line method over the estimated useful lives of the assets Amortization of leasehold improvements is computed on the straight-line method over the lease term or the estimated useful lives of the improvements whichever 1s shorter
Transfers of financial assets Transfers of financial assets are accounted for as sales when control over the assets has been surrendered Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank - put presumptively beyond the reach of the transferor and its creditors even in bankruptcy or other receivership (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets
Income taxes Lakeside Bancorp Inc with the consent of its stockholders elected to be taxed as an S corporation under sections of the federal and state income tax laws which provide that in lieu of corporate income taxes the stockholder accounts for the Banks items of income deductions losses and credits As a wholly owned subsidiary the Banks income and expenses are included in the Lakeside Bancorp Inc consolidated tax returns As a result for the periods covered by this election no corporate income taxes will be recognized in the accompanying consolidated financial statements except for certain state income taxes
11
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
The Bank evaluates its tax positions to determine the appropriate level of tax reserves to maintain for uncertain tax positions The Bank has no uncertain tax positions as of December 3 1 2014 and 2013
The Bank would recognize interest and penalties on income taxes as a component of income tax expense
The Bank is generally no longer subject to US federal or state and local income tax examinations by tax authorities for years before 201 1
Comprehensive income Comprehensive income consists of net income changes in net unrealized gains and losses on securities available for sale reclassification adjustments for realized gains and losses on sales of AFS securities and changes in defined benefit pension obligation and is presented in the consolidated statements of stockholders equity
Recent accounting pronouncements In January 2014 the FASB (Financial Accounting Standards Board) issued guidance which requires an entity derecognize the loan receivable and recognize the real estate property when it has received physical possession of residential real estate property collateralizing a consumer mortgage loan upon either ( 1 ) 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 that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement Additionally the amendments require annual disclosures This guidance is effective for the Company for fiscal years beginning after December 15 2014 The adoption of this guidance is not expected to have a material impact on the consolidated financial statements
Subsequent events The Bank has evaluated subsequent events for potential recognition andor disclosure through April 30 2015 the date the consolidated financial statements were available to be issued
1 2
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 2 Restricted Cash and Due from Banks
The Bank is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank of Chicago The total of those reserve balances averaged $1 01 2000 and $935000 in 2014 and 2013 respectively The Bank maintains amounts due from banks which exceed federally insured limits The Bank has not experienced any losses in such accounts
Note 3 Securities Available for Sale
The amortized cost and fair value of securities with gross unrealized gains and losses follows
December 31 2014
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
December 31 2013
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
$
$
$
$
Amor1ized
Cost
15917000 $
23417000
6038000
5159000
50531000
250000
50781000 $
17835000 $
32338000
6590000
5928000
62691000
250000
62941000 $
Gross
Unrealized
Gains
41000 $
216000
22000
70000
349000
17000
366000 $
41000 $
190000
39000
26000
296000
11000
307000 s
Gross
Unrealized Fair
Losses Value
(53000) s 15905000
(243000) 23390000
(8000) 6052000
(41000) 5188000
(345000) 50535000
267000
(345000) $ 50802000
(255000) $ 17621000
(987000) 31541000
(32000) 6597000
(126000) 5828000
(1400000) 61587000
261000
(1400000) $ 61848000
Securities available for sale with a carrying value of $8339000 and $3848000 at December 31 2014 and 201 3 respectively were pledged on deposits of the United States Government and other public funds as required or permitted and other short-term borrowings
The amortized costs and fair values of debt securities available for sale as of December 3 1 2014 by contractual maturity are shown below Maturities may differ from contractual maturities in mortgageshybacked securities because the mortgages underlying the securities may be called or repaid without any penalties Therefore these securities are not included in the maturity categories in the following maturity summary
1 3
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements middot-
Note 3 Securities Available for Sale (Continued)
Amortized Fair
Cost Value
Due in one year or less $ 3049000 $ 3057000 Due after one year through five years 21 506000 21 507000
Due after five years through ten years 71 70000 7163000
Due after ten years 1 3647000 1 3620000
45372000 45347000
Residential mortgage-backed securities 5 159000 5188000 Totals $ 50531 000 $ 50535000
The following tables show the gross unrealized losses and fair value of investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 3 1 2 0 1 4 and 2 0 1 3
less than 12 Months 12 Months or More Total Fair Unrealized Fair Unreahzed Fair Unrealized
2014 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 498000 s (2000) $ 7695000 s (51000) $ 8193000 $ (53000) Obligations of states and
pol1ilca subd1v1sions 13671000 (243000) 13671000 (243000) Corporate debt obligations 1132000 (8000 1 132000 (8000) Residential mortgage-backed
obligations 2128000 (4100D) 2128000 (41000) Total temporary
impaired securities s 498000 s (2000) $ 24626000 $ (343000) s 25124000 s (345000)
Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized
2013 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 10867000 $ (232000) s 2632000 $ (23000) $ 13499000 s 255000) Obligations of states and
polillcal subdivisions 11195000 (365000) 11169000 (622000) 22364000 (987000) Corporate debt obligations 1179000 (32000) 1179000 (32000) Residential mortgage-backed
obligations 3977000 (126000) 3977000 (126000) Total temporary
impaired securities 26039000 s (723000) $ 14980000 s (677000) s 41019000 $ (1400000)
In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysis reports Since management does not intend to sell any temporarily impaired securities before recovery of their cost basis no declines are deemed other-than-temporary
On sale proceeds of $5637000 there were $57000 in realized gains and $146000 in realized losses on the sale of securities during the year ended December 3 1 2 0 1 4 On sale proceeds of $708000 there were no realized gains and $246000 realized losses on the sale of securities during the year ended December 3 1 2 0 1 3
1 4
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans
A summary of the balances of loans follows
Commercial $
Commercial real estate
Construction and land development
Residential real estate
Consumer installment
Less allowance for loan losses
Loans net $
December 3 1
2014 2013
62894000
658 153000
163 1 08000
1 43579000
743000
1 028477000
2658 1 000
1 001 896 000
$ 62642000
666095000
123519000
129905000
1 229000
983390000
27626000
$ 955764000
The following tables present the contractual aging of the recorded investment in loans by class of loans as of December 3 1 2014 and 2013
Loans Past 90 Days or 30-59 Days 60middot89 Days Due 90 Days More Past Due
December 31 2014 Current Past Due Past Due or More Total and Accruin
Commercial $ 62655000 $ 4000 $ 36000 $ 199000 s 62894000 $ 199000
Commercial real estate Relail properties 295610000 105000 1212000 296927000 199000
Multifamily 90507000 90507000
Mixed-use properties 93 116000 2455000 95571000
Industrial manufacturing warehouse 63660000 1353000 65013000
Other commerc1al real estate 106101000 4034000 110135000
Construction and land development 162512000 596000 163 108000
Residential real estate 140636000 208000 2735000 143579000
Consumer installment 743000 743000
Total $ 1 015 540000 $ 109 000 $ 244 000 12584 000 $ 1 028 477 000 s 398 000
15
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Loans Past 90 Days or 30-59 Days 60-89 Days Due 90 Days More Past Due
December 31 2013 Current Past Due Past Due or More Total and Accruing
Commercial $ 61588000 $ $ 755000 $ 299000 s 62642000 $ 33000 Commercial real estate
Retail properties 284 162000 1152000 1331000 15307000 301952000 44000 Mu11ifamily 78203000 1223000 450000 4526000 84402000 Mixed-use properties 93292000 262000 316000 3644000 97514000 Industrial manufacturing
warehouse 58947000 1696000 273000 60916000 Other commercial real
estate 109449000 282000 74000 11506000 121311000 Construction and land
development 121492000 2027000 123519000 Residential real estate 126229000 1062000 306000 2308000 129905000 89000 Consumer installment 1226000 1000 2000 1229000
Total $ 934 588000 $ 3982 000 s 4 930 000 39 890 000 983 390 000 $ 166 000
The following table presents the recorded investment in nonaccrual loans by class of loans as of December 31 2014 and 2013
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties
Industrial manufacturing warehouse Other commercial real estate
Construction and land development Residential real estate
Total
$
$
16
Nonaccrual Loans 2014 2013
168000 $ 266000
2470000 15263000
4526000
2728000 3644000
1353000 273000
4480000 11506000
1609000 2027000
2796000 2219000
15604000 $ 39724000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
As part of the on-going monitoring of the credit quality of the Banks loan portfolio management categorizes loans into rrsk categories based on relevant information about the ability of borrowers to service their debt and comply with various terms of their loan agreements The Bank considers current financial information historical payment experrence credit documentation public information and current economic trends Generally all sizeable credits receive a financial review no less than annually to monitor and adjust if necessary the credits risk profile Credits classified as watch generally receive a review more frequently than annually For substandard and doubtful credit classifications the frequency of review is increased to no less than quarterly in order to determine potential impact on credit loss estimates
The Bank categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt
Pass - A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors if any) or by the fair value less cost to acquire and sell of any underlying collateral in a timely manner Pass assets also include certain assets considered watch which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring
Special Mention - A special mention asset or risk rating of 6 has potential weaknesses that deserve managements close attention The asset may also be subject to a weak or speculative market or to economic conditions which may in the future adversely affect the obligor If left uncorrected these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Banks credit position at some future date Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification
Substandard - A substandard asset or risk rating of 7 is an asset with a well-defined weakness that jeopardizes repayment in whole or in part of the debt These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged These assets are characterized by the distinct possibility that the institution will sustain some loss of principal andor interest if the deficiencies are not corrected A loan does necessarily need to have an identifiable loss potential in order to receive this rating
Doubtful - An asset that has all the weaknesses or risk rating of 8 inherent in the substandard classification with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently known facts conditions and values highly questionable and improbable The possibility of loss is extremely likely but it is not identified at this point due to pending factors
Loss - An asset or portion thereof classified as loss is considered uncollectible and of such little value that its continuance on the Companys books as an asset is not warranted This classification does not necessarily mean that an asset has no recovery or salvage value but rather there is much doubt about whether how much or when the recovery would occur As such it is not practical or desirable to defer the write-off Therefore there is no loss balance to report at December 31 2014
Residential real estate and consumer installment loans are assessed for credit quality based on the contractual aging status of the loan and payment activity Such assessment is completed at the end of each reporting period
1 7
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present the risk category of loans evaluated by internal asset classification based on the most recent analysis performed and the contractual aging as of December 31 2014 and 2013
December 31 2014
Commercial Commercial real estate
Retail properties Multifamily
Mixed-use properties Industrial manufacturing warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
December 31 201 J
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties lndustnal manufactunng warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
Pass
$ 61710000 $
272359000 88002000 85430000 63660000
104525000
1531 14000
$ 828800000 $
$
$
Pass
s 62034000 $
250040000 76086000 85355000 60643000
108880000 1 1 7047000
s 760085000 $
$
$
1 8
Special Mention Substandard Doubtful Total
$ 1 016000 $ 168000 s 62894000
3701000 17384000 3483000 296927000 635000 1870000 90507000 238000 7175000 2728000 95571000
1353000 65013000 1 130000 4480000 110 135000
5937000 3461000 596000 163108000
10511 000 $ 32036000 $ 12808000 $ 884155000
Performing Non-periorming Total
140783000 s 2796000 $ 143579000
743000 743000
141 526000 s 2796000 $ 144322000
Special Mention Substandard Doubtful Total
$ 342000 $ 266000 s 62642000
10871000 25778000 15263000 301952000 1 885000 1905000 4526000 84402000 1 714000 6801000 3644000 97514000
273000 60916000 925000 11 506000 1213 1 1 000
381000 4064000 2027000 123519000
14851 000 $ 39815000 s 37505000 $ 852256000
Performing Non-performing Total
127597000 $ 2308000 $ 129905000
1 229000 1 229000
1 28826000 $ 2308000 $ 1 3 1 1 34000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables provide additional detail of the activity in the allowance for loan losses by portfolio segment for the years ended December 3 1 2014 and 2013
Construction
Commercial and land Rcs1dent1al Consumer
December 31 2014 Commercial Real Es1ate Develoement Real Estate lnsallment Total
Allowanco for loan lossos
Beg1nn1ng balance 1385000 20052000 3549000 2623000 17000 27626000
PrOV1Son for loan losses 2210000 2680000 2007000 3000 6900000
Loans chargedmiddotoff (179000) (8163000) 687000) (2140000) (11169000)
Recovenes of loans
previously charged-off 85000 2916000 223000 3224000
Ending balance s 1291000 1701 5000 5542000 271 3000 s 20000 s 26581000
Poriod-ondtd llmount allocatod to loans
lndMdually evaluated for
1mpa1rment 200000 445000 36000 52000 s 733000
Collec11vely evaluated
for 1mpa1rrnent 1091 000 16570000 5506000 2661000 20000 25648000
Ending balance 1291000 17015000 5542000 s 2713000 20000 26581000
Loans
lndMdually evaluated for
impairment 368000 17274000 3526000 4048000 25216000
Collecively evalua1ed
for 1mpa1rrnent 62526000 640879000 159582000 139531000 743000 1003261000
Ending balance 62894000 658 153000 163108000 143579000 743000 1028477000
Construct1on
Commercial and Land Residential Consumer
December 31 2013 Commeroal Real Estate Development Real Eslale Installment Total
Allowance for loan losses
Beginning balance 1040000 18719000 2484000 2248000 17000 24508000
Provision for loan losses 363000 6508000 867000 784000 28000 8550000
Loans chargedmiddot Off (59000) (5817000) (122000) (457000) (28000) (6483000)
Recoveries ol loans
previously charged-off 41 000 642000 320000 48000 1051000
Ending balance 1385000 20052000 3549000 s 2623000 17000 27626000
Period-ended amount allocated to loans
Individually evaluated for
impairment 3475000 239000 61000 3775000
Collectively evaluated
for impairment 1385000 16577000 3310000 2562000 17000 23851000
Ending balance 1385000 20052000 3549000 2623000 17000 27626000
Loans
Individually evaluated for
1mpa1rment 266000 42380000 5522000 s 3307000 51475000
Collectively evalua1ed
for impairment 62376000 623715000 1 17997000 126598000 1229000 931915000
Endrng balance 62642000 666095000 123519000 129905000 1229000 983390000
1 9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present additional detail of impaired loans segregated by class as of December 3 1 2014 and 2013 The unpaid principal balance represents the recorded balance prior to any partial charge-offs The recorded investment represents customer balances net of any partial charge-offs recognized on the loans The interest income recognized column represents all interest income reported either on a cash or accrued basis after the loan became impaired The cash basis income column represents only the interest income recognized on a cash basis after the loan was classified as impaired
December 31 2014
Wih no relaed allowance recorded
Commercial Commercial real estale
Reail properties Multifamily Mixed-use properties lndustnal manufacturing
warehouse Other commercial real estate
Construction and land developmen
Residential real estate Consumer installment
Wi1h an allowance recorded Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties Industrial manufacturing
warehouse Other commercial real estate
Construction and land development
Residential real estate Consumer installment
To1al
$
$
Unpaid Principal Balance
216000 $
7266000
3283000
2861000 6121000
3672000 6045000
200000
564000 2421000
1 62000 170000
Recorded Investment
168000 s
5543000
3119000
1353000 4480000
3400000 3878000
200000
564000 2215000
126000 170000
32981000 $ 25216000 $
20
Allowance for Loan Losses
Allocated
200000
42000 403000
36000 52000
733000
Average Recorded
Investment
$ 208000 $
1 1 474000 3514000 4354000
131 5000 5509000
4 183000 4673000
29000
677000 2270000
141 000 44000
$ 38391000 $
Interest Income
Recognized
109000 48000
161 000
125000 33000
38000
5000
519000
$
$
Cash Basis Interest Income
Recognized
108000 48000
1 57000
1 1 3000 32000
38000
5000
501000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Cash Basis Unpaid Allowance for Average Interest Interest
Principal Recorded Loan Losses Recorded Income Income December 31 2013 Balance Investment Allocated Investment Recognized Recognized
With no related allowance recordedmiddot
Commercial $ 266000 $ 266000 $ $ 326000 $ $ Commercial real estate
Retail properties 26699000 12500000 10635000 146000 139000 Multifamily 5542000 4526000 4838000 88000 88000 Mixed-use properties 3123000 2527000 2750000 103000 102000 Industrial manufacturing
warehouse 1 641000 273000 528000 Other commercial real estate 4056000 3497000 3617000
Construction and land development 8517000 3965000 4971000 1 1 4000 1 14000
Residenial rear estate 3769000 3203000 3203000 47000 43000 Consumer installment
With an allowance recorded Commercial Commercial real estate
Retarl properties 6138000 5239000 2045000 4759000 35000 35000 Multifamily 692000 682000 69000 687000 38000 38000 Mixed-use properties 5764000 5 127000 778000 4200000 92000 87000 Industrial manufacturing
warehouse Other commercial real estate 10001000 8009000 583000 8986000
Construction and land development 2770000 1 557000 239000 1 853000
Residential real estate 120000 104000 61000 1 04000 Consumer installment
Total $ 79298000 $ 51475000 $ 3775000 $ 51457000 $ 663000 $ 646000
21
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present troubled debt restructurings and the financial effects of troubled debt restructurings
Year Ended December 31 2014
Pre-Modification Post-Modification Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reserves
Commercial $ 288000 $ 168000 $
Commercial real estate
Retail properties 3 1790000 2060000
Multifamily 1 409000 672000 732000
Mixed-use properties 6 4660000 3 118000 974000
Industrial manufacturing warehouse Other commercial real estate 4682000 2864000 1 272000
Construction and land development 1 3924000 2930000 500000
Residential real estate 3 1288000 1 252000 52000
Consumer installment Total 16 $ 1 8041000 $ 13064000 $ 3530000
Year Ended December 3 1 2013
Pre-Modification Post-Modification
Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reseives
Commercial $ $ $
Commercial real estate
Retail properties 3 8596000 3651000 4363000
Multifamily 2 7026000 5090000 1598000
Mixed-use properties 7 6005000 4421000 1 612000
Industrial manufacturing warehouse
Other commercial real estate 5 14589000 10888000 2578000
Construction and land development 3 7409000 4493000 1 162000
Residential real estate 3 1515000 1 371000 117000
Consumer installment Total 23 $ 45 140000 $ 29914000 $ 11430000
Troubled debt restructurings that were accruing interest were $9520000 and $ 1 1 382000 respectively as of December 3 1 2014 and 2013 Troubled debt restructurings that were non-accruing were $3544000 and $ 1 8532000 respectively as of December 3 1 2014 and 201 3 Troubled debt restructurings included loans where the loan principal and corresponding interest rate was reduced and i n some instances the loan amortization period was extended During 2014 there were three troubled debt restructurings with outstanding balances at the time of re-default was $ 1 1 55000 and loan balances outstanding for these loans at December 3 1 2014 was $239000
22
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies
Principles of consolidation The consolidated financial statements include the accounts of Lakeside Bank (the Bank) and its wholly owned subsidiary Lakeside Community Development LLC All intercompany transactions and balances have been eliminated The Bank is a wholly owned subsidiary of Lakeside Bancorp Inc
Nature of operations Lakeside Bank is a state chartered bank whose operations consist primarily of those financial activities common to the commercial banking industry The Bank serves northeastern Illinois and services are provided at six locations throughout Chicago The Banks wholly owned subsidiary Lakeside Community Development LLC invests in various community development activities
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 the reported amounts of revenue and expenses during the reporting period Actual results could differ from those estimates Material estimates that are susceptible to significant change in the near term relate to the determination of the allowance for loan losses valuation of other real estate owned the defined benefit plan liability and fair value of financial instruments
Presentation of cash flows For purposes of the consolidated statements of cash flows cash and due from banks include cash on hand and amounts due from banks (including cash items in process of clearing) Cash flows from interest-bearing deposits in banks loans deposits federal funds purchased and short-term and long-term borrowings are reported on a net basis
Interest-bearing deposits in banks Interest-bearing deposits in banks mature within one year and are carried at cost
Securities available for sale All securities are classified as available for sale as the Bank intends to hold the securities for an indefinite period of time but not necessarily to maturity Any decision to sell a security classified as available for sale would be based on various factors including significant movements in interest rates changes in the maturity mix of the Banks assets and liabil ities liquidity needs regulatory capital considerations and other similar factors Securities available for sale are carried at fair value U nrealized gains or losses are reported as increases or decreases in accumulated other comprehensive income Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities Realized gains or losses on sales of available for sale securities are recorded using the specific identification method
Management evaluates securities for other-than-temporary impairment (OTII) at least on a quarterly basis and more frequently when economic or market conditions warrant such evaluation Declines in the fair value of individual securities available for sale below their amortized cost that are determined to be other-than-temporary are reflected in earnings as realized losses In estimating other-than-temporary impairment losses management considers the length of time and the extent to which the fair value has been less than cost the financial condition and near-term prospects of the issuer and whether it is more likely than not to sell the security before recovery of its cost basis If they intend to sell an impaired security the Bank records an other-than-temporary loss in an amount equal to the entire difference between the fair value and amortized cost I f the Bank does not intend to sell the security only the credit portion of the estimated loss is recognized in earnings with the other portion recognized in accumulated other comprehensive income
8
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
Federal Home Loan Bank stock The Bank as a member of the Federal Home Loan Bank of Chicago (the FHLB) is required to maintain an investment in capital stock of the FHLB The stock does not have a readily determinable fair value as ownership is restricted and it lacks a ready market As a result this stock is carried at cost and evaluated periodically for impairment
Loans The Bank extends commercial mortgage and consumer loans to customers A substantial portion of the loan portfolio is represented by commercial loans in northeastern Illinois The ability of the Banks debtors to honor their contracts is dependent upon the general economic conditions in this area
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are generally reported at their outstanding unpaid principal balances adjusted for charge-offs and the allowance for loan losses I nterest income is accrued on the unpaid principal balance Loan balances include loan origination fees and direct loan origination costs that are being deferred and the net amount amortized as an adjustment of the related loans yield The Bank is amortizing these amounts over the contractual loan maturity
The accrual of interest on loans is typically discontinued at the time the loan is 90 days delinquent In al l cases loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful All interest accrued but not collected for loans that are placed on non accrual or charged-off is reversed against interest income The interest on these loans is accounted for on the cash-basis or cost-recovery method until qualifying for return to accrual Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured
Troubled debt restructurings A loan is classified as a troubled debt restructuring when a borrower is experiencing financial difficulties that leads to a restructuring of the loan and the Bank grants concessions to the borrower in the restructuring that it would not otherwise consider These concessions may include rate reductions principal forgiveness extension of maturity date and other actions intended to minimize potential losses Troubled debt restructurings are classified as impaired loans A loan that is modified at a market rate of interest may no longer be classified as a troubled debt restructuring and impaired in the calendar year subsequent to the restructuring if it is in compliance with the mod1f1ed terms Performance prior to the restructuring is considered when assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual at the time of the restructuring or after a shorter performance period
Allowance for loan losses The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to expense Loan losses are charged against the allowance when management believes that collectability of the principal is unlikely Subsequent recoveries if any are credited to the allowance
When establishing the allowance for loan losses management categorizes loans into risk categories generally based on the nature of the collateral and the basis of repayment These risk categories and the relevant risk characteristics are as follows
Commercial loans - Commercial loans are loans for corporate and business purposes including issuing letters of credit The Banks commercial business loan portfolio is comprised of loans for a variety of purposes and generally is secured by equipment machinery and other business assets Commercial business loans generally have terms of five years or less and interest rates that float in accordance with a designated published index Substantially all of such loans are secured and backed by the personal guarantees of the owners of the business
9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements -------------------------------middot middot-----------
Note 1 Summary of Significant Accounting Policies (Continued)
Commercial real estate loans - Commercial real estate loans are primarily secured by apartment buildings office and industrial buildings mixed-use properties small retail shopping centers and various special purpose properties including warehouses and restaurants Although terms vary commercial real estate loans generally have amortizations of 15 to 30 years as well as balloon payments of two to seven years and terms which provide that the interest rates thereon may be adjusted annually at the Banks discretion based on a designated index
Construction and land development loans - Construction land development loans consist of vacant land and property that is in the process of improvement Repayment of these loans can be dependent on the sale of the property to third parties or the successful completion of the improvements by the builder for the end user In the event a loan is made on property that is not yet approved for the planned development there is the risk that approvals will not be granted or will be delayed Construction and land development loans also run the risk that improvements will not be completed on time or in accordance with specifications and projected costs Construction and land development loans generally have terms of one year to 18 months during the construction period and interest rates based on a designated index
Residential real estate loans - Residential real estate loans include home equity lines of credit secured by a first or second mortgage and 1-4 family residential real estate loans Loans are generally smaller in size and are homogenous because they exhibit similar characteristics
Consumer installment loans - Consumer installment loans generally have higher interest rates than mortgage loans The risk involved in consumer loans is the type and nature of the collateral and in certain cases the absence of collateral These loans are secured by personal assets or may be unsecured and repayment is directly dependent on the borrowers income and the borrowers ability to service debt payments
The allowance for loan losses is evaluated on a regular basis by management and is based upon managements periodic review of the collectability of the loans in light of historical experience the nature and volume of the loan portfolio estimated value of any underlying collateral and prevailing economic conditions and adverse situations that may affect the borrowers ability to pay This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available In addition regulatory agencies as an integral part of their examination process periodically review the Banks allowance for loan losses and may require the Bank to make additions to the allowance based on their Judgment about information available to them at the time of their examinations
The allowance consists of specific and general components The specific component relates to loans that are classified as impaired and an allowance is established when the collateral value discounted cash flows or observable market price of the impaired loan is lower than the carrying value of that loan The general component covers non-impaired loans and is based on the Banks own loss experience adjusted for qualitative factors These qualitative factors consider local economic trends concentrations management experience and other elements of the Banks lending operations
10
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
A loan is impaired based on current information and events when it is probable the Bank will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Factors considered by management in determining impairment include payment status collateral value and the probability for collecting scheduled principal and interest payment when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on an individual-loan basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reason for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on an individual loan basis based on the fair value of the collateral if the loan is collateral dependent the present value of expected future cash flows discounted at the loans effective interest rate or the loans obtainable market price
Large groups of homogenous loans are collectively evaluated for impairment Accordingly the Bank does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Other real estate owned Assets acquired through or in lieu of loan foreclosure are held for sale and initially recorded at fair value less estimated costs to sell at the date of foreclosure establishing a new cost basis Subsequent to foreclosure valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less costs to sell Revenue and expenses from operations and changes in the valuation allowance are included in noninterest expenses-other real estate owned net
Premises and equipment Land is carried at cost Premises and equipment are stated at cost less accumulated depreciation (building 12-25 years leasehold improvements 3-15 years furniture and fixtures 3-20 years) Depreciation is provided principally by the straight-line method over the estimated useful lives of the assets Amortization of leasehold improvements is computed on the straight-line method over the lease term or the estimated useful lives of the improvements whichever 1s shorter
Transfers of financial assets Transfers of financial assets are accounted for as sales when control over the assets has been surrendered Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank - put presumptively beyond the reach of the transferor and its creditors even in bankruptcy or other receivership (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets
Income taxes Lakeside Bancorp Inc with the consent of its stockholders elected to be taxed as an S corporation under sections of the federal and state income tax laws which provide that in lieu of corporate income taxes the stockholder accounts for the Banks items of income deductions losses and credits As a wholly owned subsidiary the Banks income and expenses are included in the Lakeside Bancorp Inc consolidated tax returns As a result for the periods covered by this election no corporate income taxes will be recognized in the accompanying consolidated financial statements except for certain state income taxes
11
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
The Bank evaluates its tax positions to determine the appropriate level of tax reserves to maintain for uncertain tax positions The Bank has no uncertain tax positions as of December 3 1 2014 and 2013
The Bank would recognize interest and penalties on income taxes as a component of income tax expense
The Bank is generally no longer subject to US federal or state and local income tax examinations by tax authorities for years before 201 1
Comprehensive income Comprehensive income consists of net income changes in net unrealized gains and losses on securities available for sale reclassification adjustments for realized gains and losses on sales of AFS securities and changes in defined benefit pension obligation and is presented in the consolidated statements of stockholders equity
Recent accounting pronouncements In January 2014 the FASB (Financial Accounting Standards Board) issued guidance which requires an entity derecognize the loan receivable and recognize the real estate property when it has received physical possession of residential real estate property collateralizing a consumer mortgage loan upon either ( 1 ) 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 that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement Additionally the amendments require annual disclosures This guidance is effective for the Company for fiscal years beginning after December 15 2014 The adoption of this guidance is not expected to have a material impact on the consolidated financial statements
Subsequent events The Bank has evaluated subsequent events for potential recognition andor disclosure through April 30 2015 the date the consolidated financial statements were available to be issued
1 2
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 2 Restricted Cash and Due from Banks
The Bank is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank of Chicago The total of those reserve balances averaged $1 01 2000 and $935000 in 2014 and 2013 respectively The Bank maintains amounts due from banks which exceed federally insured limits The Bank has not experienced any losses in such accounts
Note 3 Securities Available for Sale
The amortized cost and fair value of securities with gross unrealized gains and losses follows
December 31 2014
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
December 31 2013
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
$
$
$
$
Amor1ized
Cost
15917000 $
23417000
6038000
5159000
50531000
250000
50781000 $
17835000 $
32338000
6590000
5928000
62691000
250000
62941000 $
Gross
Unrealized
Gains
41000 $
216000
22000
70000
349000
17000
366000 $
41000 $
190000
39000
26000
296000
11000
307000 s
Gross
Unrealized Fair
Losses Value
(53000) s 15905000
(243000) 23390000
(8000) 6052000
(41000) 5188000
(345000) 50535000
267000
(345000) $ 50802000
(255000) $ 17621000
(987000) 31541000
(32000) 6597000
(126000) 5828000
(1400000) 61587000
261000
(1400000) $ 61848000
Securities available for sale with a carrying value of $8339000 and $3848000 at December 31 2014 and 201 3 respectively were pledged on deposits of the United States Government and other public funds as required or permitted and other short-term borrowings
The amortized costs and fair values of debt securities available for sale as of December 3 1 2014 by contractual maturity are shown below Maturities may differ from contractual maturities in mortgageshybacked securities because the mortgages underlying the securities may be called or repaid without any penalties Therefore these securities are not included in the maturity categories in the following maturity summary
1 3
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements middot-
Note 3 Securities Available for Sale (Continued)
Amortized Fair
Cost Value
Due in one year or less $ 3049000 $ 3057000 Due after one year through five years 21 506000 21 507000
Due after five years through ten years 71 70000 7163000
Due after ten years 1 3647000 1 3620000
45372000 45347000
Residential mortgage-backed securities 5 159000 5188000 Totals $ 50531 000 $ 50535000
The following tables show the gross unrealized losses and fair value of investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 3 1 2 0 1 4 and 2 0 1 3
less than 12 Months 12 Months or More Total Fair Unrealized Fair Unreahzed Fair Unrealized
2014 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 498000 s (2000) $ 7695000 s (51000) $ 8193000 $ (53000) Obligations of states and
pol1ilca subd1v1sions 13671000 (243000) 13671000 (243000) Corporate debt obligations 1132000 (8000 1 132000 (8000) Residential mortgage-backed
obligations 2128000 (4100D) 2128000 (41000) Total temporary
impaired securities s 498000 s (2000) $ 24626000 $ (343000) s 25124000 s (345000)
Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized
2013 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 10867000 $ (232000) s 2632000 $ (23000) $ 13499000 s 255000) Obligations of states and
polillcal subdivisions 11195000 (365000) 11169000 (622000) 22364000 (987000) Corporate debt obligations 1179000 (32000) 1179000 (32000) Residential mortgage-backed
obligations 3977000 (126000) 3977000 (126000) Total temporary
impaired securities 26039000 s (723000) $ 14980000 s (677000) s 41019000 $ (1400000)
In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysis reports Since management does not intend to sell any temporarily impaired securities before recovery of their cost basis no declines are deemed other-than-temporary
On sale proceeds of $5637000 there were $57000 in realized gains and $146000 in realized losses on the sale of securities during the year ended December 3 1 2 0 1 4 On sale proceeds of $708000 there were no realized gains and $246000 realized losses on the sale of securities during the year ended December 3 1 2 0 1 3
1 4
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans
A summary of the balances of loans follows
Commercial $
Commercial real estate
Construction and land development
Residential real estate
Consumer installment
Less allowance for loan losses
Loans net $
December 3 1
2014 2013
62894000
658 153000
163 1 08000
1 43579000
743000
1 028477000
2658 1 000
1 001 896 000
$ 62642000
666095000
123519000
129905000
1 229000
983390000
27626000
$ 955764000
The following tables present the contractual aging of the recorded investment in loans by class of loans as of December 3 1 2014 and 2013
Loans Past 90 Days or 30-59 Days 60middot89 Days Due 90 Days More Past Due
December 31 2014 Current Past Due Past Due or More Total and Accruin
Commercial $ 62655000 $ 4000 $ 36000 $ 199000 s 62894000 $ 199000
Commercial real estate Relail properties 295610000 105000 1212000 296927000 199000
Multifamily 90507000 90507000
Mixed-use properties 93 116000 2455000 95571000
Industrial manufacturing warehouse 63660000 1353000 65013000
Other commerc1al real estate 106101000 4034000 110135000
Construction and land development 162512000 596000 163 108000
Residential real estate 140636000 208000 2735000 143579000
Consumer installment 743000 743000
Total $ 1 015 540000 $ 109 000 $ 244 000 12584 000 $ 1 028 477 000 s 398 000
15
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Loans Past 90 Days or 30-59 Days 60-89 Days Due 90 Days More Past Due
December 31 2013 Current Past Due Past Due or More Total and Accruing
Commercial $ 61588000 $ $ 755000 $ 299000 s 62642000 $ 33000 Commercial real estate
Retail properties 284 162000 1152000 1331000 15307000 301952000 44000 Mu11ifamily 78203000 1223000 450000 4526000 84402000 Mixed-use properties 93292000 262000 316000 3644000 97514000 Industrial manufacturing
warehouse 58947000 1696000 273000 60916000 Other commercial real
estate 109449000 282000 74000 11506000 121311000 Construction and land
development 121492000 2027000 123519000 Residential real estate 126229000 1062000 306000 2308000 129905000 89000 Consumer installment 1226000 1000 2000 1229000
Total $ 934 588000 $ 3982 000 s 4 930 000 39 890 000 983 390 000 $ 166 000
The following table presents the recorded investment in nonaccrual loans by class of loans as of December 31 2014 and 2013
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties
Industrial manufacturing warehouse Other commercial real estate
Construction and land development Residential real estate
Total
$
$
16
Nonaccrual Loans 2014 2013
168000 $ 266000
2470000 15263000
4526000
2728000 3644000
1353000 273000
4480000 11506000
1609000 2027000
2796000 2219000
15604000 $ 39724000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
As part of the on-going monitoring of the credit quality of the Banks loan portfolio management categorizes loans into rrsk categories based on relevant information about the ability of borrowers to service their debt and comply with various terms of their loan agreements The Bank considers current financial information historical payment experrence credit documentation public information and current economic trends Generally all sizeable credits receive a financial review no less than annually to monitor and adjust if necessary the credits risk profile Credits classified as watch generally receive a review more frequently than annually For substandard and doubtful credit classifications the frequency of review is increased to no less than quarterly in order to determine potential impact on credit loss estimates
The Bank categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt
Pass - A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors if any) or by the fair value less cost to acquire and sell of any underlying collateral in a timely manner Pass assets also include certain assets considered watch which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring
Special Mention - A special mention asset or risk rating of 6 has potential weaknesses that deserve managements close attention The asset may also be subject to a weak or speculative market or to economic conditions which may in the future adversely affect the obligor If left uncorrected these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Banks credit position at some future date Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification
Substandard - A substandard asset or risk rating of 7 is an asset with a well-defined weakness that jeopardizes repayment in whole or in part of the debt These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged These assets are characterized by the distinct possibility that the institution will sustain some loss of principal andor interest if the deficiencies are not corrected A loan does necessarily need to have an identifiable loss potential in order to receive this rating
Doubtful - An asset that has all the weaknesses or risk rating of 8 inherent in the substandard classification with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently known facts conditions and values highly questionable and improbable The possibility of loss is extremely likely but it is not identified at this point due to pending factors
Loss - An asset or portion thereof classified as loss is considered uncollectible and of such little value that its continuance on the Companys books as an asset is not warranted This classification does not necessarily mean that an asset has no recovery or salvage value but rather there is much doubt about whether how much or when the recovery would occur As such it is not practical or desirable to defer the write-off Therefore there is no loss balance to report at December 31 2014
Residential real estate and consumer installment loans are assessed for credit quality based on the contractual aging status of the loan and payment activity Such assessment is completed at the end of each reporting period
1 7
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present the risk category of loans evaluated by internal asset classification based on the most recent analysis performed and the contractual aging as of December 31 2014 and 2013
December 31 2014
Commercial Commercial real estate
Retail properties Multifamily
Mixed-use properties Industrial manufacturing warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
December 31 201 J
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties lndustnal manufactunng warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
Pass
$ 61710000 $
272359000 88002000 85430000 63660000
104525000
1531 14000
$ 828800000 $
$
$
Pass
s 62034000 $
250040000 76086000 85355000 60643000
108880000 1 1 7047000
s 760085000 $
$
$
1 8
Special Mention Substandard Doubtful Total
$ 1 016000 $ 168000 s 62894000
3701000 17384000 3483000 296927000 635000 1870000 90507000 238000 7175000 2728000 95571000
1353000 65013000 1 130000 4480000 110 135000
5937000 3461000 596000 163108000
10511 000 $ 32036000 $ 12808000 $ 884155000
Performing Non-periorming Total
140783000 s 2796000 $ 143579000
743000 743000
141 526000 s 2796000 $ 144322000
Special Mention Substandard Doubtful Total
$ 342000 $ 266000 s 62642000
10871000 25778000 15263000 301952000 1 885000 1905000 4526000 84402000 1 714000 6801000 3644000 97514000
273000 60916000 925000 11 506000 1213 1 1 000
381000 4064000 2027000 123519000
14851 000 $ 39815000 s 37505000 $ 852256000
Performing Non-performing Total
127597000 $ 2308000 $ 129905000
1 229000 1 229000
1 28826000 $ 2308000 $ 1 3 1 1 34000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables provide additional detail of the activity in the allowance for loan losses by portfolio segment for the years ended December 3 1 2014 and 2013
Construction
Commercial and land Rcs1dent1al Consumer
December 31 2014 Commercial Real Es1ate Develoement Real Estate lnsallment Total
Allowanco for loan lossos
Beg1nn1ng balance 1385000 20052000 3549000 2623000 17000 27626000
PrOV1Son for loan losses 2210000 2680000 2007000 3000 6900000
Loans chargedmiddotoff (179000) (8163000) 687000) (2140000) (11169000)
Recovenes of loans
previously charged-off 85000 2916000 223000 3224000
Ending balance s 1291000 1701 5000 5542000 271 3000 s 20000 s 26581000
Poriod-ondtd llmount allocatod to loans
lndMdually evaluated for
1mpa1rment 200000 445000 36000 52000 s 733000
Collec11vely evaluated
for 1mpa1rrnent 1091 000 16570000 5506000 2661000 20000 25648000
Ending balance 1291000 17015000 5542000 s 2713000 20000 26581000
Loans
lndMdually evaluated for
impairment 368000 17274000 3526000 4048000 25216000
Collecively evalua1ed
for 1mpa1rrnent 62526000 640879000 159582000 139531000 743000 1003261000
Ending balance 62894000 658 153000 163108000 143579000 743000 1028477000
Construct1on
Commercial and Land Residential Consumer
December 31 2013 Commeroal Real Estate Development Real Eslale Installment Total
Allowance for loan losses
Beginning balance 1040000 18719000 2484000 2248000 17000 24508000
Provision for loan losses 363000 6508000 867000 784000 28000 8550000
Loans chargedmiddot Off (59000) (5817000) (122000) (457000) (28000) (6483000)
Recoveries ol loans
previously charged-off 41 000 642000 320000 48000 1051000
Ending balance 1385000 20052000 3549000 s 2623000 17000 27626000
Period-ended amount allocated to loans
Individually evaluated for
impairment 3475000 239000 61000 3775000
Collectively evaluated
for impairment 1385000 16577000 3310000 2562000 17000 23851000
Ending balance 1385000 20052000 3549000 2623000 17000 27626000
Loans
Individually evaluated for
1mpa1rment 266000 42380000 5522000 s 3307000 51475000
Collectively evalua1ed
for impairment 62376000 623715000 1 17997000 126598000 1229000 931915000
Endrng balance 62642000 666095000 123519000 129905000 1229000 983390000
1 9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present additional detail of impaired loans segregated by class as of December 3 1 2014 and 2013 The unpaid principal balance represents the recorded balance prior to any partial charge-offs The recorded investment represents customer balances net of any partial charge-offs recognized on the loans The interest income recognized column represents all interest income reported either on a cash or accrued basis after the loan became impaired The cash basis income column represents only the interest income recognized on a cash basis after the loan was classified as impaired
December 31 2014
Wih no relaed allowance recorded
Commercial Commercial real estale
Reail properties Multifamily Mixed-use properties lndustnal manufacturing
warehouse Other commercial real estate
Construction and land developmen
Residential real estate Consumer installment
Wi1h an allowance recorded Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties Industrial manufacturing
warehouse Other commercial real estate
Construction and land development
Residential real estate Consumer installment
To1al
$
$
Unpaid Principal Balance
216000 $
7266000
3283000
2861000 6121000
3672000 6045000
200000
564000 2421000
1 62000 170000
Recorded Investment
168000 s
5543000
3119000
1353000 4480000
3400000 3878000
200000
564000 2215000
126000 170000
32981000 $ 25216000 $
20
Allowance for Loan Losses
Allocated
200000
42000 403000
36000 52000
733000
Average Recorded
Investment
$ 208000 $
1 1 474000 3514000 4354000
131 5000 5509000
4 183000 4673000
29000
677000 2270000
141 000 44000
$ 38391000 $
Interest Income
Recognized
109000 48000
161 000
125000 33000
38000
5000
519000
$
$
Cash Basis Interest Income
Recognized
108000 48000
1 57000
1 1 3000 32000
38000
5000
501000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Cash Basis Unpaid Allowance for Average Interest Interest
Principal Recorded Loan Losses Recorded Income Income December 31 2013 Balance Investment Allocated Investment Recognized Recognized
With no related allowance recordedmiddot
Commercial $ 266000 $ 266000 $ $ 326000 $ $ Commercial real estate
Retail properties 26699000 12500000 10635000 146000 139000 Multifamily 5542000 4526000 4838000 88000 88000 Mixed-use properties 3123000 2527000 2750000 103000 102000 Industrial manufacturing
warehouse 1 641000 273000 528000 Other commercial real estate 4056000 3497000 3617000
Construction and land development 8517000 3965000 4971000 1 1 4000 1 14000
Residenial rear estate 3769000 3203000 3203000 47000 43000 Consumer installment
With an allowance recorded Commercial Commercial real estate
Retarl properties 6138000 5239000 2045000 4759000 35000 35000 Multifamily 692000 682000 69000 687000 38000 38000 Mixed-use properties 5764000 5 127000 778000 4200000 92000 87000 Industrial manufacturing
warehouse Other commercial real estate 10001000 8009000 583000 8986000
Construction and land development 2770000 1 557000 239000 1 853000
Residential real estate 120000 104000 61000 1 04000 Consumer installment
Total $ 79298000 $ 51475000 $ 3775000 $ 51457000 $ 663000 $ 646000
21
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present troubled debt restructurings and the financial effects of troubled debt restructurings
Year Ended December 31 2014
Pre-Modification Post-Modification Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reserves
Commercial $ 288000 $ 168000 $
Commercial real estate
Retail properties 3 1790000 2060000
Multifamily 1 409000 672000 732000
Mixed-use properties 6 4660000 3 118000 974000
Industrial manufacturing warehouse Other commercial real estate 4682000 2864000 1 272000
Construction and land development 1 3924000 2930000 500000
Residential real estate 3 1288000 1 252000 52000
Consumer installment Total 16 $ 1 8041000 $ 13064000 $ 3530000
Year Ended December 3 1 2013
Pre-Modification Post-Modification
Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reseives
Commercial $ $ $
Commercial real estate
Retail properties 3 8596000 3651000 4363000
Multifamily 2 7026000 5090000 1598000
Mixed-use properties 7 6005000 4421000 1 612000
Industrial manufacturing warehouse
Other commercial real estate 5 14589000 10888000 2578000
Construction and land development 3 7409000 4493000 1 162000
Residential real estate 3 1515000 1 371000 117000
Consumer installment Total 23 $ 45 140000 $ 29914000 $ 11430000
Troubled debt restructurings that were accruing interest were $9520000 and $ 1 1 382000 respectively as of December 3 1 2014 and 2013 Troubled debt restructurings that were non-accruing were $3544000 and $ 1 8532000 respectively as of December 3 1 2014 and 201 3 Troubled debt restructurings included loans where the loan principal and corresponding interest rate was reduced and i n some instances the loan amortization period was extended During 2014 there were three troubled debt restructurings with outstanding balances at the time of re-default was $ 1 1 55000 and loan balances outstanding for these loans at December 3 1 2014 was $239000
22
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
Federal Home Loan Bank stock The Bank as a member of the Federal Home Loan Bank of Chicago (the FHLB) is required to maintain an investment in capital stock of the FHLB The stock does not have a readily determinable fair value as ownership is restricted and it lacks a ready market As a result this stock is carried at cost and evaluated periodically for impairment
Loans The Bank extends commercial mortgage and consumer loans to customers A substantial portion of the loan portfolio is represented by commercial loans in northeastern Illinois The ability of the Banks debtors to honor their contracts is dependent upon the general economic conditions in this area
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are generally reported at their outstanding unpaid principal balances adjusted for charge-offs and the allowance for loan losses I nterest income is accrued on the unpaid principal balance Loan balances include loan origination fees and direct loan origination costs that are being deferred and the net amount amortized as an adjustment of the related loans yield The Bank is amortizing these amounts over the contractual loan maturity
The accrual of interest on loans is typically discontinued at the time the loan is 90 days delinquent In al l cases loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful All interest accrued but not collected for loans that are placed on non accrual or charged-off is reversed against interest income The interest on these loans is accounted for on the cash-basis or cost-recovery method until qualifying for return to accrual Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured
Troubled debt restructurings A loan is classified as a troubled debt restructuring when a borrower is experiencing financial difficulties that leads to a restructuring of the loan and the Bank grants concessions to the borrower in the restructuring that it would not otherwise consider These concessions may include rate reductions principal forgiveness extension of maturity date and other actions intended to minimize potential losses Troubled debt restructurings are classified as impaired loans A loan that is modified at a market rate of interest may no longer be classified as a troubled debt restructuring and impaired in the calendar year subsequent to the restructuring if it is in compliance with the mod1f1ed terms Performance prior to the restructuring is considered when assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual at the time of the restructuring or after a shorter performance period
Allowance for loan losses The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to expense Loan losses are charged against the allowance when management believes that collectability of the principal is unlikely Subsequent recoveries if any are credited to the allowance
When establishing the allowance for loan losses management categorizes loans into risk categories generally based on the nature of the collateral and the basis of repayment These risk categories and the relevant risk characteristics are as follows
Commercial loans - Commercial loans are loans for corporate and business purposes including issuing letters of credit The Banks commercial business loan portfolio is comprised of loans for a variety of purposes and generally is secured by equipment machinery and other business assets Commercial business loans generally have terms of five years or less and interest rates that float in accordance with a designated published index Substantially all of such loans are secured and backed by the personal guarantees of the owners of the business
9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements -------------------------------middot middot-----------
Note 1 Summary of Significant Accounting Policies (Continued)
Commercial real estate loans - Commercial real estate loans are primarily secured by apartment buildings office and industrial buildings mixed-use properties small retail shopping centers and various special purpose properties including warehouses and restaurants Although terms vary commercial real estate loans generally have amortizations of 15 to 30 years as well as balloon payments of two to seven years and terms which provide that the interest rates thereon may be adjusted annually at the Banks discretion based on a designated index
Construction and land development loans - Construction land development loans consist of vacant land and property that is in the process of improvement Repayment of these loans can be dependent on the sale of the property to third parties or the successful completion of the improvements by the builder for the end user In the event a loan is made on property that is not yet approved for the planned development there is the risk that approvals will not be granted or will be delayed Construction and land development loans also run the risk that improvements will not be completed on time or in accordance with specifications and projected costs Construction and land development loans generally have terms of one year to 18 months during the construction period and interest rates based on a designated index
Residential real estate loans - Residential real estate loans include home equity lines of credit secured by a first or second mortgage and 1-4 family residential real estate loans Loans are generally smaller in size and are homogenous because they exhibit similar characteristics
Consumer installment loans - Consumer installment loans generally have higher interest rates than mortgage loans The risk involved in consumer loans is the type and nature of the collateral and in certain cases the absence of collateral These loans are secured by personal assets or may be unsecured and repayment is directly dependent on the borrowers income and the borrowers ability to service debt payments
The allowance for loan losses is evaluated on a regular basis by management and is based upon managements periodic review of the collectability of the loans in light of historical experience the nature and volume of the loan portfolio estimated value of any underlying collateral and prevailing economic conditions and adverse situations that may affect the borrowers ability to pay This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available In addition regulatory agencies as an integral part of their examination process periodically review the Banks allowance for loan losses and may require the Bank to make additions to the allowance based on their Judgment about information available to them at the time of their examinations
The allowance consists of specific and general components The specific component relates to loans that are classified as impaired and an allowance is established when the collateral value discounted cash flows or observable market price of the impaired loan is lower than the carrying value of that loan The general component covers non-impaired loans and is based on the Banks own loss experience adjusted for qualitative factors These qualitative factors consider local economic trends concentrations management experience and other elements of the Banks lending operations
10
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
A loan is impaired based on current information and events when it is probable the Bank will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Factors considered by management in determining impairment include payment status collateral value and the probability for collecting scheduled principal and interest payment when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on an individual-loan basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reason for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on an individual loan basis based on the fair value of the collateral if the loan is collateral dependent the present value of expected future cash flows discounted at the loans effective interest rate or the loans obtainable market price
Large groups of homogenous loans are collectively evaluated for impairment Accordingly the Bank does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Other real estate owned Assets acquired through or in lieu of loan foreclosure are held for sale and initially recorded at fair value less estimated costs to sell at the date of foreclosure establishing a new cost basis Subsequent to foreclosure valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less costs to sell Revenue and expenses from operations and changes in the valuation allowance are included in noninterest expenses-other real estate owned net
Premises and equipment Land is carried at cost Premises and equipment are stated at cost less accumulated depreciation (building 12-25 years leasehold improvements 3-15 years furniture and fixtures 3-20 years) Depreciation is provided principally by the straight-line method over the estimated useful lives of the assets Amortization of leasehold improvements is computed on the straight-line method over the lease term or the estimated useful lives of the improvements whichever 1s shorter
Transfers of financial assets Transfers of financial assets are accounted for as sales when control over the assets has been surrendered Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank - put presumptively beyond the reach of the transferor and its creditors even in bankruptcy or other receivership (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets
Income taxes Lakeside Bancorp Inc with the consent of its stockholders elected to be taxed as an S corporation under sections of the federal and state income tax laws which provide that in lieu of corporate income taxes the stockholder accounts for the Banks items of income deductions losses and credits As a wholly owned subsidiary the Banks income and expenses are included in the Lakeside Bancorp Inc consolidated tax returns As a result for the periods covered by this election no corporate income taxes will be recognized in the accompanying consolidated financial statements except for certain state income taxes
11
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
The Bank evaluates its tax positions to determine the appropriate level of tax reserves to maintain for uncertain tax positions The Bank has no uncertain tax positions as of December 3 1 2014 and 2013
The Bank would recognize interest and penalties on income taxes as a component of income tax expense
The Bank is generally no longer subject to US federal or state and local income tax examinations by tax authorities for years before 201 1
Comprehensive income Comprehensive income consists of net income changes in net unrealized gains and losses on securities available for sale reclassification adjustments for realized gains and losses on sales of AFS securities and changes in defined benefit pension obligation and is presented in the consolidated statements of stockholders equity
Recent accounting pronouncements In January 2014 the FASB (Financial Accounting Standards Board) issued guidance which requires an entity derecognize the loan receivable and recognize the real estate property when it has received physical possession of residential real estate property collateralizing a consumer mortgage loan upon either ( 1 ) 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 that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement Additionally the amendments require annual disclosures This guidance is effective for the Company for fiscal years beginning after December 15 2014 The adoption of this guidance is not expected to have a material impact on the consolidated financial statements
Subsequent events The Bank has evaluated subsequent events for potential recognition andor disclosure through April 30 2015 the date the consolidated financial statements were available to be issued
1 2
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 2 Restricted Cash and Due from Banks
The Bank is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank of Chicago The total of those reserve balances averaged $1 01 2000 and $935000 in 2014 and 2013 respectively The Bank maintains amounts due from banks which exceed federally insured limits The Bank has not experienced any losses in such accounts
Note 3 Securities Available for Sale
The amortized cost and fair value of securities with gross unrealized gains and losses follows
December 31 2014
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
December 31 2013
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
$
$
$
$
Amor1ized
Cost
15917000 $
23417000
6038000
5159000
50531000
250000
50781000 $
17835000 $
32338000
6590000
5928000
62691000
250000
62941000 $
Gross
Unrealized
Gains
41000 $
216000
22000
70000
349000
17000
366000 $
41000 $
190000
39000
26000
296000
11000
307000 s
Gross
Unrealized Fair
Losses Value
(53000) s 15905000
(243000) 23390000
(8000) 6052000
(41000) 5188000
(345000) 50535000
267000
(345000) $ 50802000
(255000) $ 17621000
(987000) 31541000
(32000) 6597000
(126000) 5828000
(1400000) 61587000
261000
(1400000) $ 61848000
Securities available for sale with a carrying value of $8339000 and $3848000 at December 31 2014 and 201 3 respectively were pledged on deposits of the United States Government and other public funds as required or permitted and other short-term borrowings
The amortized costs and fair values of debt securities available for sale as of December 3 1 2014 by contractual maturity are shown below Maturities may differ from contractual maturities in mortgageshybacked securities because the mortgages underlying the securities may be called or repaid without any penalties Therefore these securities are not included in the maturity categories in the following maturity summary
1 3
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements middot-
Note 3 Securities Available for Sale (Continued)
Amortized Fair
Cost Value
Due in one year or less $ 3049000 $ 3057000 Due after one year through five years 21 506000 21 507000
Due after five years through ten years 71 70000 7163000
Due after ten years 1 3647000 1 3620000
45372000 45347000
Residential mortgage-backed securities 5 159000 5188000 Totals $ 50531 000 $ 50535000
The following tables show the gross unrealized losses and fair value of investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 3 1 2 0 1 4 and 2 0 1 3
less than 12 Months 12 Months or More Total Fair Unrealized Fair Unreahzed Fair Unrealized
2014 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 498000 s (2000) $ 7695000 s (51000) $ 8193000 $ (53000) Obligations of states and
pol1ilca subd1v1sions 13671000 (243000) 13671000 (243000) Corporate debt obligations 1132000 (8000 1 132000 (8000) Residential mortgage-backed
obligations 2128000 (4100D) 2128000 (41000) Total temporary
impaired securities s 498000 s (2000) $ 24626000 $ (343000) s 25124000 s (345000)
Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized
2013 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 10867000 $ (232000) s 2632000 $ (23000) $ 13499000 s 255000) Obligations of states and
polillcal subdivisions 11195000 (365000) 11169000 (622000) 22364000 (987000) Corporate debt obligations 1179000 (32000) 1179000 (32000) Residential mortgage-backed
obligations 3977000 (126000) 3977000 (126000) Total temporary
impaired securities 26039000 s (723000) $ 14980000 s (677000) s 41019000 $ (1400000)
In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysis reports Since management does not intend to sell any temporarily impaired securities before recovery of their cost basis no declines are deemed other-than-temporary
On sale proceeds of $5637000 there were $57000 in realized gains and $146000 in realized losses on the sale of securities during the year ended December 3 1 2 0 1 4 On sale proceeds of $708000 there were no realized gains and $246000 realized losses on the sale of securities during the year ended December 3 1 2 0 1 3
1 4
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans
A summary of the balances of loans follows
Commercial $
Commercial real estate
Construction and land development
Residential real estate
Consumer installment
Less allowance for loan losses
Loans net $
December 3 1
2014 2013
62894000
658 153000
163 1 08000
1 43579000
743000
1 028477000
2658 1 000
1 001 896 000
$ 62642000
666095000
123519000
129905000
1 229000
983390000
27626000
$ 955764000
The following tables present the contractual aging of the recorded investment in loans by class of loans as of December 3 1 2014 and 2013
Loans Past 90 Days or 30-59 Days 60middot89 Days Due 90 Days More Past Due
December 31 2014 Current Past Due Past Due or More Total and Accruin
Commercial $ 62655000 $ 4000 $ 36000 $ 199000 s 62894000 $ 199000
Commercial real estate Relail properties 295610000 105000 1212000 296927000 199000
Multifamily 90507000 90507000
Mixed-use properties 93 116000 2455000 95571000
Industrial manufacturing warehouse 63660000 1353000 65013000
Other commerc1al real estate 106101000 4034000 110135000
Construction and land development 162512000 596000 163 108000
Residential real estate 140636000 208000 2735000 143579000
Consumer installment 743000 743000
Total $ 1 015 540000 $ 109 000 $ 244 000 12584 000 $ 1 028 477 000 s 398 000
15
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Loans Past 90 Days or 30-59 Days 60-89 Days Due 90 Days More Past Due
December 31 2013 Current Past Due Past Due or More Total and Accruing
Commercial $ 61588000 $ $ 755000 $ 299000 s 62642000 $ 33000 Commercial real estate
Retail properties 284 162000 1152000 1331000 15307000 301952000 44000 Mu11ifamily 78203000 1223000 450000 4526000 84402000 Mixed-use properties 93292000 262000 316000 3644000 97514000 Industrial manufacturing
warehouse 58947000 1696000 273000 60916000 Other commercial real
estate 109449000 282000 74000 11506000 121311000 Construction and land
development 121492000 2027000 123519000 Residential real estate 126229000 1062000 306000 2308000 129905000 89000 Consumer installment 1226000 1000 2000 1229000
Total $ 934 588000 $ 3982 000 s 4 930 000 39 890 000 983 390 000 $ 166 000
The following table presents the recorded investment in nonaccrual loans by class of loans as of December 31 2014 and 2013
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties
Industrial manufacturing warehouse Other commercial real estate
Construction and land development Residential real estate
Total
$
$
16
Nonaccrual Loans 2014 2013
168000 $ 266000
2470000 15263000
4526000
2728000 3644000
1353000 273000
4480000 11506000
1609000 2027000
2796000 2219000
15604000 $ 39724000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
As part of the on-going monitoring of the credit quality of the Banks loan portfolio management categorizes loans into rrsk categories based on relevant information about the ability of borrowers to service their debt and comply with various terms of their loan agreements The Bank considers current financial information historical payment experrence credit documentation public information and current economic trends Generally all sizeable credits receive a financial review no less than annually to monitor and adjust if necessary the credits risk profile Credits classified as watch generally receive a review more frequently than annually For substandard and doubtful credit classifications the frequency of review is increased to no less than quarterly in order to determine potential impact on credit loss estimates
The Bank categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt
Pass - A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors if any) or by the fair value less cost to acquire and sell of any underlying collateral in a timely manner Pass assets also include certain assets considered watch which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring
Special Mention - A special mention asset or risk rating of 6 has potential weaknesses that deserve managements close attention The asset may also be subject to a weak or speculative market or to economic conditions which may in the future adversely affect the obligor If left uncorrected these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Banks credit position at some future date Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification
Substandard - A substandard asset or risk rating of 7 is an asset with a well-defined weakness that jeopardizes repayment in whole or in part of the debt These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged These assets are characterized by the distinct possibility that the institution will sustain some loss of principal andor interest if the deficiencies are not corrected A loan does necessarily need to have an identifiable loss potential in order to receive this rating
Doubtful - An asset that has all the weaknesses or risk rating of 8 inherent in the substandard classification with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently known facts conditions and values highly questionable and improbable The possibility of loss is extremely likely but it is not identified at this point due to pending factors
Loss - An asset or portion thereof classified as loss is considered uncollectible and of such little value that its continuance on the Companys books as an asset is not warranted This classification does not necessarily mean that an asset has no recovery or salvage value but rather there is much doubt about whether how much or when the recovery would occur As such it is not practical or desirable to defer the write-off Therefore there is no loss balance to report at December 31 2014
Residential real estate and consumer installment loans are assessed for credit quality based on the contractual aging status of the loan and payment activity Such assessment is completed at the end of each reporting period
1 7
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present the risk category of loans evaluated by internal asset classification based on the most recent analysis performed and the contractual aging as of December 31 2014 and 2013
December 31 2014
Commercial Commercial real estate
Retail properties Multifamily
Mixed-use properties Industrial manufacturing warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
December 31 201 J
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties lndustnal manufactunng warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
Pass
$ 61710000 $
272359000 88002000 85430000 63660000
104525000
1531 14000
$ 828800000 $
$
$
Pass
s 62034000 $
250040000 76086000 85355000 60643000
108880000 1 1 7047000
s 760085000 $
$
$
1 8
Special Mention Substandard Doubtful Total
$ 1 016000 $ 168000 s 62894000
3701000 17384000 3483000 296927000 635000 1870000 90507000 238000 7175000 2728000 95571000
1353000 65013000 1 130000 4480000 110 135000
5937000 3461000 596000 163108000
10511 000 $ 32036000 $ 12808000 $ 884155000
Performing Non-periorming Total
140783000 s 2796000 $ 143579000
743000 743000
141 526000 s 2796000 $ 144322000
Special Mention Substandard Doubtful Total
$ 342000 $ 266000 s 62642000
10871000 25778000 15263000 301952000 1 885000 1905000 4526000 84402000 1 714000 6801000 3644000 97514000
273000 60916000 925000 11 506000 1213 1 1 000
381000 4064000 2027000 123519000
14851 000 $ 39815000 s 37505000 $ 852256000
Performing Non-performing Total
127597000 $ 2308000 $ 129905000
1 229000 1 229000
1 28826000 $ 2308000 $ 1 3 1 1 34000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables provide additional detail of the activity in the allowance for loan losses by portfolio segment for the years ended December 3 1 2014 and 2013
Construction
Commercial and land Rcs1dent1al Consumer
December 31 2014 Commercial Real Es1ate Develoement Real Estate lnsallment Total
Allowanco for loan lossos
Beg1nn1ng balance 1385000 20052000 3549000 2623000 17000 27626000
PrOV1Son for loan losses 2210000 2680000 2007000 3000 6900000
Loans chargedmiddotoff (179000) (8163000) 687000) (2140000) (11169000)
Recovenes of loans
previously charged-off 85000 2916000 223000 3224000
Ending balance s 1291000 1701 5000 5542000 271 3000 s 20000 s 26581000
Poriod-ondtd llmount allocatod to loans
lndMdually evaluated for
1mpa1rment 200000 445000 36000 52000 s 733000
Collec11vely evaluated
for 1mpa1rrnent 1091 000 16570000 5506000 2661000 20000 25648000
Ending balance 1291000 17015000 5542000 s 2713000 20000 26581000
Loans
lndMdually evaluated for
impairment 368000 17274000 3526000 4048000 25216000
Collecively evalua1ed
for 1mpa1rrnent 62526000 640879000 159582000 139531000 743000 1003261000
Ending balance 62894000 658 153000 163108000 143579000 743000 1028477000
Construct1on
Commercial and Land Residential Consumer
December 31 2013 Commeroal Real Estate Development Real Eslale Installment Total
Allowance for loan losses
Beginning balance 1040000 18719000 2484000 2248000 17000 24508000
Provision for loan losses 363000 6508000 867000 784000 28000 8550000
Loans chargedmiddot Off (59000) (5817000) (122000) (457000) (28000) (6483000)
Recoveries ol loans
previously charged-off 41 000 642000 320000 48000 1051000
Ending balance 1385000 20052000 3549000 s 2623000 17000 27626000
Period-ended amount allocated to loans
Individually evaluated for
impairment 3475000 239000 61000 3775000
Collectively evaluated
for impairment 1385000 16577000 3310000 2562000 17000 23851000
Ending balance 1385000 20052000 3549000 2623000 17000 27626000
Loans
Individually evaluated for
1mpa1rment 266000 42380000 5522000 s 3307000 51475000
Collectively evalua1ed
for impairment 62376000 623715000 1 17997000 126598000 1229000 931915000
Endrng balance 62642000 666095000 123519000 129905000 1229000 983390000
1 9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present additional detail of impaired loans segregated by class as of December 3 1 2014 and 2013 The unpaid principal balance represents the recorded balance prior to any partial charge-offs The recorded investment represents customer balances net of any partial charge-offs recognized on the loans The interest income recognized column represents all interest income reported either on a cash or accrued basis after the loan became impaired The cash basis income column represents only the interest income recognized on a cash basis after the loan was classified as impaired
December 31 2014
Wih no relaed allowance recorded
Commercial Commercial real estale
Reail properties Multifamily Mixed-use properties lndustnal manufacturing
warehouse Other commercial real estate
Construction and land developmen
Residential real estate Consumer installment
Wi1h an allowance recorded Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties Industrial manufacturing
warehouse Other commercial real estate
Construction and land development
Residential real estate Consumer installment
To1al
$
$
Unpaid Principal Balance
216000 $
7266000
3283000
2861000 6121000
3672000 6045000
200000
564000 2421000
1 62000 170000
Recorded Investment
168000 s
5543000
3119000
1353000 4480000
3400000 3878000
200000
564000 2215000
126000 170000
32981000 $ 25216000 $
20
Allowance for Loan Losses
Allocated
200000
42000 403000
36000 52000
733000
Average Recorded
Investment
$ 208000 $
1 1 474000 3514000 4354000
131 5000 5509000
4 183000 4673000
29000
677000 2270000
141 000 44000
$ 38391000 $
Interest Income
Recognized
109000 48000
161 000
125000 33000
38000
5000
519000
$
$
Cash Basis Interest Income
Recognized
108000 48000
1 57000
1 1 3000 32000
38000
5000
501000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Cash Basis Unpaid Allowance for Average Interest Interest
Principal Recorded Loan Losses Recorded Income Income December 31 2013 Balance Investment Allocated Investment Recognized Recognized
With no related allowance recordedmiddot
Commercial $ 266000 $ 266000 $ $ 326000 $ $ Commercial real estate
Retail properties 26699000 12500000 10635000 146000 139000 Multifamily 5542000 4526000 4838000 88000 88000 Mixed-use properties 3123000 2527000 2750000 103000 102000 Industrial manufacturing
warehouse 1 641000 273000 528000 Other commercial real estate 4056000 3497000 3617000
Construction and land development 8517000 3965000 4971000 1 1 4000 1 14000
Residenial rear estate 3769000 3203000 3203000 47000 43000 Consumer installment
With an allowance recorded Commercial Commercial real estate
Retarl properties 6138000 5239000 2045000 4759000 35000 35000 Multifamily 692000 682000 69000 687000 38000 38000 Mixed-use properties 5764000 5 127000 778000 4200000 92000 87000 Industrial manufacturing
warehouse Other commercial real estate 10001000 8009000 583000 8986000
Construction and land development 2770000 1 557000 239000 1 853000
Residential real estate 120000 104000 61000 1 04000 Consumer installment
Total $ 79298000 $ 51475000 $ 3775000 $ 51457000 $ 663000 $ 646000
21
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present troubled debt restructurings and the financial effects of troubled debt restructurings
Year Ended December 31 2014
Pre-Modification Post-Modification Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reserves
Commercial $ 288000 $ 168000 $
Commercial real estate
Retail properties 3 1790000 2060000
Multifamily 1 409000 672000 732000
Mixed-use properties 6 4660000 3 118000 974000
Industrial manufacturing warehouse Other commercial real estate 4682000 2864000 1 272000
Construction and land development 1 3924000 2930000 500000
Residential real estate 3 1288000 1 252000 52000
Consumer installment Total 16 $ 1 8041000 $ 13064000 $ 3530000
Year Ended December 3 1 2013
Pre-Modification Post-Modification
Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reseives
Commercial $ $ $
Commercial real estate
Retail properties 3 8596000 3651000 4363000
Multifamily 2 7026000 5090000 1598000
Mixed-use properties 7 6005000 4421000 1 612000
Industrial manufacturing warehouse
Other commercial real estate 5 14589000 10888000 2578000
Construction and land development 3 7409000 4493000 1 162000
Residential real estate 3 1515000 1 371000 117000
Consumer installment Total 23 $ 45 140000 $ 29914000 $ 11430000
Troubled debt restructurings that were accruing interest were $9520000 and $ 1 1 382000 respectively as of December 3 1 2014 and 2013 Troubled debt restructurings that were non-accruing were $3544000 and $ 1 8532000 respectively as of December 3 1 2014 and 201 3 Troubled debt restructurings included loans where the loan principal and corresponding interest rate was reduced and i n some instances the loan amortization period was extended During 2014 there were three troubled debt restructurings with outstanding balances at the time of re-default was $ 1 1 55000 and loan balances outstanding for these loans at December 3 1 2014 was $239000
22
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements -------------------------------middot middot-----------
Note 1 Summary of Significant Accounting Policies (Continued)
Commercial real estate loans - Commercial real estate loans are primarily secured by apartment buildings office and industrial buildings mixed-use properties small retail shopping centers and various special purpose properties including warehouses and restaurants Although terms vary commercial real estate loans generally have amortizations of 15 to 30 years as well as balloon payments of two to seven years and terms which provide that the interest rates thereon may be adjusted annually at the Banks discretion based on a designated index
Construction and land development loans - Construction land development loans consist of vacant land and property that is in the process of improvement Repayment of these loans can be dependent on the sale of the property to third parties or the successful completion of the improvements by the builder for the end user In the event a loan is made on property that is not yet approved for the planned development there is the risk that approvals will not be granted or will be delayed Construction and land development loans also run the risk that improvements will not be completed on time or in accordance with specifications and projected costs Construction and land development loans generally have terms of one year to 18 months during the construction period and interest rates based on a designated index
Residential real estate loans - Residential real estate loans include home equity lines of credit secured by a first or second mortgage and 1-4 family residential real estate loans Loans are generally smaller in size and are homogenous because they exhibit similar characteristics
Consumer installment loans - Consumer installment loans generally have higher interest rates than mortgage loans The risk involved in consumer loans is the type and nature of the collateral and in certain cases the absence of collateral These loans are secured by personal assets or may be unsecured and repayment is directly dependent on the borrowers income and the borrowers ability to service debt payments
The allowance for loan losses is evaluated on a regular basis by management and is based upon managements periodic review of the collectability of the loans in light of historical experience the nature and volume of the loan portfolio estimated value of any underlying collateral and prevailing economic conditions and adverse situations that may affect the borrowers ability to pay This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available In addition regulatory agencies as an integral part of their examination process periodically review the Banks allowance for loan losses and may require the Bank to make additions to the allowance based on their Judgment about information available to them at the time of their examinations
The allowance consists of specific and general components The specific component relates to loans that are classified as impaired and an allowance is established when the collateral value discounted cash flows or observable market price of the impaired loan is lower than the carrying value of that loan The general component covers non-impaired loans and is based on the Banks own loss experience adjusted for qualitative factors These qualitative factors consider local economic trends concentrations management experience and other elements of the Banks lending operations
10
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
A loan is impaired based on current information and events when it is probable the Bank will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Factors considered by management in determining impairment include payment status collateral value and the probability for collecting scheduled principal and interest payment when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on an individual-loan basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reason for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on an individual loan basis based on the fair value of the collateral if the loan is collateral dependent the present value of expected future cash flows discounted at the loans effective interest rate or the loans obtainable market price
Large groups of homogenous loans are collectively evaluated for impairment Accordingly the Bank does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Other real estate owned Assets acquired through or in lieu of loan foreclosure are held for sale and initially recorded at fair value less estimated costs to sell at the date of foreclosure establishing a new cost basis Subsequent to foreclosure valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less costs to sell Revenue and expenses from operations and changes in the valuation allowance are included in noninterest expenses-other real estate owned net
Premises and equipment Land is carried at cost Premises and equipment are stated at cost less accumulated depreciation (building 12-25 years leasehold improvements 3-15 years furniture and fixtures 3-20 years) Depreciation is provided principally by the straight-line method over the estimated useful lives of the assets Amortization of leasehold improvements is computed on the straight-line method over the lease term or the estimated useful lives of the improvements whichever 1s shorter
Transfers of financial assets Transfers of financial assets are accounted for as sales when control over the assets has been surrendered Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank - put presumptively beyond the reach of the transferor and its creditors even in bankruptcy or other receivership (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets
Income taxes Lakeside Bancorp Inc with the consent of its stockholders elected to be taxed as an S corporation under sections of the federal and state income tax laws which provide that in lieu of corporate income taxes the stockholder accounts for the Banks items of income deductions losses and credits As a wholly owned subsidiary the Banks income and expenses are included in the Lakeside Bancorp Inc consolidated tax returns As a result for the periods covered by this election no corporate income taxes will be recognized in the accompanying consolidated financial statements except for certain state income taxes
11
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
The Bank evaluates its tax positions to determine the appropriate level of tax reserves to maintain for uncertain tax positions The Bank has no uncertain tax positions as of December 3 1 2014 and 2013
The Bank would recognize interest and penalties on income taxes as a component of income tax expense
The Bank is generally no longer subject to US federal or state and local income tax examinations by tax authorities for years before 201 1
Comprehensive income Comprehensive income consists of net income changes in net unrealized gains and losses on securities available for sale reclassification adjustments for realized gains and losses on sales of AFS securities and changes in defined benefit pension obligation and is presented in the consolidated statements of stockholders equity
Recent accounting pronouncements In January 2014 the FASB (Financial Accounting Standards Board) issued guidance which requires an entity derecognize the loan receivable and recognize the real estate property when it has received physical possession of residential real estate property collateralizing a consumer mortgage loan upon either ( 1 ) 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 that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement Additionally the amendments require annual disclosures This guidance is effective for the Company for fiscal years beginning after December 15 2014 The adoption of this guidance is not expected to have a material impact on the consolidated financial statements
Subsequent events The Bank has evaluated subsequent events for potential recognition andor disclosure through April 30 2015 the date the consolidated financial statements were available to be issued
1 2
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 2 Restricted Cash and Due from Banks
The Bank is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank of Chicago The total of those reserve balances averaged $1 01 2000 and $935000 in 2014 and 2013 respectively The Bank maintains amounts due from banks which exceed federally insured limits The Bank has not experienced any losses in such accounts
Note 3 Securities Available for Sale
The amortized cost and fair value of securities with gross unrealized gains and losses follows
December 31 2014
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
December 31 2013
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
$
$
$
$
Amor1ized
Cost
15917000 $
23417000
6038000
5159000
50531000
250000
50781000 $
17835000 $
32338000
6590000
5928000
62691000
250000
62941000 $
Gross
Unrealized
Gains
41000 $
216000
22000
70000
349000
17000
366000 $
41000 $
190000
39000
26000
296000
11000
307000 s
Gross
Unrealized Fair
Losses Value
(53000) s 15905000
(243000) 23390000
(8000) 6052000
(41000) 5188000
(345000) 50535000
267000
(345000) $ 50802000
(255000) $ 17621000
(987000) 31541000
(32000) 6597000
(126000) 5828000
(1400000) 61587000
261000
(1400000) $ 61848000
Securities available for sale with a carrying value of $8339000 and $3848000 at December 31 2014 and 201 3 respectively were pledged on deposits of the United States Government and other public funds as required or permitted and other short-term borrowings
The amortized costs and fair values of debt securities available for sale as of December 3 1 2014 by contractual maturity are shown below Maturities may differ from contractual maturities in mortgageshybacked securities because the mortgages underlying the securities may be called or repaid without any penalties Therefore these securities are not included in the maturity categories in the following maturity summary
1 3
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements middot-
Note 3 Securities Available for Sale (Continued)
Amortized Fair
Cost Value
Due in one year or less $ 3049000 $ 3057000 Due after one year through five years 21 506000 21 507000
Due after five years through ten years 71 70000 7163000
Due after ten years 1 3647000 1 3620000
45372000 45347000
Residential mortgage-backed securities 5 159000 5188000 Totals $ 50531 000 $ 50535000
The following tables show the gross unrealized losses and fair value of investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 3 1 2 0 1 4 and 2 0 1 3
less than 12 Months 12 Months or More Total Fair Unrealized Fair Unreahzed Fair Unrealized
2014 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 498000 s (2000) $ 7695000 s (51000) $ 8193000 $ (53000) Obligations of states and
pol1ilca subd1v1sions 13671000 (243000) 13671000 (243000) Corporate debt obligations 1132000 (8000 1 132000 (8000) Residential mortgage-backed
obligations 2128000 (4100D) 2128000 (41000) Total temporary
impaired securities s 498000 s (2000) $ 24626000 $ (343000) s 25124000 s (345000)
Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized
2013 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 10867000 $ (232000) s 2632000 $ (23000) $ 13499000 s 255000) Obligations of states and
polillcal subdivisions 11195000 (365000) 11169000 (622000) 22364000 (987000) Corporate debt obligations 1179000 (32000) 1179000 (32000) Residential mortgage-backed
obligations 3977000 (126000) 3977000 (126000) Total temporary
impaired securities 26039000 s (723000) $ 14980000 s (677000) s 41019000 $ (1400000)
In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysis reports Since management does not intend to sell any temporarily impaired securities before recovery of their cost basis no declines are deemed other-than-temporary
On sale proceeds of $5637000 there were $57000 in realized gains and $146000 in realized losses on the sale of securities during the year ended December 3 1 2 0 1 4 On sale proceeds of $708000 there were no realized gains and $246000 realized losses on the sale of securities during the year ended December 3 1 2 0 1 3
1 4
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans
A summary of the balances of loans follows
Commercial $
Commercial real estate
Construction and land development
Residential real estate
Consumer installment
Less allowance for loan losses
Loans net $
December 3 1
2014 2013
62894000
658 153000
163 1 08000
1 43579000
743000
1 028477000
2658 1 000
1 001 896 000
$ 62642000
666095000
123519000
129905000
1 229000
983390000
27626000
$ 955764000
The following tables present the contractual aging of the recorded investment in loans by class of loans as of December 3 1 2014 and 2013
Loans Past 90 Days or 30-59 Days 60middot89 Days Due 90 Days More Past Due
December 31 2014 Current Past Due Past Due or More Total and Accruin
Commercial $ 62655000 $ 4000 $ 36000 $ 199000 s 62894000 $ 199000
Commercial real estate Relail properties 295610000 105000 1212000 296927000 199000
Multifamily 90507000 90507000
Mixed-use properties 93 116000 2455000 95571000
Industrial manufacturing warehouse 63660000 1353000 65013000
Other commerc1al real estate 106101000 4034000 110135000
Construction and land development 162512000 596000 163 108000
Residential real estate 140636000 208000 2735000 143579000
Consumer installment 743000 743000
Total $ 1 015 540000 $ 109 000 $ 244 000 12584 000 $ 1 028 477 000 s 398 000
15
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Loans Past 90 Days or 30-59 Days 60-89 Days Due 90 Days More Past Due
December 31 2013 Current Past Due Past Due or More Total and Accruing
Commercial $ 61588000 $ $ 755000 $ 299000 s 62642000 $ 33000 Commercial real estate
Retail properties 284 162000 1152000 1331000 15307000 301952000 44000 Mu11ifamily 78203000 1223000 450000 4526000 84402000 Mixed-use properties 93292000 262000 316000 3644000 97514000 Industrial manufacturing
warehouse 58947000 1696000 273000 60916000 Other commercial real
estate 109449000 282000 74000 11506000 121311000 Construction and land
development 121492000 2027000 123519000 Residential real estate 126229000 1062000 306000 2308000 129905000 89000 Consumer installment 1226000 1000 2000 1229000
Total $ 934 588000 $ 3982 000 s 4 930 000 39 890 000 983 390 000 $ 166 000
The following table presents the recorded investment in nonaccrual loans by class of loans as of December 31 2014 and 2013
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties
Industrial manufacturing warehouse Other commercial real estate
Construction and land development Residential real estate
Total
$
$
16
Nonaccrual Loans 2014 2013
168000 $ 266000
2470000 15263000
4526000
2728000 3644000
1353000 273000
4480000 11506000
1609000 2027000
2796000 2219000
15604000 $ 39724000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
As part of the on-going monitoring of the credit quality of the Banks loan portfolio management categorizes loans into rrsk categories based on relevant information about the ability of borrowers to service their debt and comply with various terms of their loan agreements The Bank considers current financial information historical payment experrence credit documentation public information and current economic trends Generally all sizeable credits receive a financial review no less than annually to monitor and adjust if necessary the credits risk profile Credits classified as watch generally receive a review more frequently than annually For substandard and doubtful credit classifications the frequency of review is increased to no less than quarterly in order to determine potential impact on credit loss estimates
The Bank categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt
Pass - A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors if any) or by the fair value less cost to acquire and sell of any underlying collateral in a timely manner Pass assets also include certain assets considered watch which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring
Special Mention - A special mention asset or risk rating of 6 has potential weaknesses that deserve managements close attention The asset may also be subject to a weak or speculative market or to economic conditions which may in the future adversely affect the obligor If left uncorrected these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Banks credit position at some future date Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification
Substandard - A substandard asset or risk rating of 7 is an asset with a well-defined weakness that jeopardizes repayment in whole or in part of the debt These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged These assets are characterized by the distinct possibility that the institution will sustain some loss of principal andor interest if the deficiencies are not corrected A loan does necessarily need to have an identifiable loss potential in order to receive this rating
Doubtful - An asset that has all the weaknesses or risk rating of 8 inherent in the substandard classification with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently known facts conditions and values highly questionable and improbable The possibility of loss is extremely likely but it is not identified at this point due to pending factors
Loss - An asset or portion thereof classified as loss is considered uncollectible and of such little value that its continuance on the Companys books as an asset is not warranted This classification does not necessarily mean that an asset has no recovery or salvage value but rather there is much doubt about whether how much or when the recovery would occur As such it is not practical or desirable to defer the write-off Therefore there is no loss balance to report at December 31 2014
Residential real estate and consumer installment loans are assessed for credit quality based on the contractual aging status of the loan and payment activity Such assessment is completed at the end of each reporting period
1 7
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present the risk category of loans evaluated by internal asset classification based on the most recent analysis performed and the contractual aging as of December 31 2014 and 2013
December 31 2014
Commercial Commercial real estate
Retail properties Multifamily
Mixed-use properties Industrial manufacturing warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
December 31 201 J
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties lndustnal manufactunng warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
Pass
$ 61710000 $
272359000 88002000 85430000 63660000
104525000
1531 14000
$ 828800000 $
$
$
Pass
s 62034000 $
250040000 76086000 85355000 60643000
108880000 1 1 7047000
s 760085000 $
$
$
1 8
Special Mention Substandard Doubtful Total
$ 1 016000 $ 168000 s 62894000
3701000 17384000 3483000 296927000 635000 1870000 90507000 238000 7175000 2728000 95571000
1353000 65013000 1 130000 4480000 110 135000
5937000 3461000 596000 163108000
10511 000 $ 32036000 $ 12808000 $ 884155000
Performing Non-periorming Total
140783000 s 2796000 $ 143579000
743000 743000
141 526000 s 2796000 $ 144322000
Special Mention Substandard Doubtful Total
$ 342000 $ 266000 s 62642000
10871000 25778000 15263000 301952000 1 885000 1905000 4526000 84402000 1 714000 6801000 3644000 97514000
273000 60916000 925000 11 506000 1213 1 1 000
381000 4064000 2027000 123519000
14851 000 $ 39815000 s 37505000 $ 852256000
Performing Non-performing Total
127597000 $ 2308000 $ 129905000
1 229000 1 229000
1 28826000 $ 2308000 $ 1 3 1 1 34000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables provide additional detail of the activity in the allowance for loan losses by portfolio segment for the years ended December 3 1 2014 and 2013
Construction
Commercial and land Rcs1dent1al Consumer
December 31 2014 Commercial Real Es1ate Develoement Real Estate lnsallment Total
Allowanco for loan lossos
Beg1nn1ng balance 1385000 20052000 3549000 2623000 17000 27626000
PrOV1Son for loan losses 2210000 2680000 2007000 3000 6900000
Loans chargedmiddotoff (179000) (8163000) 687000) (2140000) (11169000)
Recovenes of loans
previously charged-off 85000 2916000 223000 3224000
Ending balance s 1291000 1701 5000 5542000 271 3000 s 20000 s 26581000
Poriod-ondtd llmount allocatod to loans
lndMdually evaluated for
1mpa1rment 200000 445000 36000 52000 s 733000
Collec11vely evaluated
for 1mpa1rrnent 1091 000 16570000 5506000 2661000 20000 25648000
Ending balance 1291000 17015000 5542000 s 2713000 20000 26581000
Loans
lndMdually evaluated for
impairment 368000 17274000 3526000 4048000 25216000
Collecively evalua1ed
for 1mpa1rrnent 62526000 640879000 159582000 139531000 743000 1003261000
Ending balance 62894000 658 153000 163108000 143579000 743000 1028477000
Construct1on
Commercial and Land Residential Consumer
December 31 2013 Commeroal Real Estate Development Real Eslale Installment Total
Allowance for loan losses
Beginning balance 1040000 18719000 2484000 2248000 17000 24508000
Provision for loan losses 363000 6508000 867000 784000 28000 8550000
Loans chargedmiddot Off (59000) (5817000) (122000) (457000) (28000) (6483000)
Recoveries ol loans
previously charged-off 41 000 642000 320000 48000 1051000
Ending balance 1385000 20052000 3549000 s 2623000 17000 27626000
Period-ended amount allocated to loans
Individually evaluated for
impairment 3475000 239000 61000 3775000
Collectively evaluated
for impairment 1385000 16577000 3310000 2562000 17000 23851000
Ending balance 1385000 20052000 3549000 2623000 17000 27626000
Loans
Individually evaluated for
1mpa1rment 266000 42380000 5522000 s 3307000 51475000
Collectively evalua1ed
for impairment 62376000 623715000 1 17997000 126598000 1229000 931915000
Endrng balance 62642000 666095000 123519000 129905000 1229000 983390000
1 9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present additional detail of impaired loans segregated by class as of December 3 1 2014 and 2013 The unpaid principal balance represents the recorded balance prior to any partial charge-offs The recorded investment represents customer balances net of any partial charge-offs recognized on the loans The interest income recognized column represents all interest income reported either on a cash or accrued basis after the loan became impaired The cash basis income column represents only the interest income recognized on a cash basis after the loan was classified as impaired
December 31 2014
Wih no relaed allowance recorded
Commercial Commercial real estale
Reail properties Multifamily Mixed-use properties lndustnal manufacturing
warehouse Other commercial real estate
Construction and land developmen
Residential real estate Consumer installment
Wi1h an allowance recorded Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties Industrial manufacturing
warehouse Other commercial real estate
Construction and land development
Residential real estate Consumer installment
To1al
$
$
Unpaid Principal Balance
216000 $
7266000
3283000
2861000 6121000
3672000 6045000
200000
564000 2421000
1 62000 170000
Recorded Investment
168000 s
5543000
3119000
1353000 4480000
3400000 3878000
200000
564000 2215000
126000 170000
32981000 $ 25216000 $
20
Allowance for Loan Losses
Allocated
200000
42000 403000
36000 52000
733000
Average Recorded
Investment
$ 208000 $
1 1 474000 3514000 4354000
131 5000 5509000
4 183000 4673000
29000
677000 2270000
141 000 44000
$ 38391000 $
Interest Income
Recognized
109000 48000
161 000
125000 33000
38000
5000
519000
$
$
Cash Basis Interest Income
Recognized
108000 48000
1 57000
1 1 3000 32000
38000
5000
501000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Cash Basis Unpaid Allowance for Average Interest Interest
Principal Recorded Loan Losses Recorded Income Income December 31 2013 Balance Investment Allocated Investment Recognized Recognized
With no related allowance recordedmiddot
Commercial $ 266000 $ 266000 $ $ 326000 $ $ Commercial real estate
Retail properties 26699000 12500000 10635000 146000 139000 Multifamily 5542000 4526000 4838000 88000 88000 Mixed-use properties 3123000 2527000 2750000 103000 102000 Industrial manufacturing
warehouse 1 641000 273000 528000 Other commercial real estate 4056000 3497000 3617000
Construction and land development 8517000 3965000 4971000 1 1 4000 1 14000
Residenial rear estate 3769000 3203000 3203000 47000 43000 Consumer installment
With an allowance recorded Commercial Commercial real estate
Retarl properties 6138000 5239000 2045000 4759000 35000 35000 Multifamily 692000 682000 69000 687000 38000 38000 Mixed-use properties 5764000 5 127000 778000 4200000 92000 87000 Industrial manufacturing
warehouse Other commercial real estate 10001000 8009000 583000 8986000
Construction and land development 2770000 1 557000 239000 1 853000
Residential real estate 120000 104000 61000 1 04000 Consumer installment
Total $ 79298000 $ 51475000 $ 3775000 $ 51457000 $ 663000 $ 646000
21
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present troubled debt restructurings and the financial effects of troubled debt restructurings
Year Ended December 31 2014
Pre-Modification Post-Modification Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reserves
Commercial $ 288000 $ 168000 $
Commercial real estate
Retail properties 3 1790000 2060000
Multifamily 1 409000 672000 732000
Mixed-use properties 6 4660000 3 118000 974000
Industrial manufacturing warehouse Other commercial real estate 4682000 2864000 1 272000
Construction and land development 1 3924000 2930000 500000
Residential real estate 3 1288000 1 252000 52000
Consumer installment Total 16 $ 1 8041000 $ 13064000 $ 3530000
Year Ended December 3 1 2013
Pre-Modification Post-Modification
Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reseives
Commercial $ $ $
Commercial real estate
Retail properties 3 8596000 3651000 4363000
Multifamily 2 7026000 5090000 1598000
Mixed-use properties 7 6005000 4421000 1 612000
Industrial manufacturing warehouse
Other commercial real estate 5 14589000 10888000 2578000
Construction and land development 3 7409000 4493000 1 162000
Residential real estate 3 1515000 1 371000 117000
Consumer installment Total 23 $ 45 140000 $ 29914000 $ 11430000
Troubled debt restructurings that were accruing interest were $9520000 and $ 1 1 382000 respectively as of December 3 1 2014 and 2013 Troubled debt restructurings that were non-accruing were $3544000 and $ 1 8532000 respectively as of December 3 1 2014 and 201 3 Troubled debt restructurings included loans where the loan principal and corresponding interest rate was reduced and i n some instances the loan amortization period was extended During 2014 there were three troubled debt restructurings with outstanding balances at the time of re-default was $ 1 1 55000 and loan balances outstanding for these loans at December 3 1 2014 was $239000
22
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
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Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
A loan is impaired based on current information and events when it is probable the Bank will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Factors considered by management in determining impairment include payment status collateral value and the probability for collecting scheduled principal and interest payment when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on an individual-loan basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reason for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on an individual loan basis based on the fair value of the collateral if the loan is collateral dependent the present value of expected future cash flows discounted at the loans effective interest rate or the loans obtainable market price
Large groups of homogenous loans are collectively evaluated for impairment Accordingly the Bank does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Other real estate owned Assets acquired through or in lieu of loan foreclosure are held for sale and initially recorded at fair value less estimated costs to sell at the date of foreclosure establishing a new cost basis Subsequent to foreclosure valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less costs to sell Revenue and expenses from operations and changes in the valuation allowance are included in noninterest expenses-other real estate owned net
Premises and equipment Land is carried at cost Premises and equipment are stated at cost less accumulated depreciation (building 12-25 years leasehold improvements 3-15 years furniture and fixtures 3-20 years) Depreciation is provided principally by the straight-line method over the estimated useful lives of the assets Amortization of leasehold improvements is computed on the straight-line method over the lease term or the estimated useful lives of the improvements whichever 1s shorter
Transfers of financial assets Transfers of financial assets are accounted for as sales when control over the assets has been surrendered Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank - put presumptively beyond the reach of the transferor and its creditors even in bankruptcy or other receivership (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets
Income taxes Lakeside Bancorp Inc with the consent of its stockholders elected to be taxed as an S corporation under sections of the federal and state income tax laws which provide that in lieu of corporate income taxes the stockholder accounts for the Banks items of income deductions losses and credits As a wholly owned subsidiary the Banks income and expenses are included in the Lakeside Bancorp Inc consolidated tax returns As a result for the periods covered by this election no corporate income taxes will be recognized in the accompanying consolidated financial statements except for certain state income taxes
11
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
The Bank evaluates its tax positions to determine the appropriate level of tax reserves to maintain for uncertain tax positions The Bank has no uncertain tax positions as of December 3 1 2014 and 2013
The Bank would recognize interest and penalties on income taxes as a component of income tax expense
The Bank is generally no longer subject to US federal or state and local income tax examinations by tax authorities for years before 201 1
Comprehensive income Comprehensive income consists of net income changes in net unrealized gains and losses on securities available for sale reclassification adjustments for realized gains and losses on sales of AFS securities and changes in defined benefit pension obligation and is presented in the consolidated statements of stockholders equity
Recent accounting pronouncements In January 2014 the FASB (Financial Accounting Standards Board) issued guidance which requires an entity derecognize the loan receivable and recognize the real estate property when it has received physical possession of residential real estate property collateralizing a consumer mortgage loan upon either ( 1 ) 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 that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement Additionally the amendments require annual disclosures This guidance is effective for the Company for fiscal years beginning after December 15 2014 The adoption of this guidance is not expected to have a material impact on the consolidated financial statements
Subsequent events The Bank has evaluated subsequent events for potential recognition andor disclosure through April 30 2015 the date the consolidated financial statements were available to be issued
1 2
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 2 Restricted Cash and Due from Banks
The Bank is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank of Chicago The total of those reserve balances averaged $1 01 2000 and $935000 in 2014 and 2013 respectively The Bank maintains amounts due from banks which exceed federally insured limits The Bank has not experienced any losses in such accounts
Note 3 Securities Available for Sale
The amortized cost and fair value of securities with gross unrealized gains and losses follows
December 31 2014
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
December 31 2013
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
$
$
$
$
Amor1ized
Cost
15917000 $
23417000
6038000
5159000
50531000
250000
50781000 $
17835000 $
32338000
6590000
5928000
62691000
250000
62941000 $
Gross
Unrealized
Gains
41000 $
216000
22000
70000
349000
17000
366000 $
41000 $
190000
39000
26000
296000
11000
307000 s
Gross
Unrealized Fair
Losses Value
(53000) s 15905000
(243000) 23390000
(8000) 6052000
(41000) 5188000
(345000) 50535000
267000
(345000) $ 50802000
(255000) $ 17621000
(987000) 31541000
(32000) 6597000
(126000) 5828000
(1400000) 61587000
261000
(1400000) $ 61848000
Securities available for sale with a carrying value of $8339000 and $3848000 at December 31 2014 and 201 3 respectively were pledged on deposits of the United States Government and other public funds as required or permitted and other short-term borrowings
The amortized costs and fair values of debt securities available for sale as of December 3 1 2014 by contractual maturity are shown below Maturities may differ from contractual maturities in mortgageshybacked securities because the mortgages underlying the securities may be called or repaid without any penalties Therefore these securities are not included in the maturity categories in the following maturity summary
1 3
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements middot-
Note 3 Securities Available for Sale (Continued)
Amortized Fair
Cost Value
Due in one year or less $ 3049000 $ 3057000 Due after one year through five years 21 506000 21 507000
Due after five years through ten years 71 70000 7163000
Due after ten years 1 3647000 1 3620000
45372000 45347000
Residential mortgage-backed securities 5 159000 5188000 Totals $ 50531 000 $ 50535000
The following tables show the gross unrealized losses and fair value of investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 3 1 2 0 1 4 and 2 0 1 3
less than 12 Months 12 Months or More Total Fair Unrealized Fair Unreahzed Fair Unrealized
2014 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 498000 s (2000) $ 7695000 s (51000) $ 8193000 $ (53000) Obligations of states and
pol1ilca subd1v1sions 13671000 (243000) 13671000 (243000) Corporate debt obligations 1132000 (8000 1 132000 (8000) Residential mortgage-backed
obligations 2128000 (4100D) 2128000 (41000) Total temporary
impaired securities s 498000 s (2000) $ 24626000 $ (343000) s 25124000 s (345000)
Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized
2013 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 10867000 $ (232000) s 2632000 $ (23000) $ 13499000 s 255000) Obligations of states and
polillcal subdivisions 11195000 (365000) 11169000 (622000) 22364000 (987000) Corporate debt obligations 1179000 (32000) 1179000 (32000) Residential mortgage-backed
obligations 3977000 (126000) 3977000 (126000) Total temporary
impaired securities 26039000 s (723000) $ 14980000 s (677000) s 41019000 $ (1400000)
In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysis reports Since management does not intend to sell any temporarily impaired securities before recovery of their cost basis no declines are deemed other-than-temporary
On sale proceeds of $5637000 there were $57000 in realized gains and $146000 in realized losses on the sale of securities during the year ended December 3 1 2 0 1 4 On sale proceeds of $708000 there were no realized gains and $246000 realized losses on the sale of securities during the year ended December 3 1 2 0 1 3
1 4
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans
A summary of the balances of loans follows
Commercial $
Commercial real estate
Construction and land development
Residential real estate
Consumer installment
Less allowance for loan losses
Loans net $
December 3 1
2014 2013
62894000
658 153000
163 1 08000
1 43579000
743000
1 028477000
2658 1 000
1 001 896 000
$ 62642000
666095000
123519000
129905000
1 229000
983390000
27626000
$ 955764000
The following tables present the contractual aging of the recorded investment in loans by class of loans as of December 3 1 2014 and 2013
Loans Past 90 Days or 30-59 Days 60middot89 Days Due 90 Days More Past Due
December 31 2014 Current Past Due Past Due or More Total and Accruin
Commercial $ 62655000 $ 4000 $ 36000 $ 199000 s 62894000 $ 199000
Commercial real estate Relail properties 295610000 105000 1212000 296927000 199000
Multifamily 90507000 90507000
Mixed-use properties 93 116000 2455000 95571000
Industrial manufacturing warehouse 63660000 1353000 65013000
Other commerc1al real estate 106101000 4034000 110135000
Construction and land development 162512000 596000 163 108000
Residential real estate 140636000 208000 2735000 143579000
Consumer installment 743000 743000
Total $ 1 015 540000 $ 109 000 $ 244 000 12584 000 $ 1 028 477 000 s 398 000
15
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Loans Past 90 Days or 30-59 Days 60-89 Days Due 90 Days More Past Due
December 31 2013 Current Past Due Past Due or More Total and Accruing
Commercial $ 61588000 $ $ 755000 $ 299000 s 62642000 $ 33000 Commercial real estate
Retail properties 284 162000 1152000 1331000 15307000 301952000 44000 Mu11ifamily 78203000 1223000 450000 4526000 84402000 Mixed-use properties 93292000 262000 316000 3644000 97514000 Industrial manufacturing
warehouse 58947000 1696000 273000 60916000 Other commercial real
estate 109449000 282000 74000 11506000 121311000 Construction and land
development 121492000 2027000 123519000 Residential real estate 126229000 1062000 306000 2308000 129905000 89000 Consumer installment 1226000 1000 2000 1229000
Total $ 934 588000 $ 3982 000 s 4 930 000 39 890 000 983 390 000 $ 166 000
The following table presents the recorded investment in nonaccrual loans by class of loans as of December 31 2014 and 2013
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties
Industrial manufacturing warehouse Other commercial real estate
Construction and land development Residential real estate
Total
$
$
16
Nonaccrual Loans 2014 2013
168000 $ 266000
2470000 15263000
4526000
2728000 3644000
1353000 273000
4480000 11506000
1609000 2027000
2796000 2219000
15604000 $ 39724000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
As part of the on-going monitoring of the credit quality of the Banks loan portfolio management categorizes loans into rrsk categories based on relevant information about the ability of borrowers to service their debt and comply with various terms of their loan agreements The Bank considers current financial information historical payment experrence credit documentation public information and current economic trends Generally all sizeable credits receive a financial review no less than annually to monitor and adjust if necessary the credits risk profile Credits classified as watch generally receive a review more frequently than annually For substandard and doubtful credit classifications the frequency of review is increased to no less than quarterly in order to determine potential impact on credit loss estimates
The Bank categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt
Pass - A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors if any) or by the fair value less cost to acquire and sell of any underlying collateral in a timely manner Pass assets also include certain assets considered watch which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring
Special Mention - A special mention asset or risk rating of 6 has potential weaknesses that deserve managements close attention The asset may also be subject to a weak or speculative market or to economic conditions which may in the future adversely affect the obligor If left uncorrected these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Banks credit position at some future date Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification
Substandard - A substandard asset or risk rating of 7 is an asset with a well-defined weakness that jeopardizes repayment in whole or in part of the debt These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged These assets are characterized by the distinct possibility that the institution will sustain some loss of principal andor interest if the deficiencies are not corrected A loan does necessarily need to have an identifiable loss potential in order to receive this rating
Doubtful - An asset that has all the weaknesses or risk rating of 8 inherent in the substandard classification with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently known facts conditions and values highly questionable and improbable The possibility of loss is extremely likely but it is not identified at this point due to pending factors
Loss - An asset or portion thereof classified as loss is considered uncollectible and of such little value that its continuance on the Companys books as an asset is not warranted This classification does not necessarily mean that an asset has no recovery or salvage value but rather there is much doubt about whether how much or when the recovery would occur As such it is not practical or desirable to defer the write-off Therefore there is no loss balance to report at December 31 2014
Residential real estate and consumer installment loans are assessed for credit quality based on the contractual aging status of the loan and payment activity Such assessment is completed at the end of each reporting period
1 7
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present the risk category of loans evaluated by internal asset classification based on the most recent analysis performed and the contractual aging as of December 31 2014 and 2013
December 31 2014
Commercial Commercial real estate
Retail properties Multifamily
Mixed-use properties Industrial manufacturing warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
December 31 201 J
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties lndustnal manufactunng warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
Pass
$ 61710000 $
272359000 88002000 85430000 63660000
104525000
1531 14000
$ 828800000 $
$
$
Pass
s 62034000 $
250040000 76086000 85355000 60643000
108880000 1 1 7047000
s 760085000 $
$
$
1 8
Special Mention Substandard Doubtful Total
$ 1 016000 $ 168000 s 62894000
3701000 17384000 3483000 296927000 635000 1870000 90507000 238000 7175000 2728000 95571000
1353000 65013000 1 130000 4480000 110 135000
5937000 3461000 596000 163108000
10511 000 $ 32036000 $ 12808000 $ 884155000
Performing Non-periorming Total
140783000 s 2796000 $ 143579000
743000 743000
141 526000 s 2796000 $ 144322000
Special Mention Substandard Doubtful Total
$ 342000 $ 266000 s 62642000
10871000 25778000 15263000 301952000 1 885000 1905000 4526000 84402000 1 714000 6801000 3644000 97514000
273000 60916000 925000 11 506000 1213 1 1 000
381000 4064000 2027000 123519000
14851 000 $ 39815000 s 37505000 $ 852256000
Performing Non-performing Total
127597000 $ 2308000 $ 129905000
1 229000 1 229000
1 28826000 $ 2308000 $ 1 3 1 1 34000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables provide additional detail of the activity in the allowance for loan losses by portfolio segment for the years ended December 3 1 2014 and 2013
Construction
Commercial and land Rcs1dent1al Consumer
December 31 2014 Commercial Real Es1ate Develoement Real Estate lnsallment Total
Allowanco for loan lossos
Beg1nn1ng balance 1385000 20052000 3549000 2623000 17000 27626000
PrOV1Son for loan losses 2210000 2680000 2007000 3000 6900000
Loans chargedmiddotoff (179000) (8163000) 687000) (2140000) (11169000)
Recovenes of loans
previously charged-off 85000 2916000 223000 3224000
Ending balance s 1291000 1701 5000 5542000 271 3000 s 20000 s 26581000
Poriod-ondtd llmount allocatod to loans
lndMdually evaluated for
1mpa1rment 200000 445000 36000 52000 s 733000
Collec11vely evaluated
for 1mpa1rrnent 1091 000 16570000 5506000 2661000 20000 25648000
Ending balance 1291000 17015000 5542000 s 2713000 20000 26581000
Loans
lndMdually evaluated for
impairment 368000 17274000 3526000 4048000 25216000
Collecively evalua1ed
for 1mpa1rrnent 62526000 640879000 159582000 139531000 743000 1003261000
Ending balance 62894000 658 153000 163108000 143579000 743000 1028477000
Construct1on
Commercial and Land Residential Consumer
December 31 2013 Commeroal Real Estate Development Real Eslale Installment Total
Allowance for loan losses
Beginning balance 1040000 18719000 2484000 2248000 17000 24508000
Provision for loan losses 363000 6508000 867000 784000 28000 8550000
Loans chargedmiddot Off (59000) (5817000) (122000) (457000) (28000) (6483000)
Recoveries ol loans
previously charged-off 41 000 642000 320000 48000 1051000
Ending balance 1385000 20052000 3549000 s 2623000 17000 27626000
Period-ended amount allocated to loans
Individually evaluated for
impairment 3475000 239000 61000 3775000
Collectively evaluated
for impairment 1385000 16577000 3310000 2562000 17000 23851000
Ending balance 1385000 20052000 3549000 2623000 17000 27626000
Loans
Individually evaluated for
1mpa1rment 266000 42380000 5522000 s 3307000 51475000
Collectively evalua1ed
for impairment 62376000 623715000 1 17997000 126598000 1229000 931915000
Endrng balance 62642000 666095000 123519000 129905000 1229000 983390000
1 9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present additional detail of impaired loans segregated by class as of December 3 1 2014 and 2013 The unpaid principal balance represents the recorded balance prior to any partial charge-offs The recorded investment represents customer balances net of any partial charge-offs recognized on the loans The interest income recognized column represents all interest income reported either on a cash or accrued basis after the loan became impaired The cash basis income column represents only the interest income recognized on a cash basis after the loan was classified as impaired
December 31 2014
Wih no relaed allowance recorded
Commercial Commercial real estale
Reail properties Multifamily Mixed-use properties lndustnal manufacturing
warehouse Other commercial real estate
Construction and land developmen
Residential real estate Consumer installment
Wi1h an allowance recorded Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties Industrial manufacturing
warehouse Other commercial real estate
Construction and land development
Residential real estate Consumer installment
To1al
$
$
Unpaid Principal Balance
216000 $
7266000
3283000
2861000 6121000
3672000 6045000
200000
564000 2421000
1 62000 170000
Recorded Investment
168000 s
5543000
3119000
1353000 4480000
3400000 3878000
200000
564000 2215000
126000 170000
32981000 $ 25216000 $
20
Allowance for Loan Losses
Allocated
200000
42000 403000
36000 52000
733000
Average Recorded
Investment
$ 208000 $
1 1 474000 3514000 4354000
131 5000 5509000
4 183000 4673000
29000
677000 2270000
141 000 44000
$ 38391000 $
Interest Income
Recognized
109000 48000
161 000
125000 33000
38000
5000
519000
$
$
Cash Basis Interest Income
Recognized
108000 48000
1 57000
1 1 3000 32000
38000
5000
501000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Cash Basis Unpaid Allowance for Average Interest Interest
Principal Recorded Loan Losses Recorded Income Income December 31 2013 Balance Investment Allocated Investment Recognized Recognized
With no related allowance recordedmiddot
Commercial $ 266000 $ 266000 $ $ 326000 $ $ Commercial real estate
Retail properties 26699000 12500000 10635000 146000 139000 Multifamily 5542000 4526000 4838000 88000 88000 Mixed-use properties 3123000 2527000 2750000 103000 102000 Industrial manufacturing
warehouse 1 641000 273000 528000 Other commercial real estate 4056000 3497000 3617000
Construction and land development 8517000 3965000 4971000 1 1 4000 1 14000
Residenial rear estate 3769000 3203000 3203000 47000 43000 Consumer installment
With an allowance recorded Commercial Commercial real estate
Retarl properties 6138000 5239000 2045000 4759000 35000 35000 Multifamily 692000 682000 69000 687000 38000 38000 Mixed-use properties 5764000 5 127000 778000 4200000 92000 87000 Industrial manufacturing
warehouse Other commercial real estate 10001000 8009000 583000 8986000
Construction and land development 2770000 1 557000 239000 1 853000
Residential real estate 120000 104000 61000 1 04000 Consumer installment
Total $ 79298000 $ 51475000 $ 3775000 $ 51457000 $ 663000 $ 646000
21
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present troubled debt restructurings and the financial effects of troubled debt restructurings
Year Ended December 31 2014
Pre-Modification Post-Modification Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reserves
Commercial $ 288000 $ 168000 $
Commercial real estate
Retail properties 3 1790000 2060000
Multifamily 1 409000 672000 732000
Mixed-use properties 6 4660000 3 118000 974000
Industrial manufacturing warehouse Other commercial real estate 4682000 2864000 1 272000
Construction and land development 1 3924000 2930000 500000
Residential real estate 3 1288000 1 252000 52000
Consumer installment Total 16 $ 1 8041000 $ 13064000 $ 3530000
Year Ended December 3 1 2013
Pre-Modification Post-Modification
Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reseives
Commercial $ $ $
Commercial real estate
Retail properties 3 8596000 3651000 4363000
Multifamily 2 7026000 5090000 1598000
Mixed-use properties 7 6005000 4421000 1 612000
Industrial manufacturing warehouse
Other commercial real estate 5 14589000 10888000 2578000
Construction and land development 3 7409000 4493000 1 162000
Residential real estate 3 1515000 1 371000 117000
Consumer installment Total 23 $ 45 140000 $ 29914000 $ 11430000
Troubled debt restructurings that were accruing interest were $9520000 and $ 1 1 382000 respectively as of December 3 1 2014 and 2013 Troubled debt restructurings that were non-accruing were $3544000 and $ 1 8532000 respectively as of December 3 1 2014 and 201 3 Troubled debt restructurings included loans where the loan principal and corresponding interest rate was reduced and i n some instances the loan amortization period was extended During 2014 there were three troubled debt restructurings with outstanding balances at the time of re-default was $ 1 1 55000 and loan balances outstanding for these loans at December 3 1 2014 was $239000
22
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies (Continued)
The Bank evaluates its tax positions to determine the appropriate level of tax reserves to maintain for uncertain tax positions The Bank has no uncertain tax positions as of December 3 1 2014 and 2013
The Bank would recognize interest and penalties on income taxes as a component of income tax expense
The Bank is generally no longer subject to US federal or state and local income tax examinations by tax authorities for years before 201 1
Comprehensive income Comprehensive income consists of net income changes in net unrealized gains and losses on securities available for sale reclassification adjustments for realized gains and losses on sales of AFS securities and changes in defined benefit pension obligation and is presented in the consolidated statements of stockholders equity
Recent accounting pronouncements In January 2014 the FASB (Financial Accounting Standards Board) issued guidance which requires an entity derecognize the loan receivable and recognize the real estate property when it has received physical possession of residential real estate property collateralizing a consumer mortgage loan upon either ( 1 ) 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 that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement Additionally the amendments require annual disclosures This guidance is effective for the Company for fiscal years beginning after December 15 2014 The adoption of this guidance is not expected to have a material impact on the consolidated financial statements
Subsequent events The Bank has evaluated subsequent events for potential recognition andor disclosure through April 30 2015 the date the consolidated financial statements were available to be issued
1 2
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 2 Restricted Cash and Due from Banks
The Bank is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank of Chicago The total of those reserve balances averaged $1 01 2000 and $935000 in 2014 and 2013 respectively The Bank maintains amounts due from banks which exceed federally insured limits The Bank has not experienced any losses in such accounts
Note 3 Securities Available for Sale
The amortized cost and fair value of securities with gross unrealized gains and losses follows
December 31 2014
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
December 31 2013
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
$
$
$
$
Amor1ized
Cost
15917000 $
23417000
6038000
5159000
50531000
250000
50781000 $
17835000 $
32338000
6590000
5928000
62691000
250000
62941000 $
Gross
Unrealized
Gains
41000 $
216000
22000
70000
349000
17000
366000 $
41000 $
190000
39000
26000
296000
11000
307000 s
Gross
Unrealized Fair
Losses Value
(53000) s 15905000
(243000) 23390000
(8000) 6052000
(41000) 5188000
(345000) 50535000
267000
(345000) $ 50802000
(255000) $ 17621000
(987000) 31541000
(32000) 6597000
(126000) 5828000
(1400000) 61587000
261000
(1400000) $ 61848000
Securities available for sale with a carrying value of $8339000 and $3848000 at December 31 2014 and 201 3 respectively were pledged on deposits of the United States Government and other public funds as required or permitted and other short-term borrowings
The amortized costs and fair values of debt securities available for sale as of December 3 1 2014 by contractual maturity are shown below Maturities may differ from contractual maturities in mortgageshybacked securities because the mortgages underlying the securities may be called or repaid without any penalties Therefore these securities are not included in the maturity categories in the following maturity summary
1 3
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements middot-
Note 3 Securities Available for Sale (Continued)
Amortized Fair
Cost Value
Due in one year or less $ 3049000 $ 3057000 Due after one year through five years 21 506000 21 507000
Due after five years through ten years 71 70000 7163000
Due after ten years 1 3647000 1 3620000
45372000 45347000
Residential mortgage-backed securities 5 159000 5188000 Totals $ 50531 000 $ 50535000
The following tables show the gross unrealized losses and fair value of investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 3 1 2 0 1 4 and 2 0 1 3
less than 12 Months 12 Months or More Total Fair Unrealized Fair Unreahzed Fair Unrealized
2014 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 498000 s (2000) $ 7695000 s (51000) $ 8193000 $ (53000) Obligations of states and
pol1ilca subd1v1sions 13671000 (243000) 13671000 (243000) Corporate debt obligations 1132000 (8000 1 132000 (8000) Residential mortgage-backed
obligations 2128000 (4100D) 2128000 (41000) Total temporary
impaired securities s 498000 s (2000) $ 24626000 $ (343000) s 25124000 s (345000)
Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized
2013 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 10867000 $ (232000) s 2632000 $ (23000) $ 13499000 s 255000) Obligations of states and
polillcal subdivisions 11195000 (365000) 11169000 (622000) 22364000 (987000) Corporate debt obligations 1179000 (32000) 1179000 (32000) Residential mortgage-backed
obligations 3977000 (126000) 3977000 (126000) Total temporary
impaired securities 26039000 s (723000) $ 14980000 s (677000) s 41019000 $ (1400000)
In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysis reports Since management does not intend to sell any temporarily impaired securities before recovery of their cost basis no declines are deemed other-than-temporary
On sale proceeds of $5637000 there were $57000 in realized gains and $146000 in realized losses on the sale of securities during the year ended December 3 1 2 0 1 4 On sale proceeds of $708000 there were no realized gains and $246000 realized losses on the sale of securities during the year ended December 3 1 2 0 1 3
1 4
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans
A summary of the balances of loans follows
Commercial $
Commercial real estate
Construction and land development
Residential real estate
Consumer installment
Less allowance for loan losses
Loans net $
December 3 1
2014 2013
62894000
658 153000
163 1 08000
1 43579000
743000
1 028477000
2658 1 000
1 001 896 000
$ 62642000
666095000
123519000
129905000
1 229000
983390000
27626000
$ 955764000
The following tables present the contractual aging of the recorded investment in loans by class of loans as of December 3 1 2014 and 2013
Loans Past 90 Days or 30-59 Days 60middot89 Days Due 90 Days More Past Due
December 31 2014 Current Past Due Past Due or More Total and Accruin
Commercial $ 62655000 $ 4000 $ 36000 $ 199000 s 62894000 $ 199000
Commercial real estate Relail properties 295610000 105000 1212000 296927000 199000
Multifamily 90507000 90507000
Mixed-use properties 93 116000 2455000 95571000
Industrial manufacturing warehouse 63660000 1353000 65013000
Other commerc1al real estate 106101000 4034000 110135000
Construction and land development 162512000 596000 163 108000
Residential real estate 140636000 208000 2735000 143579000
Consumer installment 743000 743000
Total $ 1 015 540000 $ 109 000 $ 244 000 12584 000 $ 1 028 477 000 s 398 000
15
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Loans Past 90 Days or 30-59 Days 60-89 Days Due 90 Days More Past Due
December 31 2013 Current Past Due Past Due or More Total and Accruing
Commercial $ 61588000 $ $ 755000 $ 299000 s 62642000 $ 33000 Commercial real estate
Retail properties 284 162000 1152000 1331000 15307000 301952000 44000 Mu11ifamily 78203000 1223000 450000 4526000 84402000 Mixed-use properties 93292000 262000 316000 3644000 97514000 Industrial manufacturing
warehouse 58947000 1696000 273000 60916000 Other commercial real
estate 109449000 282000 74000 11506000 121311000 Construction and land
development 121492000 2027000 123519000 Residential real estate 126229000 1062000 306000 2308000 129905000 89000 Consumer installment 1226000 1000 2000 1229000
Total $ 934 588000 $ 3982 000 s 4 930 000 39 890 000 983 390 000 $ 166 000
The following table presents the recorded investment in nonaccrual loans by class of loans as of December 31 2014 and 2013
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties
Industrial manufacturing warehouse Other commercial real estate
Construction and land development Residential real estate
Total
$
$
16
Nonaccrual Loans 2014 2013
168000 $ 266000
2470000 15263000
4526000
2728000 3644000
1353000 273000
4480000 11506000
1609000 2027000
2796000 2219000
15604000 $ 39724000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
As part of the on-going monitoring of the credit quality of the Banks loan portfolio management categorizes loans into rrsk categories based on relevant information about the ability of borrowers to service their debt and comply with various terms of their loan agreements The Bank considers current financial information historical payment experrence credit documentation public information and current economic trends Generally all sizeable credits receive a financial review no less than annually to monitor and adjust if necessary the credits risk profile Credits classified as watch generally receive a review more frequently than annually For substandard and doubtful credit classifications the frequency of review is increased to no less than quarterly in order to determine potential impact on credit loss estimates
The Bank categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt
Pass - A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors if any) or by the fair value less cost to acquire and sell of any underlying collateral in a timely manner Pass assets also include certain assets considered watch which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring
Special Mention - A special mention asset or risk rating of 6 has potential weaknesses that deserve managements close attention The asset may also be subject to a weak or speculative market or to economic conditions which may in the future adversely affect the obligor If left uncorrected these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Banks credit position at some future date Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification
Substandard - A substandard asset or risk rating of 7 is an asset with a well-defined weakness that jeopardizes repayment in whole or in part of the debt These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged These assets are characterized by the distinct possibility that the institution will sustain some loss of principal andor interest if the deficiencies are not corrected A loan does necessarily need to have an identifiable loss potential in order to receive this rating
Doubtful - An asset that has all the weaknesses or risk rating of 8 inherent in the substandard classification with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently known facts conditions and values highly questionable and improbable The possibility of loss is extremely likely but it is not identified at this point due to pending factors
Loss - An asset or portion thereof classified as loss is considered uncollectible and of such little value that its continuance on the Companys books as an asset is not warranted This classification does not necessarily mean that an asset has no recovery or salvage value but rather there is much doubt about whether how much or when the recovery would occur As such it is not practical or desirable to defer the write-off Therefore there is no loss balance to report at December 31 2014
Residential real estate and consumer installment loans are assessed for credit quality based on the contractual aging status of the loan and payment activity Such assessment is completed at the end of each reporting period
1 7
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present the risk category of loans evaluated by internal asset classification based on the most recent analysis performed and the contractual aging as of December 31 2014 and 2013
December 31 2014
Commercial Commercial real estate
Retail properties Multifamily
Mixed-use properties Industrial manufacturing warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
December 31 201 J
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties lndustnal manufactunng warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
Pass
$ 61710000 $
272359000 88002000 85430000 63660000
104525000
1531 14000
$ 828800000 $
$
$
Pass
s 62034000 $
250040000 76086000 85355000 60643000
108880000 1 1 7047000
s 760085000 $
$
$
1 8
Special Mention Substandard Doubtful Total
$ 1 016000 $ 168000 s 62894000
3701000 17384000 3483000 296927000 635000 1870000 90507000 238000 7175000 2728000 95571000
1353000 65013000 1 130000 4480000 110 135000
5937000 3461000 596000 163108000
10511 000 $ 32036000 $ 12808000 $ 884155000
Performing Non-periorming Total
140783000 s 2796000 $ 143579000
743000 743000
141 526000 s 2796000 $ 144322000
Special Mention Substandard Doubtful Total
$ 342000 $ 266000 s 62642000
10871000 25778000 15263000 301952000 1 885000 1905000 4526000 84402000 1 714000 6801000 3644000 97514000
273000 60916000 925000 11 506000 1213 1 1 000
381000 4064000 2027000 123519000
14851 000 $ 39815000 s 37505000 $ 852256000
Performing Non-performing Total
127597000 $ 2308000 $ 129905000
1 229000 1 229000
1 28826000 $ 2308000 $ 1 3 1 1 34000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables provide additional detail of the activity in the allowance for loan losses by portfolio segment for the years ended December 3 1 2014 and 2013
Construction
Commercial and land Rcs1dent1al Consumer
December 31 2014 Commercial Real Es1ate Develoement Real Estate lnsallment Total
Allowanco for loan lossos
Beg1nn1ng balance 1385000 20052000 3549000 2623000 17000 27626000
PrOV1Son for loan losses 2210000 2680000 2007000 3000 6900000
Loans chargedmiddotoff (179000) (8163000) 687000) (2140000) (11169000)
Recovenes of loans
previously charged-off 85000 2916000 223000 3224000
Ending balance s 1291000 1701 5000 5542000 271 3000 s 20000 s 26581000
Poriod-ondtd llmount allocatod to loans
lndMdually evaluated for
1mpa1rment 200000 445000 36000 52000 s 733000
Collec11vely evaluated
for 1mpa1rrnent 1091 000 16570000 5506000 2661000 20000 25648000
Ending balance 1291000 17015000 5542000 s 2713000 20000 26581000
Loans
lndMdually evaluated for
impairment 368000 17274000 3526000 4048000 25216000
Collecively evalua1ed
for 1mpa1rrnent 62526000 640879000 159582000 139531000 743000 1003261000
Ending balance 62894000 658 153000 163108000 143579000 743000 1028477000
Construct1on
Commercial and Land Residential Consumer
December 31 2013 Commeroal Real Estate Development Real Eslale Installment Total
Allowance for loan losses
Beginning balance 1040000 18719000 2484000 2248000 17000 24508000
Provision for loan losses 363000 6508000 867000 784000 28000 8550000
Loans chargedmiddot Off (59000) (5817000) (122000) (457000) (28000) (6483000)
Recoveries ol loans
previously charged-off 41 000 642000 320000 48000 1051000
Ending balance 1385000 20052000 3549000 s 2623000 17000 27626000
Period-ended amount allocated to loans
Individually evaluated for
impairment 3475000 239000 61000 3775000
Collectively evaluated
for impairment 1385000 16577000 3310000 2562000 17000 23851000
Ending balance 1385000 20052000 3549000 2623000 17000 27626000
Loans
Individually evaluated for
1mpa1rment 266000 42380000 5522000 s 3307000 51475000
Collectively evalua1ed
for impairment 62376000 623715000 1 17997000 126598000 1229000 931915000
Endrng balance 62642000 666095000 123519000 129905000 1229000 983390000
1 9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present additional detail of impaired loans segregated by class as of December 3 1 2014 and 2013 The unpaid principal balance represents the recorded balance prior to any partial charge-offs The recorded investment represents customer balances net of any partial charge-offs recognized on the loans The interest income recognized column represents all interest income reported either on a cash or accrued basis after the loan became impaired The cash basis income column represents only the interest income recognized on a cash basis after the loan was classified as impaired
December 31 2014
Wih no relaed allowance recorded
Commercial Commercial real estale
Reail properties Multifamily Mixed-use properties lndustnal manufacturing
warehouse Other commercial real estate
Construction and land developmen
Residential real estate Consumer installment
Wi1h an allowance recorded Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties Industrial manufacturing
warehouse Other commercial real estate
Construction and land development
Residential real estate Consumer installment
To1al
$
$
Unpaid Principal Balance
216000 $
7266000
3283000
2861000 6121000
3672000 6045000
200000
564000 2421000
1 62000 170000
Recorded Investment
168000 s
5543000
3119000
1353000 4480000
3400000 3878000
200000
564000 2215000
126000 170000
32981000 $ 25216000 $
20
Allowance for Loan Losses
Allocated
200000
42000 403000
36000 52000
733000
Average Recorded
Investment
$ 208000 $
1 1 474000 3514000 4354000
131 5000 5509000
4 183000 4673000
29000
677000 2270000
141 000 44000
$ 38391000 $
Interest Income
Recognized
109000 48000
161 000
125000 33000
38000
5000
519000
$
$
Cash Basis Interest Income
Recognized
108000 48000
1 57000
1 1 3000 32000
38000
5000
501000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Cash Basis Unpaid Allowance for Average Interest Interest
Principal Recorded Loan Losses Recorded Income Income December 31 2013 Balance Investment Allocated Investment Recognized Recognized
With no related allowance recordedmiddot
Commercial $ 266000 $ 266000 $ $ 326000 $ $ Commercial real estate
Retail properties 26699000 12500000 10635000 146000 139000 Multifamily 5542000 4526000 4838000 88000 88000 Mixed-use properties 3123000 2527000 2750000 103000 102000 Industrial manufacturing
warehouse 1 641000 273000 528000 Other commercial real estate 4056000 3497000 3617000
Construction and land development 8517000 3965000 4971000 1 1 4000 1 14000
Residenial rear estate 3769000 3203000 3203000 47000 43000 Consumer installment
With an allowance recorded Commercial Commercial real estate
Retarl properties 6138000 5239000 2045000 4759000 35000 35000 Multifamily 692000 682000 69000 687000 38000 38000 Mixed-use properties 5764000 5 127000 778000 4200000 92000 87000 Industrial manufacturing
warehouse Other commercial real estate 10001000 8009000 583000 8986000
Construction and land development 2770000 1 557000 239000 1 853000
Residential real estate 120000 104000 61000 1 04000 Consumer installment
Total $ 79298000 $ 51475000 $ 3775000 $ 51457000 $ 663000 $ 646000
21
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present troubled debt restructurings and the financial effects of troubled debt restructurings
Year Ended December 31 2014
Pre-Modification Post-Modification Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reserves
Commercial $ 288000 $ 168000 $
Commercial real estate
Retail properties 3 1790000 2060000
Multifamily 1 409000 672000 732000
Mixed-use properties 6 4660000 3 118000 974000
Industrial manufacturing warehouse Other commercial real estate 4682000 2864000 1 272000
Construction and land development 1 3924000 2930000 500000
Residential real estate 3 1288000 1 252000 52000
Consumer installment Total 16 $ 1 8041000 $ 13064000 $ 3530000
Year Ended December 3 1 2013
Pre-Modification Post-Modification
Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reseives
Commercial $ $ $
Commercial real estate
Retail properties 3 8596000 3651000 4363000
Multifamily 2 7026000 5090000 1598000
Mixed-use properties 7 6005000 4421000 1 612000
Industrial manufacturing warehouse
Other commercial real estate 5 14589000 10888000 2578000
Construction and land development 3 7409000 4493000 1 162000
Residential real estate 3 1515000 1 371000 117000
Consumer installment Total 23 $ 45 140000 $ 29914000 $ 11430000
Troubled debt restructurings that were accruing interest were $9520000 and $ 1 1 382000 respectively as of December 3 1 2014 and 2013 Troubled debt restructurings that were non-accruing were $3544000 and $ 1 8532000 respectively as of December 3 1 2014 and 201 3 Troubled debt restructurings included loans where the loan principal and corresponding interest rate was reduced and i n some instances the loan amortization period was extended During 2014 there were three troubled debt restructurings with outstanding balances at the time of re-default was $ 1 1 55000 and loan balances outstanding for these loans at December 3 1 2014 was $239000
22
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
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Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 2 Restricted Cash and Due from Banks
The Bank is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank of Chicago The total of those reserve balances averaged $1 01 2000 and $935000 in 2014 and 2013 respectively The Bank maintains amounts due from banks which exceed federally insured limits The Bank has not experienced any losses in such accounts
Note 3 Securities Available for Sale
The amortized cost and fair value of securities with gross unrealized gains and losses follows
December 31 2014
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
December 31 2013
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Total debt securities
Equity securities
$
$
$
$
Amor1ized
Cost
15917000 $
23417000
6038000
5159000
50531000
250000
50781000 $
17835000 $
32338000
6590000
5928000
62691000
250000
62941000 $
Gross
Unrealized
Gains
41000 $
216000
22000
70000
349000
17000
366000 $
41000 $
190000
39000
26000
296000
11000
307000 s
Gross
Unrealized Fair
Losses Value
(53000) s 15905000
(243000) 23390000
(8000) 6052000
(41000) 5188000
(345000) 50535000
267000
(345000) $ 50802000
(255000) $ 17621000
(987000) 31541000
(32000) 6597000
(126000) 5828000
(1400000) 61587000
261000
(1400000) $ 61848000
Securities available for sale with a carrying value of $8339000 and $3848000 at December 31 2014 and 201 3 respectively were pledged on deposits of the United States Government and other public funds as required or permitted and other short-term borrowings
The amortized costs and fair values of debt securities available for sale as of December 3 1 2014 by contractual maturity are shown below Maturities may differ from contractual maturities in mortgageshybacked securities because the mortgages underlying the securities may be called or repaid without any penalties Therefore these securities are not included in the maturity categories in the following maturity summary
1 3
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements middot-
Note 3 Securities Available for Sale (Continued)
Amortized Fair
Cost Value
Due in one year or less $ 3049000 $ 3057000 Due after one year through five years 21 506000 21 507000
Due after five years through ten years 71 70000 7163000
Due after ten years 1 3647000 1 3620000
45372000 45347000
Residential mortgage-backed securities 5 159000 5188000 Totals $ 50531 000 $ 50535000
The following tables show the gross unrealized losses and fair value of investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 3 1 2 0 1 4 and 2 0 1 3
less than 12 Months 12 Months or More Total Fair Unrealized Fair Unreahzed Fair Unrealized
2014 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 498000 s (2000) $ 7695000 s (51000) $ 8193000 $ (53000) Obligations of states and
pol1ilca subd1v1sions 13671000 (243000) 13671000 (243000) Corporate debt obligations 1132000 (8000 1 132000 (8000) Residential mortgage-backed
obligations 2128000 (4100D) 2128000 (41000) Total temporary
impaired securities s 498000 s (2000) $ 24626000 $ (343000) s 25124000 s (345000)
Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized
2013 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 10867000 $ (232000) s 2632000 $ (23000) $ 13499000 s 255000) Obligations of states and
polillcal subdivisions 11195000 (365000) 11169000 (622000) 22364000 (987000) Corporate debt obligations 1179000 (32000) 1179000 (32000) Residential mortgage-backed
obligations 3977000 (126000) 3977000 (126000) Total temporary
impaired securities 26039000 s (723000) $ 14980000 s (677000) s 41019000 $ (1400000)
In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysis reports Since management does not intend to sell any temporarily impaired securities before recovery of their cost basis no declines are deemed other-than-temporary
On sale proceeds of $5637000 there were $57000 in realized gains and $146000 in realized losses on the sale of securities during the year ended December 3 1 2 0 1 4 On sale proceeds of $708000 there were no realized gains and $246000 realized losses on the sale of securities during the year ended December 3 1 2 0 1 3
1 4
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans
A summary of the balances of loans follows
Commercial $
Commercial real estate
Construction and land development
Residential real estate
Consumer installment
Less allowance for loan losses
Loans net $
December 3 1
2014 2013
62894000
658 153000
163 1 08000
1 43579000
743000
1 028477000
2658 1 000
1 001 896 000
$ 62642000
666095000
123519000
129905000
1 229000
983390000
27626000
$ 955764000
The following tables present the contractual aging of the recorded investment in loans by class of loans as of December 3 1 2014 and 2013
Loans Past 90 Days or 30-59 Days 60middot89 Days Due 90 Days More Past Due
December 31 2014 Current Past Due Past Due or More Total and Accruin
Commercial $ 62655000 $ 4000 $ 36000 $ 199000 s 62894000 $ 199000
Commercial real estate Relail properties 295610000 105000 1212000 296927000 199000
Multifamily 90507000 90507000
Mixed-use properties 93 116000 2455000 95571000
Industrial manufacturing warehouse 63660000 1353000 65013000
Other commerc1al real estate 106101000 4034000 110135000
Construction and land development 162512000 596000 163 108000
Residential real estate 140636000 208000 2735000 143579000
Consumer installment 743000 743000
Total $ 1 015 540000 $ 109 000 $ 244 000 12584 000 $ 1 028 477 000 s 398 000
15
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Loans Past 90 Days or 30-59 Days 60-89 Days Due 90 Days More Past Due
December 31 2013 Current Past Due Past Due or More Total and Accruing
Commercial $ 61588000 $ $ 755000 $ 299000 s 62642000 $ 33000 Commercial real estate
Retail properties 284 162000 1152000 1331000 15307000 301952000 44000 Mu11ifamily 78203000 1223000 450000 4526000 84402000 Mixed-use properties 93292000 262000 316000 3644000 97514000 Industrial manufacturing
warehouse 58947000 1696000 273000 60916000 Other commercial real
estate 109449000 282000 74000 11506000 121311000 Construction and land
development 121492000 2027000 123519000 Residential real estate 126229000 1062000 306000 2308000 129905000 89000 Consumer installment 1226000 1000 2000 1229000
Total $ 934 588000 $ 3982 000 s 4 930 000 39 890 000 983 390 000 $ 166 000
The following table presents the recorded investment in nonaccrual loans by class of loans as of December 31 2014 and 2013
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties
Industrial manufacturing warehouse Other commercial real estate
Construction and land development Residential real estate
Total
$
$
16
Nonaccrual Loans 2014 2013
168000 $ 266000
2470000 15263000
4526000
2728000 3644000
1353000 273000
4480000 11506000
1609000 2027000
2796000 2219000
15604000 $ 39724000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
As part of the on-going monitoring of the credit quality of the Banks loan portfolio management categorizes loans into rrsk categories based on relevant information about the ability of borrowers to service their debt and comply with various terms of their loan agreements The Bank considers current financial information historical payment experrence credit documentation public information and current economic trends Generally all sizeable credits receive a financial review no less than annually to monitor and adjust if necessary the credits risk profile Credits classified as watch generally receive a review more frequently than annually For substandard and doubtful credit classifications the frequency of review is increased to no less than quarterly in order to determine potential impact on credit loss estimates
The Bank categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt
Pass - A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors if any) or by the fair value less cost to acquire and sell of any underlying collateral in a timely manner Pass assets also include certain assets considered watch which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring
Special Mention - A special mention asset or risk rating of 6 has potential weaknesses that deserve managements close attention The asset may also be subject to a weak or speculative market or to economic conditions which may in the future adversely affect the obligor If left uncorrected these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Banks credit position at some future date Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification
Substandard - A substandard asset or risk rating of 7 is an asset with a well-defined weakness that jeopardizes repayment in whole or in part of the debt These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged These assets are characterized by the distinct possibility that the institution will sustain some loss of principal andor interest if the deficiencies are not corrected A loan does necessarily need to have an identifiable loss potential in order to receive this rating
Doubtful - An asset that has all the weaknesses or risk rating of 8 inherent in the substandard classification with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently known facts conditions and values highly questionable and improbable The possibility of loss is extremely likely but it is not identified at this point due to pending factors
Loss - An asset or portion thereof classified as loss is considered uncollectible and of such little value that its continuance on the Companys books as an asset is not warranted This classification does not necessarily mean that an asset has no recovery or salvage value but rather there is much doubt about whether how much or when the recovery would occur As such it is not practical or desirable to defer the write-off Therefore there is no loss balance to report at December 31 2014
Residential real estate and consumer installment loans are assessed for credit quality based on the contractual aging status of the loan and payment activity Such assessment is completed at the end of each reporting period
1 7
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present the risk category of loans evaluated by internal asset classification based on the most recent analysis performed and the contractual aging as of December 31 2014 and 2013
December 31 2014
Commercial Commercial real estate
Retail properties Multifamily
Mixed-use properties Industrial manufacturing warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
December 31 201 J
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties lndustnal manufactunng warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
Pass
$ 61710000 $
272359000 88002000 85430000 63660000
104525000
1531 14000
$ 828800000 $
$
$
Pass
s 62034000 $
250040000 76086000 85355000 60643000
108880000 1 1 7047000
s 760085000 $
$
$
1 8
Special Mention Substandard Doubtful Total
$ 1 016000 $ 168000 s 62894000
3701000 17384000 3483000 296927000 635000 1870000 90507000 238000 7175000 2728000 95571000
1353000 65013000 1 130000 4480000 110 135000
5937000 3461000 596000 163108000
10511 000 $ 32036000 $ 12808000 $ 884155000
Performing Non-periorming Total
140783000 s 2796000 $ 143579000
743000 743000
141 526000 s 2796000 $ 144322000
Special Mention Substandard Doubtful Total
$ 342000 $ 266000 s 62642000
10871000 25778000 15263000 301952000 1 885000 1905000 4526000 84402000 1 714000 6801000 3644000 97514000
273000 60916000 925000 11 506000 1213 1 1 000
381000 4064000 2027000 123519000
14851 000 $ 39815000 s 37505000 $ 852256000
Performing Non-performing Total
127597000 $ 2308000 $ 129905000
1 229000 1 229000
1 28826000 $ 2308000 $ 1 3 1 1 34000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables provide additional detail of the activity in the allowance for loan losses by portfolio segment for the years ended December 3 1 2014 and 2013
Construction
Commercial and land Rcs1dent1al Consumer
December 31 2014 Commercial Real Es1ate Develoement Real Estate lnsallment Total
Allowanco for loan lossos
Beg1nn1ng balance 1385000 20052000 3549000 2623000 17000 27626000
PrOV1Son for loan losses 2210000 2680000 2007000 3000 6900000
Loans chargedmiddotoff (179000) (8163000) 687000) (2140000) (11169000)
Recovenes of loans
previously charged-off 85000 2916000 223000 3224000
Ending balance s 1291000 1701 5000 5542000 271 3000 s 20000 s 26581000
Poriod-ondtd llmount allocatod to loans
lndMdually evaluated for
1mpa1rment 200000 445000 36000 52000 s 733000
Collec11vely evaluated
for 1mpa1rrnent 1091 000 16570000 5506000 2661000 20000 25648000
Ending balance 1291000 17015000 5542000 s 2713000 20000 26581000
Loans
lndMdually evaluated for
impairment 368000 17274000 3526000 4048000 25216000
Collecively evalua1ed
for 1mpa1rrnent 62526000 640879000 159582000 139531000 743000 1003261000
Ending balance 62894000 658 153000 163108000 143579000 743000 1028477000
Construct1on
Commercial and Land Residential Consumer
December 31 2013 Commeroal Real Estate Development Real Eslale Installment Total
Allowance for loan losses
Beginning balance 1040000 18719000 2484000 2248000 17000 24508000
Provision for loan losses 363000 6508000 867000 784000 28000 8550000
Loans chargedmiddot Off (59000) (5817000) (122000) (457000) (28000) (6483000)
Recoveries ol loans
previously charged-off 41 000 642000 320000 48000 1051000
Ending balance 1385000 20052000 3549000 s 2623000 17000 27626000
Period-ended amount allocated to loans
Individually evaluated for
impairment 3475000 239000 61000 3775000
Collectively evaluated
for impairment 1385000 16577000 3310000 2562000 17000 23851000
Ending balance 1385000 20052000 3549000 2623000 17000 27626000
Loans
Individually evaluated for
1mpa1rment 266000 42380000 5522000 s 3307000 51475000
Collectively evalua1ed
for impairment 62376000 623715000 1 17997000 126598000 1229000 931915000
Endrng balance 62642000 666095000 123519000 129905000 1229000 983390000
1 9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present additional detail of impaired loans segregated by class as of December 3 1 2014 and 2013 The unpaid principal balance represents the recorded balance prior to any partial charge-offs The recorded investment represents customer balances net of any partial charge-offs recognized on the loans The interest income recognized column represents all interest income reported either on a cash or accrued basis after the loan became impaired The cash basis income column represents only the interest income recognized on a cash basis after the loan was classified as impaired
December 31 2014
Wih no relaed allowance recorded
Commercial Commercial real estale
Reail properties Multifamily Mixed-use properties lndustnal manufacturing
warehouse Other commercial real estate
Construction and land developmen
Residential real estate Consumer installment
Wi1h an allowance recorded Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties Industrial manufacturing
warehouse Other commercial real estate
Construction and land development
Residential real estate Consumer installment
To1al
$
$
Unpaid Principal Balance
216000 $
7266000
3283000
2861000 6121000
3672000 6045000
200000
564000 2421000
1 62000 170000
Recorded Investment
168000 s
5543000
3119000
1353000 4480000
3400000 3878000
200000
564000 2215000
126000 170000
32981000 $ 25216000 $
20
Allowance for Loan Losses
Allocated
200000
42000 403000
36000 52000
733000
Average Recorded
Investment
$ 208000 $
1 1 474000 3514000 4354000
131 5000 5509000
4 183000 4673000
29000
677000 2270000
141 000 44000
$ 38391000 $
Interest Income
Recognized
109000 48000
161 000
125000 33000
38000
5000
519000
$
$
Cash Basis Interest Income
Recognized
108000 48000
1 57000
1 1 3000 32000
38000
5000
501000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Cash Basis Unpaid Allowance for Average Interest Interest
Principal Recorded Loan Losses Recorded Income Income December 31 2013 Balance Investment Allocated Investment Recognized Recognized
With no related allowance recordedmiddot
Commercial $ 266000 $ 266000 $ $ 326000 $ $ Commercial real estate
Retail properties 26699000 12500000 10635000 146000 139000 Multifamily 5542000 4526000 4838000 88000 88000 Mixed-use properties 3123000 2527000 2750000 103000 102000 Industrial manufacturing
warehouse 1 641000 273000 528000 Other commercial real estate 4056000 3497000 3617000
Construction and land development 8517000 3965000 4971000 1 1 4000 1 14000
Residenial rear estate 3769000 3203000 3203000 47000 43000 Consumer installment
With an allowance recorded Commercial Commercial real estate
Retarl properties 6138000 5239000 2045000 4759000 35000 35000 Multifamily 692000 682000 69000 687000 38000 38000 Mixed-use properties 5764000 5 127000 778000 4200000 92000 87000 Industrial manufacturing
warehouse Other commercial real estate 10001000 8009000 583000 8986000
Construction and land development 2770000 1 557000 239000 1 853000
Residential real estate 120000 104000 61000 1 04000 Consumer installment
Total $ 79298000 $ 51475000 $ 3775000 $ 51457000 $ 663000 $ 646000
21
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present troubled debt restructurings and the financial effects of troubled debt restructurings
Year Ended December 31 2014
Pre-Modification Post-Modification Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reserves
Commercial $ 288000 $ 168000 $
Commercial real estate
Retail properties 3 1790000 2060000
Multifamily 1 409000 672000 732000
Mixed-use properties 6 4660000 3 118000 974000
Industrial manufacturing warehouse Other commercial real estate 4682000 2864000 1 272000
Construction and land development 1 3924000 2930000 500000
Residential real estate 3 1288000 1 252000 52000
Consumer installment Total 16 $ 1 8041000 $ 13064000 $ 3530000
Year Ended December 3 1 2013
Pre-Modification Post-Modification
Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reseives
Commercial $ $ $
Commercial real estate
Retail properties 3 8596000 3651000 4363000
Multifamily 2 7026000 5090000 1598000
Mixed-use properties 7 6005000 4421000 1 612000
Industrial manufacturing warehouse
Other commercial real estate 5 14589000 10888000 2578000
Construction and land development 3 7409000 4493000 1 162000
Residential real estate 3 1515000 1 371000 117000
Consumer installment Total 23 $ 45 140000 $ 29914000 $ 11430000
Troubled debt restructurings that were accruing interest were $9520000 and $ 1 1 382000 respectively as of December 3 1 2014 and 2013 Troubled debt restructurings that were non-accruing were $3544000 and $ 1 8532000 respectively as of December 3 1 2014 and 201 3 Troubled debt restructurings included loans where the loan principal and corresponding interest rate was reduced and i n some instances the loan amortization period was extended During 2014 there were three troubled debt restructurings with outstanding balances at the time of re-default was $ 1 1 55000 and loan balances outstanding for these loans at December 3 1 2014 was $239000
22
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
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DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
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UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements middot-
Note 3 Securities Available for Sale (Continued)
Amortized Fair
Cost Value
Due in one year or less $ 3049000 $ 3057000 Due after one year through five years 21 506000 21 507000
Due after five years through ten years 71 70000 7163000
Due after ten years 1 3647000 1 3620000
45372000 45347000
Residential mortgage-backed securities 5 159000 5188000 Totals $ 50531 000 $ 50535000
The following tables show the gross unrealized losses and fair value of investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 3 1 2 0 1 4 and 2 0 1 3
less than 12 Months 12 Months or More Total Fair Unrealized Fair Unreahzed Fair Unrealized
2014 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 498000 s (2000) $ 7695000 s (51000) $ 8193000 $ (53000) Obligations of states and
pol1ilca subd1v1sions 13671000 (243000) 13671000 (243000) Corporate debt obligations 1132000 (8000 1 132000 (8000) Residential mortgage-backed
obligations 2128000 (4100D) 2128000 (41000) Total temporary
impaired securities s 498000 s (2000) $ 24626000 $ (343000) s 25124000 s (345000)
Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized
2013 Value Loss Value Loss Value Loss
Available-for-sale securities
US government and
agency obligations $ 10867000 $ (232000) s 2632000 $ (23000) $ 13499000 s 255000) Obligations of states and
polillcal subdivisions 11195000 (365000) 11169000 (622000) 22364000 (987000) Corporate debt obligations 1179000 (32000) 1179000 (32000) Residential mortgage-backed
obligations 3977000 (126000) 3977000 (126000) Total temporary
impaired securities 26039000 s (723000) $ 14980000 s (677000) s 41019000 $ (1400000)
In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysis reports Since management does not intend to sell any temporarily impaired securities before recovery of their cost basis no declines are deemed other-than-temporary
On sale proceeds of $5637000 there were $57000 in realized gains and $146000 in realized losses on the sale of securities during the year ended December 3 1 2 0 1 4 On sale proceeds of $708000 there were no realized gains and $246000 realized losses on the sale of securities during the year ended December 3 1 2 0 1 3
1 4
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans
A summary of the balances of loans follows
Commercial $
Commercial real estate
Construction and land development
Residential real estate
Consumer installment
Less allowance for loan losses
Loans net $
December 3 1
2014 2013
62894000
658 153000
163 1 08000
1 43579000
743000
1 028477000
2658 1 000
1 001 896 000
$ 62642000
666095000
123519000
129905000
1 229000
983390000
27626000
$ 955764000
The following tables present the contractual aging of the recorded investment in loans by class of loans as of December 3 1 2014 and 2013
Loans Past 90 Days or 30-59 Days 60middot89 Days Due 90 Days More Past Due
December 31 2014 Current Past Due Past Due or More Total and Accruin
Commercial $ 62655000 $ 4000 $ 36000 $ 199000 s 62894000 $ 199000
Commercial real estate Relail properties 295610000 105000 1212000 296927000 199000
Multifamily 90507000 90507000
Mixed-use properties 93 116000 2455000 95571000
Industrial manufacturing warehouse 63660000 1353000 65013000
Other commerc1al real estate 106101000 4034000 110135000
Construction and land development 162512000 596000 163 108000
Residential real estate 140636000 208000 2735000 143579000
Consumer installment 743000 743000
Total $ 1 015 540000 $ 109 000 $ 244 000 12584 000 $ 1 028 477 000 s 398 000
15
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Loans Past 90 Days or 30-59 Days 60-89 Days Due 90 Days More Past Due
December 31 2013 Current Past Due Past Due or More Total and Accruing
Commercial $ 61588000 $ $ 755000 $ 299000 s 62642000 $ 33000 Commercial real estate
Retail properties 284 162000 1152000 1331000 15307000 301952000 44000 Mu11ifamily 78203000 1223000 450000 4526000 84402000 Mixed-use properties 93292000 262000 316000 3644000 97514000 Industrial manufacturing
warehouse 58947000 1696000 273000 60916000 Other commercial real
estate 109449000 282000 74000 11506000 121311000 Construction and land
development 121492000 2027000 123519000 Residential real estate 126229000 1062000 306000 2308000 129905000 89000 Consumer installment 1226000 1000 2000 1229000
Total $ 934 588000 $ 3982 000 s 4 930 000 39 890 000 983 390 000 $ 166 000
The following table presents the recorded investment in nonaccrual loans by class of loans as of December 31 2014 and 2013
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties
Industrial manufacturing warehouse Other commercial real estate
Construction and land development Residential real estate
Total
$
$
16
Nonaccrual Loans 2014 2013
168000 $ 266000
2470000 15263000
4526000
2728000 3644000
1353000 273000
4480000 11506000
1609000 2027000
2796000 2219000
15604000 $ 39724000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
As part of the on-going monitoring of the credit quality of the Banks loan portfolio management categorizes loans into rrsk categories based on relevant information about the ability of borrowers to service their debt and comply with various terms of their loan agreements The Bank considers current financial information historical payment experrence credit documentation public information and current economic trends Generally all sizeable credits receive a financial review no less than annually to monitor and adjust if necessary the credits risk profile Credits classified as watch generally receive a review more frequently than annually For substandard and doubtful credit classifications the frequency of review is increased to no less than quarterly in order to determine potential impact on credit loss estimates
The Bank categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt
Pass - A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors if any) or by the fair value less cost to acquire and sell of any underlying collateral in a timely manner Pass assets also include certain assets considered watch which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring
Special Mention - A special mention asset or risk rating of 6 has potential weaknesses that deserve managements close attention The asset may also be subject to a weak or speculative market or to economic conditions which may in the future adversely affect the obligor If left uncorrected these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Banks credit position at some future date Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification
Substandard - A substandard asset or risk rating of 7 is an asset with a well-defined weakness that jeopardizes repayment in whole or in part of the debt These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged These assets are characterized by the distinct possibility that the institution will sustain some loss of principal andor interest if the deficiencies are not corrected A loan does necessarily need to have an identifiable loss potential in order to receive this rating
Doubtful - An asset that has all the weaknesses or risk rating of 8 inherent in the substandard classification with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently known facts conditions and values highly questionable and improbable The possibility of loss is extremely likely but it is not identified at this point due to pending factors
Loss - An asset or portion thereof classified as loss is considered uncollectible and of such little value that its continuance on the Companys books as an asset is not warranted This classification does not necessarily mean that an asset has no recovery or salvage value but rather there is much doubt about whether how much or when the recovery would occur As such it is not practical or desirable to defer the write-off Therefore there is no loss balance to report at December 31 2014
Residential real estate and consumer installment loans are assessed for credit quality based on the contractual aging status of the loan and payment activity Such assessment is completed at the end of each reporting period
1 7
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present the risk category of loans evaluated by internal asset classification based on the most recent analysis performed and the contractual aging as of December 31 2014 and 2013
December 31 2014
Commercial Commercial real estate
Retail properties Multifamily
Mixed-use properties Industrial manufacturing warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
December 31 201 J
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties lndustnal manufactunng warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
Pass
$ 61710000 $
272359000 88002000 85430000 63660000
104525000
1531 14000
$ 828800000 $
$
$
Pass
s 62034000 $
250040000 76086000 85355000 60643000
108880000 1 1 7047000
s 760085000 $
$
$
1 8
Special Mention Substandard Doubtful Total
$ 1 016000 $ 168000 s 62894000
3701000 17384000 3483000 296927000 635000 1870000 90507000 238000 7175000 2728000 95571000
1353000 65013000 1 130000 4480000 110 135000
5937000 3461000 596000 163108000
10511 000 $ 32036000 $ 12808000 $ 884155000
Performing Non-periorming Total
140783000 s 2796000 $ 143579000
743000 743000
141 526000 s 2796000 $ 144322000
Special Mention Substandard Doubtful Total
$ 342000 $ 266000 s 62642000
10871000 25778000 15263000 301952000 1 885000 1905000 4526000 84402000 1 714000 6801000 3644000 97514000
273000 60916000 925000 11 506000 1213 1 1 000
381000 4064000 2027000 123519000
14851 000 $ 39815000 s 37505000 $ 852256000
Performing Non-performing Total
127597000 $ 2308000 $ 129905000
1 229000 1 229000
1 28826000 $ 2308000 $ 1 3 1 1 34000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables provide additional detail of the activity in the allowance for loan losses by portfolio segment for the years ended December 3 1 2014 and 2013
Construction
Commercial and land Rcs1dent1al Consumer
December 31 2014 Commercial Real Es1ate Develoement Real Estate lnsallment Total
Allowanco for loan lossos
Beg1nn1ng balance 1385000 20052000 3549000 2623000 17000 27626000
PrOV1Son for loan losses 2210000 2680000 2007000 3000 6900000
Loans chargedmiddotoff (179000) (8163000) 687000) (2140000) (11169000)
Recovenes of loans
previously charged-off 85000 2916000 223000 3224000
Ending balance s 1291000 1701 5000 5542000 271 3000 s 20000 s 26581000
Poriod-ondtd llmount allocatod to loans
lndMdually evaluated for
1mpa1rment 200000 445000 36000 52000 s 733000
Collec11vely evaluated
for 1mpa1rrnent 1091 000 16570000 5506000 2661000 20000 25648000
Ending balance 1291000 17015000 5542000 s 2713000 20000 26581000
Loans
lndMdually evaluated for
impairment 368000 17274000 3526000 4048000 25216000
Collecively evalua1ed
for 1mpa1rrnent 62526000 640879000 159582000 139531000 743000 1003261000
Ending balance 62894000 658 153000 163108000 143579000 743000 1028477000
Construct1on
Commercial and Land Residential Consumer
December 31 2013 Commeroal Real Estate Development Real Eslale Installment Total
Allowance for loan losses
Beginning balance 1040000 18719000 2484000 2248000 17000 24508000
Provision for loan losses 363000 6508000 867000 784000 28000 8550000
Loans chargedmiddot Off (59000) (5817000) (122000) (457000) (28000) (6483000)
Recoveries ol loans
previously charged-off 41 000 642000 320000 48000 1051000
Ending balance 1385000 20052000 3549000 s 2623000 17000 27626000
Period-ended amount allocated to loans
Individually evaluated for
impairment 3475000 239000 61000 3775000
Collectively evaluated
for impairment 1385000 16577000 3310000 2562000 17000 23851000
Ending balance 1385000 20052000 3549000 2623000 17000 27626000
Loans
Individually evaluated for
1mpa1rment 266000 42380000 5522000 s 3307000 51475000
Collectively evalua1ed
for impairment 62376000 623715000 1 17997000 126598000 1229000 931915000
Endrng balance 62642000 666095000 123519000 129905000 1229000 983390000
1 9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present additional detail of impaired loans segregated by class as of December 3 1 2014 and 2013 The unpaid principal balance represents the recorded balance prior to any partial charge-offs The recorded investment represents customer balances net of any partial charge-offs recognized on the loans The interest income recognized column represents all interest income reported either on a cash or accrued basis after the loan became impaired The cash basis income column represents only the interest income recognized on a cash basis after the loan was classified as impaired
December 31 2014
Wih no relaed allowance recorded
Commercial Commercial real estale
Reail properties Multifamily Mixed-use properties lndustnal manufacturing
warehouse Other commercial real estate
Construction and land developmen
Residential real estate Consumer installment
Wi1h an allowance recorded Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties Industrial manufacturing
warehouse Other commercial real estate
Construction and land development
Residential real estate Consumer installment
To1al
$
$
Unpaid Principal Balance
216000 $
7266000
3283000
2861000 6121000
3672000 6045000
200000
564000 2421000
1 62000 170000
Recorded Investment
168000 s
5543000
3119000
1353000 4480000
3400000 3878000
200000
564000 2215000
126000 170000
32981000 $ 25216000 $
20
Allowance for Loan Losses
Allocated
200000
42000 403000
36000 52000
733000
Average Recorded
Investment
$ 208000 $
1 1 474000 3514000 4354000
131 5000 5509000
4 183000 4673000
29000
677000 2270000
141 000 44000
$ 38391000 $
Interest Income
Recognized
109000 48000
161 000
125000 33000
38000
5000
519000
$
$
Cash Basis Interest Income
Recognized
108000 48000
1 57000
1 1 3000 32000
38000
5000
501000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Cash Basis Unpaid Allowance for Average Interest Interest
Principal Recorded Loan Losses Recorded Income Income December 31 2013 Balance Investment Allocated Investment Recognized Recognized
With no related allowance recordedmiddot
Commercial $ 266000 $ 266000 $ $ 326000 $ $ Commercial real estate
Retail properties 26699000 12500000 10635000 146000 139000 Multifamily 5542000 4526000 4838000 88000 88000 Mixed-use properties 3123000 2527000 2750000 103000 102000 Industrial manufacturing
warehouse 1 641000 273000 528000 Other commercial real estate 4056000 3497000 3617000
Construction and land development 8517000 3965000 4971000 1 1 4000 1 14000
Residenial rear estate 3769000 3203000 3203000 47000 43000 Consumer installment
With an allowance recorded Commercial Commercial real estate
Retarl properties 6138000 5239000 2045000 4759000 35000 35000 Multifamily 692000 682000 69000 687000 38000 38000 Mixed-use properties 5764000 5 127000 778000 4200000 92000 87000 Industrial manufacturing
warehouse Other commercial real estate 10001000 8009000 583000 8986000
Construction and land development 2770000 1 557000 239000 1 853000
Residential real estate 120000 104000 61000 1 04000 Consumer installment
Total $ 79298000 $ 51475000 $ 3775000 $ 51457000 $ 663000 $ 646000
21
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present troubled debt restructurings and the financial effects of troubled debt restructurings
Year Ended December 31 2014
Pre-Modification Post-Modification Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reserves
Commercial $ 288000 $ 168000 $
Commercial real estate
Retail properties 3 1790000 2060000
Multifamily 1 409000 672000 732000
Mixed-use properties 6 4660000 3 118000 974000
Industrial manufacturing warehouse Other commercial real estate 4682000 2864000 1 272000
Construction and land development 1 3924000 2930000 500000
Residential real estate 3 1288000 1 252000 52000
Consumer installment Total 16 $ 1 8041000 $ 13064000 $ 3530000
Year Ended December 3 1 2013
Pre-Modification Post-Modification
Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reseives
Commercial $ $ $
Commercial real estate
Retail properties 3 8596000 3651000 4363000
Multifamily 2 7026000 5090000 1598000
Mixed-use properties 7 6005000 4421000 1 612000
Industrial manufacturing warehouse
Other commercial real estate 5 14589000 10888000 2578000
Construction and land development 3 7409000 4493000 1 162000
Residential real estate 3 1515000 1 371000 117000
Consumer installment Total 23 $ 45 140000 $ 29914000 $ 11430000
Troubled debt restructurings that were accruing interest were $9520000 and $ 1 1 382000 respectively as of December 3 1 2014 and 2013 Troubled debt restructurings that were non-accruing were $3544000 and $ 1 8532000 respectively as of December 3 1 2014 and 201 3 Troubled debt restructurings included loans where the loan principal and corresponding interest rate was reduced and i n some instances the loan amortization period was extended During 2014 there were three troubled debt restructurings with outstanding balances at the time of re-default was $ 1 1 55000 and loan balances outstanding for these loans at December 3 1 2014 was $239000
22
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans
A summary of the balances of loans follows
Commercial $
Commercial real estate
Construction and land development
Residential real estate
Consumer installment
Less allowance for loan losses
Loans net $
December 3 1
2014 2013
62894000
658 153000
163 1 08000
1 43579000
743000
1 028477000
2658 1 000
1 001 896 000
$ 62642000
666095000
123519000
129905000
1 229000
983390000
27626000
$ 955764000
The following tables present the contractual aging of the recorded investment in loans by class of loans as of December 3 1 2014 and 2013
Loans Past 90 Days or 30-59 Days 60middot89 Days Due 90 Days More Past Due
December 31 2014 Current Past Due Past Due or More Total and Accruin
Commercial $ 62655000 $ 4000 $ 36000 $ 199000 s 62894000 $ 199000
Commercial real estate Relail properties 295610000 105000 1212000 296927000 199000
Multifamily 90507000 90507000
Mixed-use properties 93 116000 2455000 95571000
Industrial manufacturing warehouse 63660000 1353000 65013000
Other commerc1al real estate 106101000 4034000 110135000
Construction and land development 162512000 596000 163 108000
Residential real estate 140636000 208000 2735000 143579000
Consumer installment 743000 743000
Total $ 1 015 540000 $ 109 000 $ 244 000 12584 000 $ 1 028 477 000 s 398 000
15
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Loans Past 90 Days or 30-59 Days 60-89 Days Due 90 Days More Past Due
December 31 2013 Current Past Due Past Due or More Total and Accruing
Commercial $ 61588000 $ $ 755000 $ 299000 s 62642000 $ 33000 Commercial real estate
Retail properties 284 162000 1152000 1331000 15307000 301952000 44000 Mu11ifamily 78203000 1223000 450000 4526000 84402000 Mixed-use properties 93292000 262000 316000 3644000 97514000 Industrial manufacturing
warehouse 58947000 1696000 273000 60916000 Other commercial real
estate 109449000 282000 74000 11506000 121311000 Construction and land
development 121492000 2027000 123519000 Residential real estate 126229000 1062000 306000 2308000 129905000 89000 Consumer installment 1226000 1000 2000 1229000
Total $ 934 588000 $ 3982 000 s 4 930 000 39 890 000 983 390 000 $ 166 000
The following table presents the recorded investment in nonaccrual loans by class of loans as of December 31 2014 and 2013
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties
Industrial manufacturing warehouse Other commercial real estate
Construction and land development Residential real estate
Total
$
$
16
Nonaccrual Loans 2014 2013
168000 $ 266000
2470000 15263000
4526000
2728000 3644000
1353000 273000
4480000 11506000
1609000 2027000
2796000 2219000
15604000 $ 39724000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
As part of the on-going monitoring of the credit quality of the Banks loan portfolio management categorizes loans into rrsk categories based on relevant information about the ability of borrowers to service their debt and comply with various terms of their loan agreements The Bank considers current financial information historical payment experrence credit documentation public information and current economic trends Generally all sizeable credits receive a financial review no less than annually to monitor and adjust if necessary the credits risk profile Credits classified as watch generally receive a review more frequently than annually For substandard and doubtful credit classifications the frequency of review is increased to no less than quarterly in order to determine potential impact on credit loss estimates
The Bank categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt
Pass - A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors if any) or by the fair value less cost to acquire and sell of any underlying collateral in a timely manner Pass assets also include certain assets considered watch which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring
Special Mention - A special mention asset or risk rating of 6 has potential weaknesses that deserve managements close attention The asset may also be subject to a weak or speculative market or to economic conditions which may in the future adversely affect the obligor If left uncorrected these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Banks credit position at some future date Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification
Substandard - A substandard asset or risk rating of 7 is an asset with a well-defined weakness that jeopardizes repayment in whole or in part of the debt These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged These assets are characterized by the distinct possibility that the institution will sustain some loss of principal andor interest if the deficiencies are not corrected A loan does necessarily need to have an identifiable loss potential in order to receive this rating
Doubtful - An asset that has all the weaknesses or risk rating of 8 inherent in the substandard classification with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently known facts conditions and values highly questionable and improbable The possibility of loss is extremely likely but it is not identified at this point due to pending factors
Loss - An asset or portion thereof classified as loss is considered uncollectible and of such little value that its continuance on the Companys books as an asset is not warranted This classification does not necessarily mean that an asset has no recovery or salvage value but rather there is much doubt about whether how much or when the recovery would occur As such it is not practical or desirable to defer the write-off Therefore there is no loss balance to report at December 31 2014
Residential real estate and consumer installment loans are assessed for credit quality based on the contractual aging status of the loan and payment activity Such assessment is completed at the end of each reporting period
1 7
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present the risk category of loans evaluated by internal asset classification based on the most recent analysis performed and the contractual aging as of December 31 2014 and 2013
December 31 2014
Commercial Commercial real estate
Retail properties Multifamily
Mixed-use properties Industrial manufacturing warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
December 31 201 J
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties lndustnal manufactunng warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
Pass
$ 61710000 $
272359000 88002000 85430000 63660000
104525000
1531 14000
$ 828800000 $
$
$
Pass
s 62034000 $
250040000 76086000 85355000 60643000
108880000 1 1 7047000
s 760085000 $
$
$
1 8
Special Mention Substandard Doubtful Total
$ 1 016000 $ 168000 s 62894000
3701000 17384000 3483000 296927000 635000 1870000 90507000 238000 7175000 2728000 95571000
1353000 65013000 1 130000 4480000 110 135000
5937000 3461000 596000 163108000
10511 000 $ 32036000 $ 12808000 $ 884155000
Performing Non-periorming Total
140783000 s 2796000 $ 143579000
743000 743000
141 526000 s 2796000 $ 144322000
Special Mention Substandard Doubtful Total
$ 342000 $ 266000 s 62642000
10871000 25778000 15263000 301952000 1 885000 1905000 4526000 84402000 1 714000 6801000 3644000 97514000
273000 60916000 925000 11 506000 1213 1 1 000
381000 4064000 2027000 123519000
14851 000 $ 39815000 s 37505000 $ 852256000
Performing Non-performing Total
127597000 $ 2308000 $ 129905000
1 229000 1 229000
1 28826000 $ 2308000 $ 1 3 1 1 34000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables provide additional detail of the activity in the allowance for loan losses by portfolio segment for the years ended December 3 1 2014 and 2013
Construction
Commercial and land Rcs1dent1al Consumer
December 31 2014 Commercial Real Es1ate Develoement Real Estate lnsallment Total
Allowanco for loan lossos
Beg1nn1ng balance 1385000 20052000 3549000 2623000 17000 27626000
PrOV1Son for loan losses 2210000 2680000 2007000 3000 6900000
Loans chargedmiddotoff (179000) (8163000) 687000) (2140000) (11169000)
Recovenes of loans
previously charged-off 85000 2916000 223000 3224000
Ending balance s 1291000 1701 5000 5542000 271 3000 s 20000 s 26581000
Poriod-ondtd llmount allocatod to loans
lndMdually evaluated for
1mpa1rment 200000 445000 36000 52000 s 733000
Collec11vely evaluated
for 1mpa1rrnent 1091 000 16570000 5506000 2661000 20000 25648000
Ending balance 1291000 17015000 5542000 s 2713000 20000 26581000
Loans
lndMdually evaluated for
impairment 368000 17274000 3526000 4048000 25216000
Collecively evalua1ed
for 1mpa1rrnent 62526000 640879000 159582000 139531000 743000 1003261000
Ending balance 62894000 658 153000 163108000 143579000 743000 1028477000
Construct1on
Commercial and Land Residential Consumer
December 31 2013 Commeroal Real Estate Development Real Eslale Installment Total
Allowance for loan losses
Beginning balance 1040000 18719000 2484000 2248000 17000 24508000
Provision for loan losses 363000 6508000 867000 784000 28000 8550000
Loans chargedmiddot Off (59000) (5817000) (122000) (457000) (28000) (6483000)
Recoveries ol loans
previously charged-off 41 000 642000 320000 48000 1051000
Ending balance 1385000 20052000 3549000 s 2623000 17000 27626000
Period-ended amount allocated to loans
Individually evaluated for
impairment 3475000 239000 61000 3775000
Collectively evaluated
for impairment 1385000 16577000 3310000 2562000 17000 23851000
Ending balance 1385000 20052000 3549000 2623000 17000 27626000
Loans
Individually evaluated for
1mpa1rment 266000 42380000 5522000 s 3307000 51475000
Collectively evalua1ed
for impairment 62376000 623715000 1 17997000 126598000 1229000 931915000
Endrng balance 62642000 666095000 123519000 129905000 1229000 983390000
1 9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present additional detail of impaired loans segregated by class as of December 3 1 2014 and 2013 The unpaid principal balance represents the recorded balance prior to any partial charge-offs The recorded investment represents customer balances net of any partial charge-offs recognized on the loans The interest income recognized column represents all interest income reported either on a cash or accrued basis after the loan became impaired The cash basis income column represents only the interest income recognized on a cash basis after the loan was classified as impaired
December 31 2014
Wih no relaed allowance recorded
Commercial Commercial real estale
Reail properties Multifamily Mixed-use properties lndustnal manufacturing
warehouse Other commercial real estate
Construction and land developmen
Residential real estate Consumer installment
Wi1h an allowance recorded Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties Industrial manufacturing
warehouse Other commercial real estate
Construction and land development
Residential real estate Consumer installment
To1al
$
$
Unpaid Principal Balance
216000 $
7266000
3283000
2861000 6121000
3672000 6045000
200000
564000 2421000
1 62000 170000
Recorded Investment
168000 s
5543000
3119000
1353000 4480000
3400000 3878000
200000
564000 2215000
126000 170000
32981000 $ 25216000 $
20
Allowance for Loan Losses
Allocated
200000
42000 403000
36000 52000
733000
Average Recorded
Investment
$ 208000 $
1 1 474000 3514000 4354000
131 5000 5509000
4 183000 4673000
29000
677000 2270000
141 000 44000
$ 38391000 $
Interest Income
Recognized
109000 48000
161 000
125000 33000
38000
5000
519000
$
$
Cash Basis Interest Income
Recognized
108000 48000
1 57000
1 1 3000 32000
38000
5000
501000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Cash Basis Unpaid Allowance for Average Interest Interest
Principal Recorded Loan Losses Recorded Income Income December 31 2013 Balance Investment Allocated Investment Recognized Recognized
With no related allowance recordedmiddot
Commercial $ 266000 $ 266000 $ $ 326000 $ $ Commercial real estate
Retail properties 26699000 12500000 10635000 146000 139000 Multifamily 5542000 4526000 4838000 88000 88000 Mixed-use properties 3123000 2527000 2750000 103000 102000 Industrial manufacturing
warehouse 1 641000 273000 528000 Other commercial real estate 4056000 3497000 3617000
Construction and land development 8517000 3965000 4971000 1 1 4000 1 14000
Residenial rear estate 3769000 3203000 3203000 47000 43000 Consumer installment
With an allowance recorded Commercial Commercial real estate
Retarl properties 6138000 5239000 2045000 4759000 35000 35000 Multifamily 692000 682000 69000 687000 38000 38000 Mixed-use properties 5764000 5 127000 778000 4200000 92000 87000 Industrial manufacturing
warehouse Other commercial real estate 10001000 8009000 583000 8986000
Construction and land development 2770000 1 557000 239000 1 853000
Residential real estate 120000 104000 61000 1 04000 Consumer installment
Total $ 79298000 $ 51475000 $ 3775000 $ 51457000 $ 663000 $ 646000
21
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present troubled debt restructurings and the financial effects of troubled debt restructurings
Year Ended December 31 2014
Pre-Modification Post-Modification Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reserves
Commercial $ 288000 $ 168000 $
Commercial real estate
Retail properties 3 1790000 2060000
Multifamily 1 409000 672000 732000
Mixed-use properties 6 4660000 3 118000 974000
Industrial manufacturing warehouse Other commercial real estate 4682000 2864000 1 272000
Construction and land development 1 3924000 2930000 500000
Residential real estate 3 1288000 1 252000 52000
Consumer installment Total 16 $ 1 8041000 $ 13064000 $ 3530000
Year Ended December 3 1 2013
Pre-Modification Post-Modification
Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reseives
Commercial $ $ $
Commercial real estate
Retail properties 3 8596000 3651000 4363000
Multifamily 2 7026000 5090000 1598000
Mixed-use properties 7 6005000 4421000 1 612000
Industrial manufacturing warehouse
Other commercial real estate 5 14589000 10888000 2578000
Construction and land development 3 7409000 4493000 1 162000
Residential real estate 3 1515000 1 371000 117000
Consumer installment Total 23 $ 45 140000 $ 29914000 $ 11430000
Troubled debt restructurings that were accruing interest were $9520000 and $ 1 1 382000 respectively as of December 3 1 2014 and 2013 Troubled debt restructurings that were non-accruing were $3544000 and $ 1 8532000 respectively as of December 3 1 2014 and 201 3 Troubled debt restructurings included loans where the loan principal and corresponding interest rate was reduced and i n some instances the loan amortization period was extended During 2014 there were three troubled debt restructurings with outstanding balances at the time of re-default was $ 1 1 55000 and loan balances outstanding for these loans at December 3 1 2014 was $239000
22
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Loans Past 90 Days or 30-59 Days 60-89 Days Due 90 Days More Past Due
December 31 2013 Current Past Due Past Due or More Total and Accruing
Commercial $ 61588000 $ $ 755000 $ 299000 s 62642000 $ 33000 Commercial real estate
Retail properties 284 162000 1152000 1331000 15307000 301952000 44000 Mu11ifamily 78203000 1223000 450000 4526000 84402000 Mixed-use properties 93292000 262000 316000 3644000 97514000 Industrial manufacturing
warehouse 58947000 1696000 273000 60916000 Other commercial real
estate 109449000 282000 74000 11506000 121311000 Construction and land
development 121492000 2027000 123519000 Residential real estate 126229000 1062000 306000 2308000 129905000 89000 Consumer installment 1226000 1000 2000 1229000
Total $ 934 588000 $ 3982 000 s 4 930 000 39 890 000 983 390 000 $ 166 000
The following table presents the recorded investment in nonaccrual loans by class of loans as of December 31 2014 and 2013
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties
Industrial manufacturing warehouse Other commercial real estate
Construction and land development Residential real estate
Total
$
$
16
Nonaccrual Loans 2014 2013
168000 $ 266000
2470000 15263000
4526000
2728000 3644000
1353000 273000
4480000 11506000
1609000 2027000
2796000 2219000
15604000 $ 39724000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
As part of the on-going monitoring of the credit quality of the Banks loan portfolio management categorizes loans into rrsk categories based on relevant information about the ability of borrowers to service their debt and comply with various terms of their loan agreements The Bank considers current financial information historical payment experrence credit documentation public information and current economic trends Generally all sizeable credits receive a financial review no less than annually to monitor and adjust if necessary the credits risk profile Credits classified as watch generally receive a review more frequently than annually For substandard and doubtful credit classifications the frequency of review is increased to no less than quarterly in order to determine potential impact on credit loss estimates
The Bank categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt
Pass - A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors if any) or by the fair value less cost to acquire and sell of any underlying collateral in a timely manner Pass assets also include certain assets considered watch which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring
Special Mention - A special mention asset or risk rating of 6 has potential weaknesses that deserve managements close attention The asset may also be subject to a weak or speculative market or to economic conditions which may in the future adversely affect the obligor If left uncorrected these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Banks credit position at some future date Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification
Substandard - A substandard asset or risk rating of 7 is an asset with a well-defined weakness that jeopardizes repayment in whole or in part of the debt These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged These assets are characterized by the distinct possibility that the institution will sustain some loss of principal andor interest if the deficiencies are not corrected A loan does necessarily need to have an identifiable loss potential in order to receive this rating
Doubtful - An asset that has all the weaknesses or risk rating of 8 inherent in the substandard classification with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently known facts conditions and values highly questionable and improbable The possibility of loss is extremely likely but it is not identified at this point due to pending factors
Loss - An asset or portion thereof classified as loss is considered uncollectible and of such little value that its continuance on the Companys books as an asset is not warranted This classification does not necessarily mean that an asset has no recovery or salvage value but rather there is much doubt about whether how much or when the recovery would occur As such it is not practical or desirable to defer the write-off Therefore there is no loss balance to report at December 31 2014
Residential real estate and consumer installment loans are assessed for credit quality based on the contractual aging status of the loan and payment activity Such assessment is completed at the end of each reporting period
1 7
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present the risk category of loans evaluated by internal asset classification based on the most recent analysis performed and the contractual aging as of December 31 2014 and 2013
December 31 2014
Commercial Commercial real estate
Retail properties Multifamily
Mixed-use properties Industrial manufacturing warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
December 31 201 J
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties lndustnal manufactunng warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
Pass
$ 61710000 $
272359000 88002000 85430000 63660000
104525000
1531 14000
$ 828800000 $
$
$
Pass
s 62034000 $
250040000 76086000 85355000 60643000
108880000 1 1 7047000
s 760085000 $
$
$
1 8
Special Mention Substandard Doubtful Total
$ 1 016000 $ 168000 s 62894000
3701000 17384000 3483000 296927000 635000 1870000 90507000 238000 7175000 2728000 95571000
1353000 65013000 1 130000 4480000 110 135000
5937000 3461000 596000 163108000
10511 000 $ 32036000 $ 12808000 $ 884155000
Performing Non-periorming Total
140783000 s 2796000 $ 143579000
743000 743000
141 526000 s 2796000 $ 144322000
Special Mention Substandard Doubtful Total
$ 342000 $ 266000 s 62642000
10871000 25778000 15263000 301952000 1 885000 1905000 4526000 84402000 1 714000 6801000 3644000 97514000
273000 60916000 925000 11 506000 1213 1 1 000
381000 4064000 2027000 123519000
14851 000 $ 39815000 s 37505000 $ 852256000
Performing Non-performing Total
127597000 $ 2308000 $ 129905000
1 229000 1 229000
1 28826000 $ 2308000 $ 1 3 1 1 34000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables provide additional detail of the activity in the allowance for loan losses by portfolio segment for the years ended December 3 1 2014 and 2013
Construction
Commercial and land Rcs1dent1al Consumer
December 31 2014 Commercial Real Es1ate Develoement Real Estate lnsallment Total
Allowanco for loan lossos
Beg1nn1ng balance 1385000 20052000 3549000 2623000 17000 27626000
PrOV1Son for loan losses 2210000 2680000 2007000 3000 6900000
Loans chargedmiddotoff (179000) (8163000) 687000) (2140000) (11169000)
Recovenes of loans
previously charged-off 85000 2916000 223000 3224000
Ending balance s 1291000 1701 5000 5542000 271 3000 s 20000 s 26581000
Poriod-ondtd llmount allocatod to loans
lndMdually evaluated for
1mpa1rment 200000 445000 36000 52000 s 733000
Collec11vely evaluated
for 1mpa1rrnent 1091 000 16570000 5506000 2661000 20000 25648000
Ending balance 1291000 17015000 5542000 s 2713000 20000 26581000
Loans
lndMdually evaluated for
impairment 368000 17274000 3526000 4048000 25216000
Collecively evalua1ed
for 1mpa1rrnent 62526000 640879000 159582000 139531000 743000 1003261000
Ending balance 62894000 658 153000 163108000 143579000 743000 1028477000
Construct1on
Commercial and Land Residential Consumer
December 31 2013 Commeroal Real Estate Development Real Eslale Installment Total
Allowance for loan losses
Beginning balance 1040000 18719000 2484000 2248000 17000 24508000
Provision for loan losses 363000 6508000 867000 784000 28000 8550000
Loans chargedmiddot Off (59000) (5817000) (122000) (457000) (28000) (6483000)
Recoveries ol loans
previously charged-off 41 000 642000 320000 48000 1051000
Ending balance 1385000 20052000 3549000 s 2623000 17000 27626000
Period-ended amount allocated to loans
Individually evaluated for
impairment 3475000 239000 61000 3775000
Collectively evaluated
for impairment 1385000 16577000 3310000 2562000 17000 23851000
Ending balance 1385000 20052000 3549000 2623000 17000 27626000
Loans
Individually evaluated for
1mpa1rment 266000 42380000 5522000 s 3307000 51475000
Collectively evalua1ed
for impairment 62376000 623715000 1 17997000 126598000 1229000 931915000
Endrng balance 62642000 666095000 123519000 129905000 1229000 983390000
1 9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present additional detail of impaired loans segregated by class as of December 3 1 2014 and 2013 The unpaid principal balance represents the recorded balance prior to any partial charge-offs The recorded investment represents customer balances net of any partial charge-offs recognized on the loans The interest income recognized column represents all interest income reported either on a cash or accrued basis after the loan became impaired The cash basis income column represents only the interest income recognized on a cash basis after the loan was classified as impaired
December 31 2014
Wih no relaed allowance recorded
Commercial Commercial real estale
Reail properties Multifamily Mixed-use properties lndustnal manufacturing
warehouse Other commercial real estate
Construction and land developmen
Residential real estate Consumer installment
Wi1h an allowance recorded Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties Industrial manufacturing
warehouse Other commercial real estate
Construction and land development
Residential real estate Consumer installment
To1al
$
$
Unpaid Principal Balance
216000 $
7266000
3283000
2861000 6121000
3672000 6045000
200000
564000 2421000
1 62000 170000
Recorded Investment
168000 s
5543000
3119000
1353000 4480000
3400000 3878000
200000
564000 2215000
126000 170000
32981000 $ 25216000 $
20
Allowance for Loan Losses
Allocated
200000
42000 403000
36000 52000
733000
Average Recorded
Investment
$ 208000 $
1 1 474000 3514000 4354000
131 5000 5509000
4 183000 4673000
29000
677000 2270000
141 000 44000
$ 38391000 $
Interest Income
Recognized
109000 48000
161 000
125000 33000
38000
5000
519000
$
$
Cash Basis Interest Income
Recognized
108000 48000
1 57000
1 1 3000 32000
38000
5000
501000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Cash Basis Unpaid Allowance for Average Interest Interest
Principal Recorded Loan Losses Recorded Income Income December 31 2013 Balance Investment Allocated Investment Recognized Recognized
With no related allowance recordedmiddot
Commercial $ 266000 $ 266000 $ $ 326000 $ $ Commercial real estate
Retail properties 26699000 12500000 10635000 146000 139000 Multifamily 5542000 4526000 4838000 88000 88000 Mixed-use properties 3123000 2527000 2750000 103000 102000 Industrial manufacturing
warehouse 1 641000 273000 528000 Other commercial real estate 4056000 3497000 3617000
Construction and land development 8517000 3965000 4971000 1 1 4000 1 14000
Residenial rear estate 3769000 3203000 3203000 47000 43000 Consumer installment
With an allowance recorded Commercial Commercial real estate
Retarl properties 6138000 5239000 2045000 4759000 35000 35000 Multifamily 692000 682000 69000 687000 38000 38000 Mixed-use properties 5764000 5 127000 778000 4200000 92000 87000 Industrial manufacturing
warehouse Other commercial real estate 10001000 8009000 583000 8986000
Construction and land development 2770000 1 557000 239000 1 853000
Residential real estate 120000 104000 61000 1 04000 Consumer installment
Total $ 79298000 $ 51475000 $ 3775000 $ 51457000 $ 663000 $ 646000
21
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present troubled debt restructurings and the financial effects of troubled debt restructurings
Year Ended December 31 2014
Pre-Modification Post-Modification Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reserves
Commercial $ 288000 $ 168000 $
Commercial real estate
Retail properties 3 1790000 2060000
Multifamily 1 409000 672000 732000
Mixed-use properties 6 4660000 3 118000 974000
Industrial manufacturing warehouse Other commercial real estate 4682000 2864000 1 272000
Construction and land development 1 3924000 2930000 500000
Residential real estate 3 1288000 1 252000 52000
Consumer installment Total 16 $ 1 8041000 $ 13064000 $ 3530000
Year Ended December 3 1 2013
Pre-Modification Post-Modification
Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reseives
Commercial $ $ $
Commercial real estate
Retail properties 3 8596000 3651000 4363000
Multifamily 2 7026000 5090000 1598000
Mixed-use properties 7 6005000 4421000 1 612000
Industrial manufacturing warehouse
Other commercial real estate 5 14589000 10888000 2578000
Construction and land development 3 7409000 4493000 1 162000
Residential real estate 3 1515000 1 371000 117000
Consumer installment Total 23 $ 45 140000 $ 29914000 $ 11430000
Troubled debt restructurings that were accruing interest were $9520000 and $ 1 1 382000 respectively as of December 3 1 2014 and 2013 Troubled debt restructurings that were non-accruing were $3544000 and $ 1 8532000 respectively as of December 3 1 2014 and 201 3 Troubled debt restructurings included loans where the loan principal and corresponding interest rate was reduced and i n some instances the loan amortization period was extended During 2014 there were three troubled debt restructurings with outstanding balances at the time of re-default was $ 1 1 55000 and loan balances outstanding for these loans at December 3 1 2014 was $239000
22
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
As part of the on-going monitoring of the credit quality of the Banks loan portfolio management categorizes loans into rrsk categories based on relevant information about the ability of borrowers to service their debt and comply with various terms of their loan agreements The Bank considers current financial information historical payment experrence credit documentation public information and current economic trends Generally all sizeable credits receive a financial review no less than annually to monitor and adjust if necessary the credits risk profile Credits classified as watch generally receive a review more frequently than annually For substandard and doubtful credit classifications the frequency of review is increased to no less than quarterly in order to determine potential impact on credit loss estimates
The Bank categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt
Pass - A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors if any) or by the fair value less cost to acquire and sell of any underlying collateral in a timely manner Pass assets also include certain assets considered watch which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring
Special Mention - A special mention asset or risk rating of 6 has potential weaknesses that deserve managements close attention The asset may also be subject to a weak or speculative market or to economic conditions which may in the future adversely affect the obligor If left uncorrected these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Banks credit position at some future date Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification
Substandard - A substandard asset or risk rating of 7 is an asset with a well-defined weakness that jeopardizes repayment in whole or in part of the debt These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged These assets are characterized by the distinct possibility that the institution will sustain some loss of principal andor interest if the deficiencies are not corrected A loan does necessarily need to have an identifiable loss potential in order to receive this rating
Doubtful - An asset that has all the weaknesses or risk rating of 8 inherent in the substandard classification with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently known facts conditions and values highly questionable and improbable The possibility of loss is extremely likely but it is not identified at this point due to pending factors
Loss - An asset or portion thereof classified as loss is considered uncollectible and of such little value that its continuance on the Companys books as an asset is not warranted This classification does not necessarily mean that an asset has no recovery or salvage value but rather there is much doubt about whether how much or when the recovery would occur As such it is not practical or desirable to defer the write-off Therefore there is no loss balance to report at December 31 2014
Residential real estate and consumer installment loans are assessed for credit quality based on the contractual aging status of the loan and payment activity Such assessment is completed at the end of each reporting period
1 7
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present the risk category of loans evaluated by internal asset classification based on the most recent analysis performed and the contractual aging as of December 31 2014 and 2013
December 31 2014
Commercial Commercial real estate
Retail properties Multifamily
Mixed-use properties Industrial manufacturing warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
December 31 201 J
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties lndustnal manufactunng warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
Pass
$ 61710000 $
272359000 88002000 85430000 63660000
104525000
1531 14000
$ 828800000 $
$
$
Pass
s 62034000 $
250040000 76086000 85355000 60643000
108880000 1 1 7047000
s 760085000 $
$
$
1 8
Special Mention Substandard Doubtful Total
$ 1 016000 $ 168000 s 62894000
3701000 17384000 3483000 296927000 635000 1870000 90507000 238000 7175000 2728000 95571000
1353000 65013000 1 130000 4480000 110 135000
5937000 3461000 596000 163108000
10511 000 $ 32036000 $ 12808000 $ 884155000
Performing Non-periorming Total
140783000 s 2796000 $ 143579000
743000 743000
141 526000 s 2796000 $ 144322000
Special Mention Substandard Doubtful Total
$ 342000 $ 266000 s 62642000
10871000 25778000 15263000 301952000 1 885000 1905000 4526000 84402000 1 714000 6801000 3644000 97514000
273000 60916000 925000 11 506000 1213 1 1 000
381000 4064000 2027000 123519000
14851 000 $ 39815000 s 37505000 $ 852256000
Performing Non-performing Total
127597000 $ 2308000 $ 129905000
1 229000 1 229000
1 28826000 $ 2308000 $ 1 3 1 1 34000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables provide additional detail of the activity in the allowance for loan losses by portfolio segment for the years ended December 3 1 2014 and 2013
Construction
Commercial and land Rcs1dent1al Consumer
December 31 2014 Commercial Real Es1ate Develoement Real Estate lnsallment Total
Allowanco for loan lossos
Beg1nn1ng balance 1385000 20052000 3549000 2623000 17000 27626000
PrOV1Son for loan losses 2210000 2680000 2007000 3000 6900000
Loans chargedmiddotoff (179000) (8163000) 687000) (2140000) (11169000)
Recovenes of loans
previously charged-off 85000 2916000 223000 3224000
Ending balance s 1291000 1701 5000 5542000 271 3000 s 20000 s 26581000
Poriod-ondtd llmount allocatod to loans
lndMdually evaluated for
1mpa1rment 200000 445000 36000 52000 s 733000
Collec11vely evaluated
for 1mpa1rrnent 1091 000 16570000 5506000 2661000 20000 25648000
Ending balance 1291000 17015000 5542000 s 2713000 20000 26581000
Loans
lndMdually evaluated for
impairment 368000 17274000 3526000 4048000 25216000
Collecively evalua1ed
for 1mpa1rrnent 62526000 640879000 159582000 139531000 743000 1003261000
Ending balance 62894000 658 153000 163108000 143579000 743000 1028477000
Construct1on
Commercial and Land Residential Consumer
December 31 2013 Commeroal Real Estate Development Real Eslale Installment Total
Allowance for loan losses
Beginning balance 1040000 18719000 2484000 2248000 17000 24508000
Provision for loan losses 363000 6508000 867000 784000 28000 8550000
Loans chargedmiddot Off (59000) (5817000) (122000) (457000) (28000) (6483000)
Recoveries ol loans
previously charged-off 41 000 642000 320000 48000 1051000
Ending balance 1385000 20052000 3549000 s 2623000 17000 27626000
Period-ended amount allocated to loans
Individually evaluated for
impairment 3475000 239000 61000 3775000
Collectively evaluated
for impairment 1385000 16577000 3310000 2562000 17000 23851000
Ending balance 1385000 20052000 3549000 2623000 17000 27626000
Loans
Individually evaluated for
1mpa1rment 266000 42380000 5522000 s 3307000 51475000
Collectively evalua1ed
for impairment 62376000 623715000 1 17997000 126598000 1229000 931915000
Endrng balance 62642000 666095000 123519000 129905000 1229000 983390000
1 9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present additional detail of impaired loans segregated by class as of December 3 1 2014 and 2013 The unpaid principal balance represents the recorded balance prior to any partial charge-offs The recorded investment represents customer balances net of any partial charge-offs recognized on the loans The interest income recognized column represents all interest income reported either on a cash or accrued basis after the loan became impaired The cash basis income column represents only the interest income recognized on a cash basis after the loan was classified as impaired
December 31 2014
Wih no relaed allowance recorded
Commercial Commercial real estale
Reail properties Multifamily Mixed-use properties lndustnal manufacturing
warehouse Other commercial real estate
Construction and land developmen
Residential real estate Consumer installment
Wi1h an allowance recorded Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties Industrial manufacturing
warehouse Other commercial real estate
Construction and land development
Residential real estate Consumer installment
To1al
$
$
Unpaid Principal Balance
216000 $
7266000
3283000
2861000 6121000
3672000 6045000
200000
564000 2421000
1 62000 170000
Recorded Investment
168000 s
5543000
3119000
1353000 4480000
3400000 3878000
200000
564000 2215000
126000 170000
32981000 $ 25216000 $
20
Allowance for Loan Losses
Allocated
200000
42000 403000
36000 52000
733000
Average Recorded
Investment
$ 208000 $
1 1 474000 3514000 4354000
131 5000 5509000
4 183000 4673000
29000
677000 2270000
141 000 44000
$ 38391000 $
Interest Income
Recognized
109000 48000
161 000
125000 33000
38000
5000
519000
$
$
Cash Basis Interest Income
Recognized
108000 48000
1 57000
1 1 3000 32000
38000
5000
501000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Cash Basis Unpaid Allowance for Average Interest Interest
Principal Recorded Loan Losses Recorded Income Income December 31 2013 Balance Investment Allocated Investment Recognized Recognized
With no related allowance recordedmiddot
Commercial $ 266000 $ 266000 $ $ 326000 $ $ Commercial real estate
Retail properties 26699000 12500000 10635000 146000 139000 Multifamily 5542000 4526000 4838000 88000 88000 Mixed-use properties 3123000 2527000 2750000 103000 102000 Industrial manufacturing
warehouse 1 641000 273000 528000 Other commercial real estate 4056000 3497000 3617000
Construction and land development 8517000 3965000 4971000 1 1 4000 1 14000
Residenial rear estate 3769000 3203000 3203000 47000 43000 Consumer installment
With an allowance recorded Commercial Commercial real estate
Retarl properties 6138000 5239000 2045000 4759000 35000 35000 Multifamily 692000 682000 69000 687000 38000 38000 Mixed-use properties 5764000 5 127000 778000 4200000 92000 87000 Industrial manufacturing
warehouse Other commercial real estate 10001000 8009000 583000 8986000
Construction and land development 2770000 1 557000 239000 1 853000
Residential real estate 120000 104000 61000 1 04000 Consumer installment
Total $ 79298000 $ 51475000 $ 3775000 $ 51457000 $ 663000 $ 646000
21
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present troubled debt restructurings and the financial effects of troubled debt restructurings
Year Ended December 31 2014
Pre-Modification Post-Modification Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reserves
Commercial $ 288000 $ 168000 $
Commercial real estate
Retail properties 3 1790000 2060000
Multifamily 1 409000 672000 732000
Mixed-use properties 6 4660000 3 118000 974000
Industrial manufacturing warehouse Other commercial real estate 4682000 2864000 1 272000
Construction and land development 1 3924000 2930000 500000
Residential real estate 3 1288000 1 252000 52000
Consumer installment Total 16 $ 1 8041000 $ 13064000 $ 3530000
Year Ended December 3 1 2013
Pre-Modification Post-Modification
Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reseives
Commercial $ $ $
Commercial real estate
Retail properties 3 8596000 3651000 4363000
Multifamily 2 7026000 5090000 1598000
Mixed-use properties 7 6005000 4421000 1 612000
Industrial manufacturing warehouse
Other commercial real estate 5 14589000 10888000 2578000
Construction and land development 3 7409000 4493000 1 162000
Residential real estate 3 1515000 1 371000 117000
Consumer installment Total 23 $ 45 140000 $ 29914000 $ 11430000
Troubled debt restructurings that were accruing interest were $9520000 and $ 1 1 382000 respectively as of December 3 1 2014 and 2013 Troubled debt restructurings that were non-accruing were $3544000 and $ 1 8532000 respectively as of December 3 1 2014 and 201 3 Troubled debt restructurings included loans where the loan principal and corresponding interest rate was reduced and i n some instances the loan amortization period was extended During 2014 there were three troubled debt restructurings with outstanding balances at the time of re-default was $ 1 1 55000 and loan balances outstanding for these loans at December 3 1 2014 was $239000
22
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present the risk category of loans evaluated by internal asset classification based on the most recent analysis performed and the contractual aging as of December 31 2014 and 2013
December 31 2014
Commercial Commercial real estate
Retail properties Multifamily
Mixed-use properties Industrial manufacturing warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
December 31 201 J
Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties lndustnal manufactunng warehouse
Other commercial real estate Construction and land development
Total
Residential real estate
Consumer installment
Total
Pass
$ 61710000 $
272359000 88002000 85430000 63660000
104525000
1531 14000
$ 828800000 $
$
$
Pass
s 62034000 $
250040000 76086000 85355000 60643000
108880000 1 1 7047000
s 760085000 $
$
$
1 8
Special Mention Substandard Doubtful Total
$ 1 016000 $ 168000 s 62894000
3701000 17384000 3483000 296927000 635000 1870000 90507000 238000 7175000 2728000 95571000
1353000 65013000 1 130000 4480000 110 135000
5937000 3461000 596000 163108000
10511 000 $ 32036000 $ 12808000 $ 884155000
Performing Non-periorming Total
140783000 s 2796000 $ 143579000
743000 743000
141 526000 s 2796000 $ 144322000
Special Mention Substandard Doubtful Total
$ 342000 $ 266000 s 62642000
10871000 25778000 15263000 301952000 1 885000 1905000 4526000 84402000 1 714000 6801000 3644000 97514000
273000 60916000 925000 11 506000 1213 1 1 000
381000 4064000 2027000 123519000
14851 000 $ 39815000 s 37505000 $ 852256000
Performing Non-performing Total
127597000 $ 2308000 $ 129905000
1 229000 1 229000
1 28826000 $ 2308000 $ 1 3 1 1 34000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables provide additional detail of the activity in the allowance for loan losses by portfolio segment for the years ended December 3 1 2014 and 2013
Construction
Commercial and land Rcs1dent1al Consumer
December 31 2014 Commercial Real Es1ate Develoement Real Estate lnsallment Total
Allowanco for loan lossos
Beg1nn1ng balance 1385000 20052000 3549000 2623000 17000 27626000
PrOV1Son for loan losses 2210000 2680000 2007000 3000 6900000
Loans chargedmiddotoff (179000) (8163000) 687000) (2140000) (11169000)
Recovenes of loans
previously charged-off 85000 2916000 223000 3224000
Ending balance s 1291000 1701 5000 5542000 271 3000 s 20000 s 26581000
Poriod-ondtd llmount allocatod to loans
lndMdually evaluated for
1mpa1rment 200000 445000 36000 52000 s 733000
Collec11vely evaluated
for 1mpa1rrnent 1091 000 16570000 5506000 2661000 20000 25648000
Ending balance 1291000 17015000 5542000 s 2713000 20000 26581000
Loans
lndMdually evaluated for
impairment 368000 17274000 3526000 4048000 25216000
Collecively evalua1ed
for 1mpa1rrnent 62526000 640879000 159582000 139531000 743000 1003261000
Ending balance 62894000 658 153000 163108000 143579000 743000 1028477000
Construct1on
Commercial and Land Residential Consumer
December 31 2013 Commeroal Real Estate Development Real Eslale Installment Total
Allowance for loan losses
Beginning balance 1040000 18719000 2484000 2248000 17000 24508000
Provision for loan losses 363000 6508000 867000 784000 28000 8550000
Loans chargedmiddot Off (59000) (5817000) (122000) (457000) (28000) (6483000)
Recoveries ol loans
previously charged-off 41 000 642000 320000 48000 1051000
Ending balance 1385000 20052000 3549000 s 2623000 17000 27626000
Period-ended amount allocated to loans
Individually evaluated for
impairment 3475000 239000 61000 3775000
Collectively evaluated
for impairment 1385000 16577000 3310000 2562000 17000 23851000
Ending balance 1385000 20052000 3549000 2623000 17000 27626000
Loans
Individually evaluated for
1mpa1rment 266000 42380000 5522000 s 3307000 51475000
Collectively evalua1ed
for impairment 62376000 623715000 1 17997000 126598000 1229000 931915000
Endrng balance 62642000 666095000 123519000 129905000 1229000 983390000
1 9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present additional detail of impaired loans segregated by class as of December 3 1 2014 and 2013 The unpaid principal balance represents the recorded balance prior to any partial charge-offs The recorded investment represents customer balances net of any partial charge-offs recognized on the loans The interest income recognized column represents all interest income reported either on a cash or accrued basis after the loan became impaired The cash basis income column represents only the interest income recognized on a cash basis after the loan was classified as impaired
December 31 2014
Wih no relaed allowance recorded
Commercial Commercial real estale
Reail properties Multifamily Mixed-use properties lndustnal manufacturing
warehouse Other commercial real estate
Construction and land developmen
Residential real estate Consumer installment
Wi1h an allowance recorded Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties Industrial manufacturing
warehouse Other commercial real estate
Construction and land development
Residential real estate Consumer installment
To1al
$
$
Unpaid Principal Balance
216000 $
7266000
3283000
2861000 6121000
3672000 6045000
200000
564000 2421000
1 62000 170000
Recorded Investment
168000 s
5543000
3119000
1353000 4480000
3400000 3878000
200000
564000 2215000
126000 170000
32981000 $ 25216000 $
20
Allowance for Loan Losses
Allocated
200000
42000 403000
36000 52000
733000
Average Recorded
Investment
$ 208000 $
1 1 474000 3514000 4354000
131 5000 5509000
4 183000 4673000
29000
677000 2270000
141 000 44000
$ 38391000 $
Interest Income
Recognized
109000 48000
161 000
125000 33000
38000
5000
519000
$
$
Cash Basis Interest Income
Recognized
108000 48000
1 57000
1 1 3000 32000
38000
5000
501000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Cash Basis Unpaid Allowance for Average Interest Interest
Principal Recorded Loan Losses Recorded Income Income December 31 2013 Balance Investment Allocated Investment Recognized Recognized
With no related allowance recordedmiddot
Commercial $ 266000 $ 266000 $ $ 326000 $ $ Commercial real estate
Retail properties 26699000 12500000 10635000 146000 139000 Multifamily 5542000 4526000 4838000 88000 88000 Mixed-use properties 3123000 2527000 2750000 103000 102000 Industrial manufacturing
warehouse 1 641000 273000 528000 Other commercial real estate 4056000 3497000 3617000
Construction and land development 8517000 3965000 4971000 1 1 4000 1 14000
Residenial rear estate 3769000 3203000 3203000 47000 43000 Consumer installment
With an allowance recorded Commercial Commercial real estate
Retarl properties 6138000 5239000 2045000 4759000 35000 35000 Multifamily 692000 682000 69000 687000 38000 38000 Mixed-use properties 5764000 5 127000 778000 4200000 92000 87000 Industrial manufacturing
warehouse Other commercial real estate 10001000 8009000 583000 8986000
Construction and land development 2770000 1 557000 239000 1 853000
Residential real estate 120000 104000 61000 1 04000 Consumer installment
Total $ 79298000 $ 51475000 $ 3775000 $ 51457000 $ 663000 $ 646000
21
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present troubled debt restructurings and the financial effects of troubled debt restructurings
Year Ended December 31 2014
Pre-Modification Post-Modification Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reserves
Commercial $ 288000 $ 168000 $
Commercial real estate
Retail properties 3 1790000 2060000
Multifamily 1 409000 672000 732000
Mixed-use properties 6 4660000 3 118000 974000
Industrial manufacturing warehouse Other commercial real estate 4682000 2864000 1 272000
Construction and land development 1 3924000 2930000 500000
Residential real estate 3 1288000 1 252000 52000
Consumer installment Total 16 $ 1 8041000 $ 13064000 $ 3530000
Year Ended December 3 1 2013
Pre-Modification Post-Modification
Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reseives
Commercial $ $ $
Commercial real estate
Retail properties 3 8596000 3651000 4363000
Multifamily 2 7026000 5090000 1598000
Mixed-use properties 7 6005000 4421000 1 612000
Industrial manufacturing warehouse
Other commercial real estate 5 14589000 10888000 2578000
Construction and land development 3 7409000 4493000 1 162000
Residential real estate 3 1515000 1 371000 117000
Consumer installment Total 23 $ 45 140000 $ 29914000 $ 11430000
Troubled debt restructurings that were accruing interest were $9520000 and $ 1 1 382000 respectively as of December 3 1 2014 and 2013 Troubled debt restructurings that were non-accruing were $3544000 and $ 1 8532000 respectively as of December 3 1 2014 and 201 3 Troubled debt restructurings included loans where the loan principal and corresponding interest rate was reduced and i n some instances the loan amortization period was extended During 2014 there were three troubled debt restructurings with outstanding balances at the time of re-default was $ 1 1 55000 and loan balances outstanding for these loans at December 3 1 2014 was $239000
22
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables provide additional detail of the activity in the allowance for loan losses by portfolio segment for the years ended December 3 1 2014 and 2013
Construction
Commercial and land Rcs1dent1al Consumer
December 31 2014 Commercial Real Es1ate Develoement Real Estate lnsallment Total
Allowanco for loan lossos
Beg1nn1ng balance 1385000 20052000 3549000 2623000 17000 27626000
PrOV1Son for loan losses 2210000 2680000 2007000 3000 6900000
Loans chargedmiddotoff (179000) (8163000) 687000) (2140000) (11169000)
Recovenes of loans
previously charged-off 85000 2916000 223000 3224000
Ending balance s 1291000 1701 5000 5542000 271 3000 s 20000 s 26581000
Poriod-ondtd llmount allocatod to loans
lndMdually evaluated for
1mpa1rment 200000 445000 36000 52000 s 733000
Collec11vely evaluated
for 1mpa1rrnent 1091 000 16570000 5506000 2661000 20000 25648000
Ending balance 1291000 17015000 5542000 s 2713000 20000 26581000
Loans
lndMdually evaluated for
impairment 368000 17274000 3526000 4048000 25216000
Collecively evalua1ed
for 1mpa1rrnent 62526000 640879000 159582000 139531000 743000 1003261000
Ending balance 62894000 658 153000 163108000 143579000 743000 1028477000
Construct1on
Commercial and Land Residential Consumer
December 31 2013 Commeroal Real Estate Development Real Eslale Installment Total
Allowance for loan losses
Beginning balance 1040000 18719000 2484000 2248000 17000 24508000
Provision for loan losses 363000 6508000 867000 784000 28000 8550000
Loans chargedmiddot Off (59000) (5817000) (122000) (457000) (28000) (6483000)
Recoveries ol loans
previously charged-off 41 000 642000 320000 48000 1051000
Ending balance 1385000 20052000 3549000 s 2623000 17000 27626000
Period-ended amount allocated to loans
Individually evaluated for
impairment 3475000 239000 61000 3775000
Collectively evaluated
for impairment 1385000 16577000 3310000 2562000 17000 23851000
Ending balance 1385000 20052000 3549000 2623000 17000 27626000
Loans
Individually evaluated for
1mpa1rment 266000 42380000 5522000 s 3307000 51475000
Collectively evalua1ed
for impairment 62376000 623715000 1 17997000 126598000 1229000 931915000
Endrng balance 62642000 666095000 123519000 129905000 1229000 983390000
1 9
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present additional detail of impaired loans segregated by class as of December 3 1 2014 and 2013 The unpaid principal balance represents the recorded balance prior to any partial charge-offs The recorded investment represents customer balances net of any partial charge-offs recognized on the loans The interest income recognized column represents all interest income reported either on a cash or accrued basis after the loan became impaired The cash basis income column represents only the interest income recognized on a cash basis after the loan was classified as impaired
December 31 2014
Wih no relaed allowance recorded
Commercial Commercial real estale
Reail properties Multifamily Mixed-use properties lndustnal manufacturing
warehouse Other commercial real estate
Construction and land developmen
Residential real estate Consumer installment
Wi1h an allowance recorded Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties Industrial manufacturing
warehouse Other commercial real estate
Construction and land development
Residential real estate Consumer installment
To1al
$
$
Unpaid Principal Balance
216000 $
7266000
3283000
2861000 6121000
3672000 6045000
200000
564000 2421000
1 62000 170000
Recorded Investment
168000 s
5543000
3119000
1353000 4480000
3400000 3878000
200000
564000 2215000
126000 170000
32981000 $ 25216000 $
20
Allowance for Loan Losses
Allocated
200000
42000 403000
36000 52000
733000
Average Recorded
Investment
$ 208000 $
1 1 474000 3514000 4354000
131 5000 5509000
4 183000 4673000
29000
677000 2270000
141 000 44000
$ 38391000 $
Interest Income
Recognized
109000 48000
161 000
125000 33000
38000
5000
519000
$
$
Cash Basis Interest Income
Recognized
108000 48000
1 57000
1 1 3000 32000
38000
5000
501000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Cash Basis Unpaid Allowance for Average Interest Interest
Principal Recorded Loan Losses Recorded Income Income December 31 2013 Balance Investment Allocated Investment Recognized Recognized
With no related allowance recordedmiddot
Commercial $ 266000 $ 266000 $ $ 326000 $ $ Commercial real estate
Retail properties 26699000 12500000 10635000 146000 139000 Multifamily 5542000 4526000 4838000 88000 88000 Mixed-use properties 3123000 2527000 2750000 103000 102000 Industrial manufacturing
warehouse 1 641000 273000 528000 Other commercial real estate 4056000 3497000 3617000
Construction and land development 8517000 3965000 4971000 1 1 4000 1 14000
Residenial rear estate 3769000 3203000 3203000 47000 43000 Consumer installment
With an allowance recorded Commercial Commercial real estate
Retarl properties 6138000 5239000 2045000 4759000 35000 35000 Multifamily 692000 682000 69000 687000 38000 38000 Mixed-use properties 5764000 5 127000 778000 4200000 92000 87000 Industrial manufacturing
warehouse Other commercial real estate 10001000 8009000 583000 8986000
Construction and land development 2770000 1 557000 239000 1 853000
Residential real estate 120000 104000 61000 1 04000 Consumer installment
Total $ 79298000 $ 51475000 $ 3775000 $ 51457000 $ 663000 $ 646000
21
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present troubled debt restructurings and the financial effects of troubled debt restructurings
Year Ended December 31 2014
Pre-Modification Post-Modification Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reserves
Commercial $ 288000 $ 168000 $
Commercial real estate
Retail properties 3 1790000 2060000
Multifamily 1 409000 672000 732000
Mixed-use properties 6 4660000 3 118000 974000
Industrial manufacturing warehouse Other commercial real estate 4682000 2864000 1 272000
Construction and land development 1 3924000 2930000 500000
Residential real estate 3 1288000 1 252000 52000
Consumer installment Total 16 $ 1 8041000 $ 13064000 $ 3530000
Year Ended December 3 1 2013
Pre-Modification Post-Modification
Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reseives
Commercial $ $ $
Commercial real estate
Retail properties 3 8596000 3651000 4363000
Multifamily 2 7026000 5090000 1598000
Mixed-use properties 7 6005000 4421000 1 612000
Industrial manufacturing warehouse
Other commercial real estate 5 14589000 10888000 2578000
Construction and land development 3 7409000 4493000 1 162000
Residential real estate 3 1515000 1 371000 117000
Consumer installment Total 23 $ 45 140000 $ 29914000 $ 11430000
Troubled debt restructurings that were accruing interest were $9520000 and $ 1 1 382000 respectively as of December 3 1 2014 and 2013 Troubled debt restructurings that were non-accruing were $3544000 and $ 1 8532000 respectively as of December 3 1 2014 and 201 3 Troubled debt restructurings included loans where the loan principal and corresponding interest rate was reduced and i n some instances the loan amortization period was extended During 2014 there were three troubled debt restructurings with outstanding balances at the time of re-default was $ 1 1 55000 and loan balances outstanding for these loans at December 3 1 2014 was $239000
22
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present additional detail of impaired loans segregated by class as of December 3 1 2014 and 2013 The unpaid principal balance represents the recorded balance prior to any partial charge-offs The recorded investment represents customer balances net of any partial charge-offs recognized on the loans The interest income recognized column represents all interest income reported either on a cash or accrued basis after the loan became impaired The cash basis income column represents only the interest income recognized on a cash basis after the loan was classified as impaired
December 31 2014
Wih no relaed allowance recorded
Commercial Commercial real estale
Reail properties Multifamily Mixed-use properties lndustnal manufacturing
warehouse Other commercial real estate
Construction and land developmen
Residential real estate Consumer installment
Wi1h an allowance recorded Commercial Commercial real estate
Retail properties Multifamily Mixed-use properties Industrial manufacturing
warehouse Other commercial real estate
Construction and land development
Residential real estate Consumer installment
To1al
$
$
Unpaid Principal Balance
216000 $
7266000
3283000
2861000 6121000
3672000 6045000
200000
564000 2421000
1 62000 170000
Recorded Investment
168000 s
5543000
3119000
1353000 4480000
3400000 3878000
200000
564000 2215000
126000 170000
32981000 $ 25216000 $
20
Allowance for Loan Losses
Allocated
200000
42000 403000
36000 52000
733000
Average Recorded
Investment
$ 208000 $
1 1 474000 3514000 4354000
131 5000 5509000
4 183000 4673000
29000
677000 2270000
141 000 44000
$ 38391000 $
Interest Income
Recognized
109000 48000
161 000
125000 33000
38000
5000
519000
$
$
Cash Basis Interest Income
Recognized
108000 48000
1 57000
1 1 3000 32000
38000
5000
501000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Cash Basis Unpaid Allowance for Average Interest Interest
Principal Recorded Loan Losses Recorded Income Income December 31 2013 Balance Investment Allocated Investment Recognized Recognized
With no related allowance recordedmiddot
Commercial $ 266000 $ 266000 $ $ 326000 $ $ Commercial real estate
Retail properties 26699000 12500000 10635000 146000 139000 Multifamily 5542000 4526000 4838000 88000 88000 Mixed-use properties 3123000 2527000 2750000 103000 102000 Industrial manufacturing
warehouse 1 641000 273000 528000 Other commercial real estate 4056000 3497000 3617000
Construction and land development 8517000 3965000 4971000 1 1 4000 1 14000
Residenial rear estate 3769000 3203000 3203000 47000 43000 Consumer installment
With an allowance recorded Commercial Commercial real estate
Retarl properties 6138000 5239000 2045000 4759000 35000 35000 Multifamily 692000 682000 69000 687000 38000 38000 Mixed-use properties 5764000 5 127000 778000 4200000 92000 87000 Industrial manufacturing
warehouse Other commercial real estate 10001000 8009000 583000 8986000
Construction and land development 2770000 1 557000 239000 1 853000
Residential real estate 120000 104000 61000 1 04000 Consumer installment
Total $ 79298000 $ 51475000 $ 3775000 $ 51457000 $ 663000 $ 646000
21
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present troubled debt restructurings and the financial effects of troubled debt restructurings
Year Ended December 31 2014
Pre-Modification Post-Modification Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reserves
Commercial $ 288000 $ 168000 $
Commercial real estate
Retail properties 3 1790000 2060000
Multifamily 1 409000 672000 732000
Mixed-use properties 6 4660000 3 118000 974000
Industrial manufacturing warehouse Other commercial real estate 4682000 2864000 1 272000
Construction and land development 1 3924000 2930000 500000
Residential real estate 3 1288000 1 252000 52000
Consumer installment Total 16 $ 1 8041000 $ 13064000 $ 3530000
Year Ended December 3 1 2013
Pre-Modification Post-Modification
Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reseives
Commercial $ $ $
Commercial real estate
Retail properties 3 8596000 3651000 4363000
Multifamily 2 7026000 5090000 1598000
Mixed-use properties 7 6005000 4421000 1 612000
Industrial manufacturing warehouse
Other commercial real estate 5 14589000 10888000 2578000
Construction and land development 3 7409000 4493000 1 162000
Residential real estate 3 1515000 1 371000 117000
Consumer installment Total 23 $ 45 140000 $ 29914000 $ 11430000
Troubled debt restructurings that were accruing interest were $9520000 and $ 1 1 382000 respectively as of December 3 1 2014 and 2013 Troubled debt restructurings that were non-accruing were $3544000 and $ 1 8532000 respectively as of December 3 1 2014 and 201 3 Troubled debt restructurings included loans where the loan principal and corresponding interest rate was reduced and i n some instances the loan amortization period was extended During 2014 there were three troubled debt restructurings with outstanding balances at the time of re-default was $ 1 1 55000 and loan balances outstanding for these loans at December 3 1 2014 was $239000
22
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
Cash Basis Unpaid Allowance for Average Interest Interest
Principal Recorded Loan Losses Recorded Income Income December 31 2013 Balance Investment Allocated Investment Recognized Recognized
With no related allowance recordedmiddot
Commercial $ 266000 $ 266000 $ $ 326000 $ $ Commercial real estate
Retail properties 26699000 12500000 10635000 146000 139000 Multifamily 5542000 4526000 4838000 88000 88000 Mixed-use properties 3123000 2527000 2750000 103000 102000 Industrial manufacturing
warehouse 1 641000 273000 528000 Other commercial real estate 4056000 3497000 3617000
Construction and land development 8517000 3965000 4971000 1 1 4000 1 14000
Residenial rear estate 3769000 3203000 3203000 47000 43000 Consumer installment
With an allowance recorded Commercial Commercial real estate
Retarl properties 6138000 5239000 2045000 4759000 35000 35000 Multifamily 692000 682000 69000 687000 38000 38000 Mixed-use properties 5764000 5 127000 778000 4200000 92000 87000 Industrial manufacturing
warehouse Other commercial real estate 10001000 8009000 583000 8986000
Construction and land development 2770000 1 557000 239000 1 853000
Residential real estate 120000 104000 61000 1 04000 Consumer installment
Total $ 79298000 $ 51475000 $ 3775000 $ 51457000 $ 663000 $ 646000
21
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present troubled debt restructurings and the financial effects of troubled debt restructurings
Year Ended December 31 2014
Pre-Modification Post-Modification Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reserves
Commercial $ 288000 $ 168000 $
Commercial real estate
Retail properties 3 1790000 2060000
Multifamily 1 409000 672000 732000
Mixed-use properties 6 4660000 3 118000 974000
Industrial manufacturing warehouse Other commercial real estate 4682000 2864000 1 272000
Construction and land development 1 3924000 2930000 500000
Residential real estate 3 1288000 1 252000 52000
Consumer installment Total 16 $ 1 8041000 $ 13064000 $ 3530000
Year Ended December 3 1 2013
Pre-Modification Post-Modification
Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reseives
Commercial $ $ $
Commercial real estate
Retail properties 3 8596000 3651000 4363000
Multifamily 2 7026000 5090000 1598000
Mixed-use properties 7 6005000 4421000 1 612000
Industrial manufacturing warehouse
Other commercial real estate 5 14589000 10888000 2578000
Construction and land development 3 7409000 4493000 1 162000
Residential real estate 3 1515000 1 371000 117000
Consumer installment Total 23 $ 45 140000 $ 29914000 $ 11430000
Troubled debt restructurings that were accruing interest were $9520000 and $ 1 1 382000 respectively as of December 3 1 2014 and 2013 Troubled debt restructurings that were non-accruing were $3544000 and $ 1 8532000 respectively as of December 3 1 2014 and 201 3 Troubled debt restructurings included loans where the loan principal and corresponding interest rate was reduced and i n some instances the loan amortization period was extended During 2014 there were three troubled debt restructurings with outstanding balances at the time of re-default was $ 1 1 55000 and loan balances outstanding for these loans at December 3 1 2014 was $239000
22
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 4 Loans (Continued)
The following tables present troubled debt restructurings and the financial effects of troubled debt restructurings
Year Ended December 31 2014
Pre-Modification Post-Modification Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reserves
Commercial $ 288000 $ 168000 $
Commercial real estate
Retail properties 3 1790000 2060000
Multifamily 1 409000 672000 732000
Mixed-use properties 6 4660000 3 118000 974000
Industrial manufacturing warehouse Other commercial real estate 4682000 2864000 1 272000
Construction and land development 1 3924000 2930000 500000
Residential real estate 3 1288000 1 252000 52000
Consumer installment Total 16 $ 1 8041000 $ 13064000 $ 3530000
Year Ended December 3 1 2013
Pre-Modification Post-Modification
Outstanding Outstanding Charge-offs
Number of Recorded Recorded and Specific Contracts Investment Investment Reseives
Commercial $ $ $
Commercial real estate
Retail properties 3 8596000 3651000 4363000
Multifamily 2 7026000 5090000 1598000
Mixed-use properties 7 6005000 4421000 1 612000
Industrial manufacturing warehouse
Other commercial real estate 5 14589000 10888000 2578000
Construction and land development 3 7409000 4493000 1 162000
Residential real estate 3 1515000 1 371000 117000
Consumer installment Total 23 $ 45 140000 $ 29914000 $ 11430000
Troubled debt restructurings that were accruing interest were $9520000 and $ 1 1 382000 respectively as of December 3 1 2014 and 2013 Troubled debt restructurings that were non-accruing were $3544000 and $ 1 8532000 respectively as of December 3 1 2014 and 201 3 Troubled debt restructurings included loans where the loan principal and corresponding interest rate was reduced and i n some instances the loan amortization period was extended During 2014 there were three troubled debt restructurings with outstanding balances at the time of re-default was $ 1 1 55000 and loan balances outstanding for these loans at December 3 1 2014 was $239000
22
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 5 Other Real Estate Owned
An analysis of other real estate owned is as follows
Balance beginning
Transfer of loans
Sales financed by Bank
OREO improvements
Proceeds on sale
Wntedown to realizable value
Net gain on sale
$
$
Expense applicable to other real estate owned include the following
Operating expenses net of rental income
Writedown to realizable value
Net gain on sale
23
$
$
December 31 2014 2013
1 1 399000 $ 14043000 1 881 000 1 345000
(5689000) 706000
(4644000) (2225000) (728000) (1 778000)
1 794000 14000 471 9000 $ 1 1 399000
Years Ended December 31 2014 2013
747000 $ 183000 728000 1 778000
(1 794000) (14000) (319000) $ 1 947000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 6 Premises and Equipment and Lease Commitments
Premises and equipment are summarized as follows
December 3 1
2014 2013
Land $ 1 0075000 $ 8913000
Building 1 1 553000 1 1 213000
Leasehold improvements 732000 732000
Furniture and fixtures 8946000 8448000
Construction in-process 4623000
35929000 29306000
Less accumulated depreciation 1 3640000 1 2749000
$ 22289000 $ 1 6557000
During December 201 3 the Metropolitan Pier and Exposition Authority acquired the Lakeside Bank branch location at 2000 S Indiana Avenue in Chicago Illinois through a condemnation proceeding I n accordance with a n Agreed Order Fixing Preliminary Just Compensation Lakeside Bank received proceeds of $9600000 from the Metropolitan and Pier Exposition Authority for the real estate property These proceeds resulted in Lakeside Bank recording a gain on the disposal of $9 0 1 1 000 during the year ended December 3 1 2013 The Bank also acquired land for $530 1 000 on which it started construction of the branch to be completed in 2015 Construction in-process of $4623000 reflects total costs incurred as of December 3 1 2014
The Bank is obligated under non-cancelable leases for its facilities which will expire at various dates through 2024 All leases for these facilities are classified as operating leases and some contain an option to renew or extend the lease term for periods of 5-1 5 years In addition to the minimum rental certain leases contain real estate tax payment requirements andor escalationannual adjustment clauses
The total minimum base rental commitments under operating leases are as follows
Years ending December 3 1
2015
201 6
201 7
2018
201 9
During the remaining term of the lease
Future minimum rental payments
$
$
526000
372000
379000
385000
392000
1 996000
4050000
Total rental expense for operating leases for the years ended December 31 2014 and 201 3 was $619 000 and $594000 respectively
24
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 7 Deposits
The Bank had brokered deposits of $20242 1 000 and $ 1 34668000 at December 31 2 0 1 4 and 201 3 respectively
The Bank participates in a deposit placement program that allows for reciprocal deposits from other banks in the program or al lows for the Bank to place deposits with other participating banks The purpose of the deposit placement program is to allow customers to obtain FDIC insurance coverage for deposits at the Bank that exceed $250 000 The Bank had time deposits aggregating $73 1 1 6000 and $79453 000 that exceed $250000 at December 3 1 2014 and 2013 respectively The Bank had time deposits aggregating $22 872000 and $31 269000 in the reciprocal program at December 3 1 2014 and 201 3 respectively
At December 31 2014 the scheduled maturities of time deposits are as follows
Years ending December 31
201 5 $ 228420000
2016 1 1 4 196000
201 7 68003000
2018 26556000
Thereafter 10 987000
$ 448 162000
Note 8 Short-Term Borrowings
Short-term borrowings consist of securities sold under agreements to repurchase which are classified as secured borrowings and generally mature within one to four days from the transaction date Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction The Bank may be required to provide additional collateral based on the fair value of the underlying securities
The Company has the ability to obtain short-term borrowings through the Federal Reserve Bank of Chicagos Federal Discount Window Borrower in Custody program While no borrowings were outstanding the Company did pledge $ 1 08480000 and $ 1 46 1 97000 in commercial real estate and construction loans to collateralize this short-term borrowing availability at December 3 1 2014 and 201 3 respectively
25
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 9 Long-Term Borrowings
Long-term borrowings consisted of Federal Home Loan Bank advances of the following
December 3 1 2014 2013
Fixed advance 1 26 interest rate due March 2014 $ $ 1 000000 Fixed advance 017 interest rate due March 2015 4000000 Fixed advance 1 74 interest rate due May 2015 2000000 2000000 Fixed advance 097 interest rate due October 2015 5000000 Fixed advance 1 25 interest rate due October 2016 5000000 Fixed advance 1 04 interest rate due July 201 7 3000000 3000000 Fixed advance 1 51 interest rate due October 2017 5000000 Fixed advance 1 71 interest rate due October 2018 5000000 Variable advance 1 63 interest rate due June 2021 3000000 Variable advance 1 49 interest rate due June 2021 3000000
$ 28000000 $ 1 3000000
At December 3 1 2014 the maturities on long-term borrowings are as follows
Years ending December 3 1 201 5 $ 7000000
2016 5000000
201 7 8000000
2018 5000000
Thereafter 3000000 $ 28000000
A collateral pledge agreement requires the Bank to maintain on hand free of all other pledges liens and encumbrances first mortgage loans and 200 for home equity loans of the outstanding secured advances from the Federal Home Loan Bank of Chicago The Bank had $ 1 2541 7000 and $1 1 8778000 of loans pledged as collateral for Federal Home Loan Bank of Chicago advances as of December 31 2014 and 2013 respectively
Additionally the Bank committed to transacting $20000000 in Federal Home Loan Bank of Chicago forward advances The transaction originated on October 26 2012 The transaction obligates the Bank to accept four separate advances of $5000000 each and maintain adequate pledged collateral starting on October 27 2014 The forward advances have maturity dates ranging from October 27 201 5 to October 29 201 8 with interest rates ranging from 097 to 1 71 These advances were executed in 2014 contributing to the Banks increased long-term borrowings from 201 3 to 2014
26
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 10 Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income are as follows
Net Unrealized
Gains ( Losses) Net Unrealized
on Defined Gains (Losses)
Pension Plan on Securities
Balance at December 31 2012 $ (381 1 000) $ 600000
Unrealized gains ( losses) 1 604000 (1 693000)
Balance at December 3 1 2013 (2207000) ( 1 093000)
Unrealized (losses) gains ( 1 896000) 1 1 14000
Balance at December 31 2014 $ (4 1 03000) $ 21 000
27
Accumulated
Other
Comprehensive
Loss
$ (32 1 1 000)
(89000)
(3300000)
(782000)
$ (4082000)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans
The Bank provides two retirement plans covering substantially all employees These plans include a contributory 401 (k) savings plan and a noncontributory defined benefit pension plan
401(k) Plan The Banks 401 (k) plan covers substantially all full-time employees Under the plan employee contributions are partially matched by the Bank Bank contributions for the years ended December 3 1 2 0 1 4 and 201 3 were $1 26000 and $ 1 27000 respectively
Pension Plan The Banks defined benefit pension plan covers substantially all employees The benefits are based on years of service and the employees average compensation during the last 10 years of employment since 1 983 The Banks funding policy is to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1 974 plus such additional amounts as appropriate
Information relative to the Banks defined benefit pension plan is presented below using a measurement date of December 3 1 2014 and 201 3
Obligations and Funded Status
Obligations and funded status at end of years
Fair value of plan assets
Benefit obligations
Funded status - plan assets greater
than benefit obligations
Amounts recognized on balance sheets as
Other assets(liabilities)
Accumulated benefit obligation
Amounts recognized in accumulated other comprehensive
loss consist of
Net loss
$
$
$
$
$
$
December 31
2014 201 3
14978000 $ 1421 5000
1 4299000 1 1 802000
679000 $ 241 3000
679000 $ 2413000
1 2705000 $ 1 0 702 000
Years Ended December 3 1
2014 2013
4 1 03000 $ 2207000
4 1 03000 $ 2 207 000
During 2004 the plan administrator chose a new investment contract Under the prior contract retirees were funded through purchased participating annuities Under the current contract retiree benefits are still guaranteed by an insurance company However the assets supporting retirees are now i nvested at the plan administrators discretion within the investment contract Returns above those needed to support the retiree liability remain in plan assets As a result of this change both retiree assets and liabilities are included in the measurements above
28
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
The assumptions used to determine the benefit obligations are as follows
Discount rate
Rate of compensation increase
Net Periodic Pension Cost $
December 3 1
2014 2013
395
353
475
356
Years Ended December 31
2014 2013
1 23000 $ 507000
The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2 0 1 5 is $1 06000 There is no estimated prior service cost anticipated to be amortized during 2015
The assumptions used to determine net periodic pension cost are as follows
Discount rate Rate of compensation increase Expected return on plan assets
Years Ended December 3 1
2014 2013
475
356
650
400
356
650
Historical and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class The overall rate for each asset class was developed by combining a long-term infiation component the risk-free real rate of return and the associated risk premium A weighted-average rate was developed based on those overall rates and the target asset al location plan
Plan Assets
Asset Cateqorv Equity securities Debt securities Real estate
Total
Percentage of Plan
Assets at December 3 1
2014 201 3
36
38
26
1 00
35dego
42
23
1 00
The Banks overall strategy is to invest in securities and other assets in order to maintain a moderately conservative portfolio The Banks policy limits international securities to 1 0 of total assets I nvestments are reviewed and revised quarterly
29
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 1 Employee Benefit Plans (Continued)
The fair values of the Banks pension plan assets at December 3 1 2014 and 2013 by asset category are as follows
Equity securities
Debt securities
Real estate
Equity securities
Debt securities
Real estate
s
$
$
$
Fair Value Measurements at December 3 1 2014
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
5427000 $ $ 5427000 $ 5755000 5755000
3796000 3796000
14978000 $ $ 14978000 $
Fair Value Measurements at December 3 1 2013
Quoted Prices in Significant Other
Active Markets for Observable
Identical Assets Inputs
Total (Level 1) (Level 2)
4903000 $ $ 4903000 $ 6003000 6003000
3309000 3309000
14215000 $ $ 14215000 $
30
Significant
Unobservable
Inputs
(Level 3)
Significant
Unobservable
Inputs
(Level 3)
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 11 Employee Benefit Plans (Continued)
Cash Flows Pension Plans
Employer contributions during the years ended December 3 1
201 5 (estimated)
2014 (actual)
201 3 (actual)
Benefit payments during the years ended December 3 1
201 4
201 3
$
$
285000
2310000
488000
575000
The following benefit payments which reflect expected future service as appropriate are expected to be
paid during the years ending December 3 1
2015
2016
2017
201 8
2019
Years 2020 - 2024
3 1
$ 530000
560000
530000
530000
640000
3650000
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk
Concentration of credit risk The Bank makes commercial consumer and residential loans to its customers throughout northeastern Illinois The majority of loans made are secured by specific collateral Collateral held varies but may include deposits held in financial institutions US Treasury securities other marketable securities income-producing commercial properties accounts receivable and property plant and equipment The loan portfolio includes a concentration of Joans secured by commercial real estate
Information relative to the Banks concentrations of credit risk by collateral type at December 3 1 201 4 is as follows
Total Percent of
Outstanding loan Percent of
Balance Portfolio Tier 1 Capital
Construction $ 1 1 0721 000 108dego 683oo
Retail restaurant 96309000 94oo 594dego
Mixed-use 95571 000 93dego 589dego
Multifamily 90507000 88 558dego
Retail strip centersstand alone 82187000 801 507
Industrialmanufacturingwarehouse 6501 3000 63 40 1 dego
1 to 4 non-owner 59746000 58 368oo
Retail investment grade 59529000 58dego 367oo
Retail gas station 58902000 57oo 363
Office building 56935000 55 351
land development and vacant 52387000 51dego 3231
Commercial secured 46863000 46 289
Other CRE - recreaionalautoreligious 40 1 18000 39dego 247dego
Home equity Jines of credit 37558000 37 23-2
Condominium non-owner 24538000 2-4dego 1 5 1 dego
Single-family owner occupied 2 1 737000 2 1 134
HealthcareMedical offices 1 3953000 1 4dego 86dego
Other loan types less than 1dego of total loans 1 5903000 1 4 98
$ 1 028477000 1 000
Credit-related financial instruments The Bank is party to credit-related financial instruments with offshybalance-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 amounts recognized on the consolidated balance sheets
The Banks exposure to credit loss is represented by the contractual amount of these comm itments The Bank follows these same credit policies in making commitments as it does for on-balance-sheet instruments
32
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 12 Commitments Contingencies and Credit Risk (Continued)
The following instruments were outstanding whose contract amounts represent credit risk
Commitments to extend credit
Standby letters of credit $
$
December 3 1
2014 2013
17731 6000 $ 1 5077000
1 92 393 000 $
1 55792000
1 3296000
169088000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established 1n the contract Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee The commitments for equity lines of credit may expire without being drawn upon therefore the total commitment amounts do not necessarily represent future cash requirements The Bank evaluates each customers credit worthiness on a case-by-case basis The amount of collateral obtained to secure borrowing on the lines of credit is based on managements credit evaluation of the customer
Unfunded commitments under commercial lines of credit revolving credit lines and overdraft-protection agreements are commitments for possible future extensions of credit to existing customers These lines of credit are collateralized and contain a specified maturity date and ultimately may not be drawn upon to the total extent to which the Bank is committed
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 primarily issued to support public and private borrowing arrangements and generally have terms of one year or less The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Bank holds collateral supporting those commitments if deemed necessary In the event the customer does not perform in accordance with the terms of the agreement with the third party the Bank would be required to fund the commitment The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above If the commitment is funded the Bank would be entitled to seek recovery from the customer At December 3 1
2014 and 2013 no amounts have been recorded as liabilities for the Banks potential obligations under these g uarantees
Contingencies Due to the nature of its business activities the Bank is at all times subject to pending and threatened legal action which arises in the normal course of business I n the opinion of management after considering the advice of its legal counsel there is no pending or threatened legal action of any material consequence at December 3 1 2014
33
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 13 Capital Matters
Provisions of Illinois banking laws place restrictions upon the amount of dividends that can be paid by the Bank Illinois State law requires that no dividends may be paid in an amount greater than the net profits then on hand reduced by certain loan losses (as defined) As a practical matter dividend payments are restricted to lesser amounts because of the desire to maintain a strong capital position
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that 1f undertaken could have a direct material effect on 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 the Banks 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 established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table which follows) of Total and Tier I capital (as defined by the regulations) to risk weighted assets (as defined) and of Tier I capital to average assets (as defined) Management believes as of December 31 2014 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier I risk-based and Tier I leverage ratios as set forth in the table There are no conditions or events since that notification that management believes have changed the Banks category The Banks actual capital ratios are presented in the table below
As of December 31 2014
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier I capital (to average assets)
As of December 31 2013
Total capital (to risk weighted assets) $
Tier I capital (to risk weighted assets) Tier r capital (to average assets)
To Be Well
Capitalized For Capital Under Prompt
Adequacy Corrective Action
Actual Purposes Provisions
Amount Ratio Amount Ratio Amount Ratio (Dollar amounts in thousands)
175351 168dego $ 83474 80dego $ 1 04343 100dego
162141 1 5 5dego 41737 40dego 62606 60dego
162141 1360o 47730 40dego 59663 50oo
1 68035 167 $ 80380 8 0degAi $ 100476 100dega
1 55290 155 40 190 4Q0o 60285 60oo
1 55290 137dego 45363 40dego 56704 50oo
In July 2013 the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on January 1 2015 The rule implements the Basel Committees December 201 O
framework known as Basel I l l for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act The final rule implements a revised definition of regulatory capital a new common equity Tier 1 minimum capital requirement of 450 and a higher minimum Tier 1 capital requirement of 600 (which is an increase from 400) Under the final rule the total capital ratio remains at 800oo and the minimum leverage ratio is 400dego
34
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 3 Capital Matters (Continued)
Additionally under the final rule in order to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers a banking organization must
hold a 25 capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements The buffer is measured relative to risk-weighted assets The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets
The new minimum capital requirements will be effective for the Bank on January 1 2015 whereas the capital conservation buffer and the deductions from common equity Tier 1 capital phase in over time beginning on January 1 2016
Note 14 Transactions with Related Parties
Executive officers and directors of the Bank including their families and companies of which they are principal owners are considered to be related parties Some of these related parties were loan customers of and had other transactions with the Bank 1n the ordinary course of business Loans to related parties totaled approximately $12326000 and $16010000 at December 31 2014 and 2013 respectively
The Bank conducts business with an architectural firm whose principal is a director and with a legal professional firm an insurance brokerage company and a real estate management company whose principals are stockholders of the Parent Company Legal insurance architectural and real estate management services paid to these firms were $701000 and $1 168000 for the years ended December 31 2014 and 2013 respectively
In managements opinion these loans and transactions were on the same terms as those for comparable loans and transactions with unrelated parties
Note 15 Fair Value Measurements
The Bank uses the provisions of Fair Value Measurements and Disclosures (Standard) for assets and liabilities measured and reported at fair value The Standard defines fair value establishes a framework for measuring fair value and expands disclosures about fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants The Standard requires the use of valuation techniques that are consistent with the market approach the income approach andor the cost approach I nputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability I nputs may be observable meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources or unobservable meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances In that regard the Standard establishes a fair value hierarchy for valuation inputs that gives the highest priority to q uoted prices in active markets for identical assets or liabil ities and the lowest priority to unobservable inputs The fair value hierarchy is as follows
Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data
35
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Level 3 Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability
A description of the valuation methodologies used for assets and liabilities measured at fair value as well as the general classification of such instruments pursuant to the valuation h ierarchy is set forth below
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Securities Available for Sale When available quoted market prices are used to determine the fair value of investment securities and such items are classified within Level 1 of the fair value hierarchy An example is US Treasury securities For other securities the Bank determines fair value based on various sources and may apply matrix pricing with observable prices for similar bonds where a price for the identical bond is not observable Securities measured at fair value by such methods are classified as Level 2 Certain securities are not valued based on observable transactions and are therefore classified as Level 3 The fair value of these securities is based on managements best estimates
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31 2014 and 2013 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
Assets
Government-sponsored agencies
State and municipal
Corporate
Residential mortgage-backed
Equity securities
December 3 1
2014
$ 15905000
23390000
6052000
5 188000
267000
December 3 1
2013
$ 17621 000
31 54 1 000
6597000
5828000
261 000
Fair Value Measurements at December 3 1 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Jn puts Inputs
(Level 1 ) (Level 2) (Level 3 )
$ $ 15905000 $
23390000
6052000
51 88000
267000
Fair Value Measurements at December 3 1 2013 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
(Level 1 ) (Level 2) (level 3)
$ $ 1 7621 000 $
3 1 541 000
6597000
5828000
261000
There were no transfers between Level 1 and Level 2 during 2014 and 2013
36
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 1 5 Fair Value Measurements (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Bank may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with US generally accepted accounting principles These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period
Impaired Loans Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or fair value Fair value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value h ierarchy Collateral may be real estate andor business assets including equipment inventory andor accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Bank Appraised and reported values may be d iscounted based on managements h istorical knowledge changes in market conditions from the time of valuation andor managements expertise and knowledge of the client and clients business
Other real estate owned other real estate owned upon initial recognition is measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the other real estate owned Fair values are generally based on third-party appraisals of the property resulting in a Level 3 classification subsequent to the initial transfer periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal In cases where the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized
Assets measured at fair value on a nonrecurring basis are set forth below
Assets
Impaired loans
Other real estate owned
Assets
Impaired loans
Other real estate owned
Fair Value Measurements at December 31 2014 Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
December 31 Identical Assets Inputs Inputs
2014 (Level 1 ) (Level 2) (Level 3)
$ 2542000 $ $ $ 2542000
4719000 4719000
Fair Value Measurements at December 3 1 2013 Using
December 3 1
2013
Quoted Prices in
Active Markets for
Identical Assets
$ 16943000 $
1 1 399000
(Level 1 )
Significant Other
Observable
Inputs
(Level 2)
$
Significant
Unobservable
Inputs
(Level 3 )
$ 1 6943000
1 1 399000
Disclosure of fair value information about financial instruments whether or not recognized in the consolidated balance sheet is required Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements The methodologies for measuring fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above The methodologies for other financial assets and financial liabilities are discussed below
37
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bank and Subsidiary
Notes to Consolidated Financial Statements
Note 15 Fair Value Measurements (Continued)
Accordingly the aggregate fair value amounts presented do not represent the underlying value of the Bank
The following methods and assumptions were used by the Bank in estimating the fair value of its financial instruments
Cash and due from banks and interest-bearing deposits in banks The carrying amounts reported in the consolidated balance sheets for cash and due from banks and interest-bearing deposits in banks approximate their fair values
Federal Home Loan Bank stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the respective redemption provisions
Loans For variable-rate loans that re-price frequently and with no significant change in credit risk fair values are based on carrying values The fair values for other loans are determined using estimated future cash flows discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality
Deposits The fair value of deposits with no stated maturity such as non interest-bearing deposits savings NOW accounts money market and checking accounts is equal to the amount payable on demand (ie the carrying value) 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
Short-term borrowings The carrying amount of short-term borrowings approximates their fair value
Long-term borrowings Fair values of FHLB borrowings are estimated using a discounted cash flow calculation that applies interest rates currently being charged on FHLB advances to a schedule of aggregated expected monthly maturities of FHLB borrowings
Accrued interest The carrying amount of accrued interest approximates its fair value
Off-balance-sheet instruments Fair values for the Banks oft-balance-sheet instruments credit-related financial instruments are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing The fair value of these commitments is not material
The carrying amount and estimated fair value of the Banks financial instruments are as follows
December 31 2014 December 31 2013
Canying Fair Carrying Fair
Amount Value Amount Value
Financial assetsmiddot
Cash and due from banks $ 1 1 2952000 $ 1 12952000 $ 66775000 $ 66775000
Interest-bearing deposits in banks 6938000 6938000 953000 953000
Securities available for sale 50802000 50802000 61 848000 61 848000
Federal Home Loan Bank stock 2403000 2403000 2403000 2403000
Loans nel 1 001 896000 1 004402000 955764000 957489000
Accrued interest receivable 3345000 3345000 341 9000 3419000
Financial liabilities
Deposits 1 001091 000 1 002329000 942258000 943461 000
Short-term borrowings 4518000 4518000 1 314000 1314000
Long-term borrowings 28000000 28000000 13000000 13000000
Accrued interest payable 439000 439000 396000 396000
38
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
ANNUAL REPORT OF BANK HOLDING COMPANIES FR Y-6
AS OF DECEMBER 31 2014
LAKESIDE BANCORP INC
Report Item 1 Bank Holding Company Financial Statements
Item I Annual report to shareholders will be sent under separate cover
Report Item 2a Organization Chart
The Corporation has two subsidiaries The following depicts all direct and indirect ownership of the Corporations subsidiaries
--------Lakeside Bancorp Inc ---------
1 55 W Wacker Drive I I Chicago IL 6060 I I I Incorporated Delaware I
Lakeside Bank ( I 00 owned) 55 W Wacker Drive Chicago IL 6060 I Incorporated Illinois
Report Item 2b Branch Data Verification
Lakeside Statutory Trust I ( 1 00) 55 W Wacker Drive
Chicago IL 6060 I Incorporated Delaware
Lakeside Bancorp Inc s Management has updated and verified its Domestic Branch Listing Per instructions the Domestice Branch Listing was emailed to the Federal Reserve Bank
Report Item 3 Securities holders
( I ) Following are shareholders of record that directly or indirectly own control or hold with power to vote five (5) per cent or more of the stock of the Corporation as of 1 2-3 1 -2014
I) a Victor J Cacciatore Sr Annuity I Revocable Trusts Chicago Illinois
b United States c 75988 shares (25) owned
2) a Philip D Cacciatore a US Citizen Elmhurst Illinois
b United States c 325 1 2 shares ( 1 1 ) owned
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Anuhs A hstof brllIChes degyour holdtnc com llllHbull UrbullltOf 1 1 f bull IGOIL The daU we a of 111 J01 OitJ reflects tnform1uon that wn recetved and proceu4d throoamph G406101
ltlCOdlton tnd Vlfiatlo SttlS 1 In the 01t1 Action cofumn of exh brMCh rflN enter one or more of the actKgtnS specified betow 2 If required entet the date ln the Effective 01te agtlumn
()(- tf the branch 1nfonn1taon 11 CXgtnert enter 01( In the 01t1 Actkgtn cotumn
Chlle tf the tnnch H1fonnati0n Is mcorrea or 1ncompampte fr-1M the daU mter I In the 01t1 Acdon coh1mn Ind the date bullhen ttn 1nform1tJOn first became hd n the f fftctiYe Ollt column
CloM If 1 brnch listed wn MJfd Of closed enter 1 - m the Oita Action column the wle or ctosure te m the effective Otbull column
Ollete If 1 br1nch hlled Wraquo newt owned by this depository Institution entff middotete In the Dita Aalon column
Add If 1 reporuble ts m1tradens 1nKrt 1 ffNI the bBndl dlU enttf middotadmiddot in the Dita Action cotumn ind the opene Of acqu1sib0n dite 1n the Effective D1tbull column
Submiukgtn Proqdurt When you are f1n1shed send a wved copy 10 your FRB contact See the det1lled lmtructkgtm on ttws 1te for more 1nform1tJOn
tf you are e--mahnc this to VoJf FRB contMt put your WIStlMKgtn nilfTle dtv ind suite in the subjKt hoe of tht e-mail
Note
To satisfy the FR YmiddotlO rortina requ1rtnMfltl you must Jlso wbm1t FR V-10 Domesttt Bunch Schedule-s fOf eKh br1nch with 1 OatI ActJon of ns Clow Oelte Of Add The FR Y middot 10 rf9(11t may be submitted in a hitdcopy form1t Of the FRYmiddot 10 Online iPl)llQtlon htlplvJOon11ne freserw 1ov
bull FDIC UN1NUM Offce Numbef lnd ID_RSSO umns are for refttfl on Venfte1tlon of these vilJun ls not required
Dou (-Dou lflnch svklaquo T ltanch 10 wobull p ullrme SttMt Addttu Statbull ZJ Dk Full sMce HHd Offiu 20l83( LAKESIDE BANK SS WEST WACKER DRIVE CHICAGO IL
DK FullSltrVla 2lS8021i BOAAD Of TIIADE BRANCH 141 WEST JACKSON BOULEVARD CHICAGO IL 60604 OK fullSeMce 2072739 CHINATOWN FACllJTY 2200 SOIJTli ARCHER AVpoundNUpound CHICAGO IL 60616
OO$Cd 1 152015 Full Servtce 349437 INOlANA FAOUTY 2141 SOIJTli INDIANA AVENUE CHICAGO IL 60616
OK Full Sennce 3765449 LAKEVIEW BRANCH 2800 NORTH ASHLAND AVENUE otlCAGO ll 606S7 ()I( Full Servtce 3494356 NEAR WEST UIC BRANCH 1055 WpoundST ROOSEVpoundLT ROAD CHICAGO ll 6060amp
COOi(
(OOI( COOilt
COOk
COOK
UNITTD STATES
UNITED STATES
UNITTD STATES
UNITTD STATES
UNITED STAT15
Fote UNINUMbull OllkeNu- HHd Offlce HNdOHktlD RSSDbull COnlmonS
6$919 8 LAKESIDE BANK 20183(
13373 0 LAICESIDE BANK 20183(
248890 I LAICESIDE BANI 201134
248891 2 LAKESIDE BANK 201834
248892 3 LAKESIDE BANK 201834
443296 7 LAKESIDE BANK 201834
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bancorp Inc FR Y-6
December 31 2014
There was no other shareholder that directly or indirectly owned or controlled five (5) percent or more of the stock of the Corporation during 2014
Report item 4 lnsiders--Directors and Officers
A ( I ) Victor J Cacciatore Sr a US Citizen (Deceased) River Forest Illinois
(2) Formerly Chairman amp Chief Executive Officer Lakeside Bank Formerly Principal Law Offices of Victor J Cacciatore
(3) (a) Formerly Director and Chairman Lakeside Bancorp Inc (b) Formerly Chairman and Chief Executive Officer Lakeside Bank ( c) Title or position with other businesses
Formerly Principal Law Offices of Victor J Cacciatore
(4) (a) 75998 shares (25) owned (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership None
B ( I ) Philip Cacciatore a US Citizen Elmhurst Illinois
(2) Chairman amp Chief Executive Officer Lakeside Bank
(3) (a) Director and President Lakeside Bancorp Inc (b) Chairman and Chief Executive Officer Lakeside Bank (c) Title or position with other businesses Director of each of the following
bull Jos Cacciatore amp Co
bull Hunter Alliance bull Hunter Parking
bull Elgin Sweeping bull Hunter Petroleum
(4) (a) 325 1 2 shares ( 1 1 ) owned (b) Subsidiary is 1 00 owned by parent (c) Other business with gt 25 ownership
None C ( I ) Stanley Bochnowski a US Citizen
Munster Indiana
(2) Executive Vice President amp Chief Lending Officer Lakeside Bank
2
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-
Lakeside Bancorp Inc FR Y-6 December 31 2014
(3) (a) Director and Secretary Lakeside Bancorp Inc (b) Executive Vice President General Counsel Trust Officer and
Secretary Lakeside Bank (c) Title or position with other businesses None
(4) (a) None (b) Subsidiary is 1 00 owned by the Corporation (c) Other business with gt 25 ownership None
D () Peter Cacciatore a US Citizen Chicago Illinois
(2) Principal Occupation President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking
(3) (a) Director (b) Director ( c) Title or position with other businesses President amp Director Jos Cacciatore amp Company Pres CEO amp Director Hunter Parking Director JCC Insurance Director Hunter Alliance Director Elgin Sweeping
(4) (a) 1 2070 shares (4) (b) Subsidiary is I 00 owned by parent (c) Other business with gt 25 ownership Hunter Parking (50)
E () David Pinkerton a US Citizen Elmhurst Illinois
(2) Director amp President Lakeside Bank
(3) (a) Director and Vice President Lakeside Bancorp Inc (b) Director and President Lakeside Bank (c) Title or position with other businesses None
(4) (a) 4356 shares ( ) (b) Subsidiary is I 00 owned by the Corporation (c) Other business with gt 25 ownership None
3
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Items 2a Organization Chart 3 Securities Holders
- Report Item 2b Domestic Branch Listing
- Report Item 4 Insiders
-