<PAGE>
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING
SUBMITTED PURSUANT TO RULE 901(d) OF REGULATION S-T.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended June 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For transition period from __________ to __________
Commission File Number 0 -17609
WEST SUBURBAN BANCORP, INC.
(Exact name of Registrant as specified in its
charter)
Illinois 36-3452469
State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
711 South Meyers Road, Lombard, Illinois 60148
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(708) 629-4200
Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the
Issuer's classes of common stock as of the latest practicable
date.
1,000,000 shares of Common Stock, Class A, no par value,
were authorized and 347,015 shares were issued and outstanding
as of June 30, 1994.
1,000,000 shares of Common Stock, Class B, no par value,
were authorized and 85,480 shares were issued and outstanding
as of June 30, 1994.
<PAGE>
WEST SUBURBAN BANCORP, INC.
Form 10-Q Quarterly Report
Table of Contents
PART I
Page
Number
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Form 10-Q Signature Page 13
<PAGE>
PART I
ITEM 1.FINANCIAL STATEMENTS
WEST SUBURBAN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
<S> <C> <C>
Assets
Cash and due from banks $32,297 $37,727
Interest-bearing deposits in financial
institutions 116 610
Federal funds sold 14,110 6,160
Total cash and cash equivalents 46,523 44,497
Investment securities:
Available for sale (amortized cost
of $151,536 in 1994; market value of
$174,088 in 1993) 147,962 171,475
Held to maturity (market value of
$71,575 in 1994; market value of
$19,251 in 1993) 72,859 19,119
Mortgage-backed securities available
for sale (amortized cost of
$128 in 1994; market value of
$19,501 in 1993) 128 17,559
Loans, less allowance for loan losses
of $7,913 in 1994; $7,125 in 1993 681,260 692,274
Premises and equipment, net 25,052 25,401
Other real estate 4,921 9,954
Banker's acceptances 1,679 2,026
Accrued interest and other assets 19,801 17,573
Total assets $1,000,185 $999,878
Liabilities and Shareholders' Equity
Deposits
Noninterest-bearing $91,242 $94,268
Interest-bearing 803,018 789,196
Total deposits 894,260 883,464
Federal Home Loan Bank ("FHLB") advances ---- 8,220
Real Estate Mortgage Investment Conduit
("REMIC") ---- 3,541
Subordinated convertible capital notes 10 50
Banker's acceptances 1,679 2,026
Accrued interest and other liabilities 6,788 6,754
Total liabilities 902,737 904,055
Shareholders' equity
Common Stock, Class A, no par value;
1,000,000 shares authorized; 347,015
shares issued and outstanding 2,774 2,774
Common Stock, Class B, no par value;
1,000,000 shares authorized; 85,480
shares issued and outstanding 683 683
Surplus 38,066 38,066
Retained earnings 58,078 54,300
Unrealized holding losses on
securities available for sale,(net of
taxes) (2,153) ----
Total shareholders' equity 97,448 95,823
Total liabilities and
shareholders' equity $1,000,185 $999,878
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
1
<PAGE>
WEST SUBURBAN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993
(Dollars in Thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Interest Income
Loans, including fees $25,116 $24,739
Investment securities:
Corporate 3,562 6,129
U.S. government agencies and
corporations 2,195 990
States and political subdivisions 584 328
U.S. Treasury securities 322 ---
Mortgage-backed securities 690 1,206
Deposits in financial institutions 80 66
Federal funds sold 301 162
Total interest income 32,850 33,620
Interest Expense
Deposits 12,326 13,248
Other 130 500
Total interest expense 12,456 13,748
Net interest income 20,394 19,872
Provision for Loan Losses 1,100 1,553
Net interest income after Provision for
Loan Losses 19,294 18,319
Other Income
Service fees 1,680 1,734
Net gain on sale of investment
securities available for sale 329 49
Net gain on sale of mortgage-backed
securities available for sale 1,163 ----
Trust fees 176 188
Net gain on sale of loans originated
for sale 199 754
Loan servicing 438 466
Other 1,536 1,857
Total other income 5,521 5,048
Other Expense
Salaries and employee benefits 6,340 6,138
Occupancy 1,076 1,147
Premises and equipment 1,112 1,135
FDIC insurance premiums 987 816
Professional fees 645 401
Other 3,770 3,262
Total other expense 13,930 12,899
Income before income taxes 10,886 10,468
Applicable income taxes 4,187 3,904
Income before cumulative effect of
accounting change 6,699 6,564
Cumulative effect of accounting change ---- 359
Net income $6,699 $6,923
Earnings Per Share
Before cumulative effect of accounting change:
Primary $16.27
Fully diluted $15.34
Primary $15.49 $17.16
Fully diluted $15.49 $16.17
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
2
<PAGE>
WEST SUBURBAN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 1994 AND 1993
(Dollars in Thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Interest Income
Loans, including fees $12,970 $12,526
Investment securities:
Corporate 1,436 2,879
U.S. government agencies and
corporations 1,513 519
States and political subdivisions 303 160
U.S. Treasury securities 200 ---
Mortgage-backed securities 192 575
Deposits in financial institutions 42 33
Federal funds sold 125 88
Total interest income 16,781 16,780
Interest Expense
Deposits 6,452 6,518
Other 51 242
Total interest expense 6,503 6,760
Net interest income 10,278 10,020
Provision for Loan Losses 513 721
Net interest income after Provision for
Loan Losses 9,765 9,299
Other Income
Service fees 856 890
Net gain on sale of investment
securities available for sale 95 35
Net gain on sale of mortgage-backed
securities available for sale 1,163 ----
Trust fees 57 65
Net gain on sale of loans originated
for sale 28 404
Loan servicing 216 230
Other 1,007 918
Total other income 3,422 2,542
Other Expense
Salaries and employee benefits 3,288 2,951
Occupancy 527 542
Premises and equipment 534 529
FDIC insurance premiums 493 408
Professional fees 232 340
Other 1,996 1,744
Total other expense 7,070 6,514
Income before income taxes 6,117 5,327
Applicable income taxes 2,356 1,960
Net income $3,761 $3,367
Earnings Per Share
Primary $8.70 $8.35
Fully diluted $8.70 $7.87
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
3
<PAGE>
WEST SUBURBAN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993
(Dollars in Thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Cash flows from operating activities
Net income $6,699 $6,923
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation and amortization 1,197 1,226
Cumulative effect of
accounting change ---- (359)
Provision for loan losses 1,100 1,553
Provision for deferred income
taxes 1,619 (207)
Premium amortization of
securities, net 957 2,089
Net gain on sale of investment
securities available for sale (329) (49)
Net gain on sale of mortgage-
backed securities available
for sale (1,163) ----
Net gain on sale of loans
originated for sale (199) (754)
Sale of loans originated for
sale 7,336 44,995
Loans originated for sale (11,548) (42,816)
(Gain) loss on sale of
premises and equipment 266 (29)
Gain on sale of other real
estate (378) (166)
Increase in other assets (3,511) (1,076)
Increase (Decrease)in other
liabilities (545) 2,106
Total adjustments (5,198) 6,513
Net cash provided by
operating activities 1,501 13,436
Cash flows from investing activities
Proceeds from sales of investment
securities available for sale 53,183 31,822
Proceeds from sales of mortgage-
backed securities available
for sale 14,941 ----
Proceeds from maturities of
investment securities 34,043 43,331
Purchases of investment securities (118,618) (56,476)
Proceeds from payments on
mortgage-backed securities 2,037 3,063
Net (increase) decrease in loans 13,542 (6,755)
Purchases of premises and equipment (1,139) (354)
Proceeds from sale of premises and
equipment 23 40
Proceeds from sale of other real
estate 6,194 1,779
Net cash provided by investing $4,206 $16,450
activities
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
4
<PAGE>
WEST SUBURBAN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993 (CONTINUED)
(Dollars in Thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Cash flows from financing activities
Net increase in demand deposits, NOW
accounts and savings accounts $10,020 $12,394
Net (decrease) increase in
certificates of deposit 777 (13,720)
Decrease in FHLB advances (8,220) (11,440)
Repayment of REMIC (3,541) (3,254)
Repayment of note payable ---- (2,000)
Cash dividends paid (2,717) (2,521)
Net cash used in financing
activities (3,681) (20,541)
Net decrease in cash and cash
equivalents 2,026 9,345
Cash and cash equivalents at
beginning of period 44,497 43,817
Cash and cash equivalents at end of
period $46,523 $53,162
Supplemental disclosure of cash flow
information
Cash paid during the year for:
Interest on deposits and other
borrowings $12,755 $13,791
Income Taxes $2,165 $3,262
Supplemental schedule of noncash
investing and financing activities:
Decrease in allowance for
unrealized losses on marketable
equity securities ---- ($548)
Securities fair value adjustment $3,574 ----
Unrealized loss on investment
securities available for sale,
(net of taxes) ($2,153) ----
Transfers to other real estate $783 $2,005
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
5
<PAGE>
WEST SUBURBAN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The unaudited interim consolidated financial statements include
the accounts of the Company and it's subsidiaries and are
prepared pursuant to the rules and regulations for reporting
on Form 10-Q. Accordingly, certain information and footnote
disclosures normally accompanying the annual financial
statements have been omitted. The interim financial statements
and notes should be read in conjunction with the consolidated
financial statements and notes thereto included in the latest
Annual Report on Form 10-K filed by West Suburban Bancorp,
Inc.(the "Company"). In the opinion of management, the
consolidated financial statements include all adjustments
(none of which were other than normal recurring adjustments)
necessary for a fair statement of the results for the interim
periods.
Earnings per share are calculated on the basis of the daily
weighted average number of shares outstanding. Net income has
been adjusted for the interest expense (net of tax) incurred in
connection with the subordinated convertible capital notes.
NOTE 2-SECURITIES
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards("SFAS") No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." SFAS No.115
requires that all debt and equity securities be classified as
held to maturity, trading assets or available for sale.
Securities held to maturity are classified as such only when the
Company determines it has the ability and intent to hold these
securities to maturity. Trading account assets include securities
acquired as part of trading activities and are typically
purchased with the expectation of near-term profit. All
securities not qualifying for held to maturity or trading
treatment are classified as available for sale, even if the
Company has no intention to sell the security.
Application of SFAS No. 115 to prior periods is not permitted
and, accordingly, prior period financial statements have not
been restated to reflect the change in accounting principle.
There is no cumulative effect on the Company's Consolidated
Statement of Income for the six or three months ended June 30,
1994 from adopting SFAS No. 115. Shareholders' equity at June
30, 1994 was decreased by $2.2 million, which represents the
unrealized losses on securities classified as available for
sale, net of deferred income taxes. The effect of adopting SFAS
No. 115 at January 1, 1994 resulted in an increase to
shareholders' equity of approximately $2.7 million, net of
deferred income taxes.
NOTE 3-COMMITTMENTS TO EXTEND CREDIT
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
<S> <C> <C>
Home Equity Lines $93,610 $85,687
Time Loans in Process 139,563 145,121
Visa Credit Lines 55,492 56,879
Mortgage Committments 10,771 7,699
Total committments $299,436 $295,386
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION - OVERVIEW
The Company recorded pre-tax earnings of $10.9 million for
the six months ended June 30, 1994 and $10.5 million for the
same period in 1993. This represents an increase of $.4
million (4.0%) during the first six months of 1994 compared to
the first six months of 1993. The reasons for this increase
are discussed in more detail under "Results of Operations for
the Six Months Ended June 30,1994 and 1993."
The Company recorded pre-tax earnings of $6.1 million for the
three months ended June 30, 1994 and $5.3 million for the same
period in 1993. This represents an increase of $.8 million
(14.8%) during the second quarter of 1994 compared to the
second quarter of 1993. The reasons for this increase are
discussed in more detail under "Results of Operations for the
Three Months Ended June 30, 1994 and 1993."
LIQUIDITY
Management believes that the Company continues to maintain an
adequate level of liquidity while seeking to maximize income.
Cash and cash equivalents increased $2.0 million (4.6%) during
the first six months of 1994. The largest component of the
increase in cash and cash equivalents was federal funds sold
which increased from $6.2 million to $14.1 million during the
six month period ended June 30, 1994. This increase was
partially offset by a decrease in cash and due from banks which
declined from $37.7 million to $32.3 million during the
six month period ended June 30, 1994.
The Company depends primarily upon cash and cash equivalents,
which includes federal funds sold, for liquidity. As in the
past, the Company has not relied on brokered deposits as a
source of liquidity. The Company has used, however, FHLB advances
as a short-term means of funding the residential real estate
loan volume of its thrift subsidiary. Additionally, the
Company occasionally has used federal funds purchased to fund its
short term liquidity needs.
ASSET DISTRIBUTION
Investment securities increased $30.2 million (15.9%)from $190.6
million at December 31, 1993 to $220.8 million at June 30,1994.
The primary reasons for this increase were the purchase by the
Company of investment securities with the proceeds from loan
repayments and theliquidation of substantially all of it's
mortgage-backed securitiesportfolio. The mortgage-backed
securities portfolio was liquidated in connection with the
termination of the REMIC. As of June 30, 1994, the investment
securities portfolio had a recorded value of $223.1 million
and an estimated fair value of $219.5 million compared to
December 31, 1993 at which time the book value of the Company's
investment securities portfolio was $190.6 million and the
estimated market value was $193.3 million. The primary cause of
the decline in market value of the Company's investment
securities portfolio was the increase in interest rates which
occurred during the first half of 1994. Management reviews its
portfolio on an ongoing basis and in doing so reviews market
conditions and trends.
Total loans decreased $11.0 million (1.6%) during the first six
months of 1994. The decline in loans resulted from reduced
origination of residential mortgage loans caused by a less
favorable interest rate environment. As a result of the decline
in loan funding, the Company repaid the FHLB advances which were
outstanding at the end of 1993.
7
<PAGE>
ALLOWANCE FOR LOAN LOSSES AND ASSET QUALITY
The allowance for loan losses represents the amount which
management has determined will be adequate to cover possible
future losses based on the Company's current loan portfolio.
Management's determination is based upon its consideration of
risk presented by the various components in the loan portfolio,
past loan loss experience and trends, current loan holdings and
delinquencies and anticipated economic conditions in the
Company's market area. The allowance for loan losses increased
$.8 million (11.1%) from $7.1 million at December 31, 1993 to
$7.9 million at June 30, 1994. This represents an increase in
the allowance for loan losses to total loans outstanding from
1.02% at December 31, 1993 to 1.14% at June 30, 1994. This
increase was attributable in part to the decrease in total loans
outstanding. General improvement in the quality of the loan
portfolio resulted in a decrease in nonaccrual loans of $.6
million (8.7%) from $6.5 million at December 31, 1993 to $5.9
million at June 30, 1994. For the three month period ended June
30, 1994,nonaccrual loans decreased $.1 million from $6.0 million
at March 31, 1994 to $5.9 million at June 30, 1994. As of June
30, 1994 and December 31, 1993,the ratio of nonperforming loans
to net loans was 1.6% and 1.5%, respectively. Loans 90 days or
more past due increased $1.0 million (25.1%) from $4.0 million at
December 31, 1993 to $5.0 million at June 30, 1994. This increase
was principally due to one troubled real estate loan. For the
three month period ended June 30, 1994, loans 90 days or more
past due increased $1.3 million from $3.7 million at March 31,
1994 to $5.0 million at June 30, 1994.
Management believes that the allowance for loan losses
adequately reflects potential losses at June 30, 1994. At the
end of 1993, management was aware of two troubled commercial real
estate loans that were of significance. During 1993, one of the
loans was transferred to other real estate owned and as of June
30, 1994, the real property that secured the loan was sold.
Other real estate decreased $5.0 million (50.6%) primarily as a
result of the sale of this property and continued liquidation of
another property in OREO.
LIABILITY DISTRIBUTION
Total liabilities decreased $1.3 million (.1%) from $904.0
million at December 31, 1993 to $902.7 million at June 30, 1994.
This decrease was principally due to the repayment of FHLB
advances ($8.2 million) and a paydown of the REMIC, which were
largely offset by deposit growth.
Total deposits increased $10.8 million (1.2%) to $894.3 million
during the first six months of 1994. Non-interest bearing
deposits decreased $3.0 million (3.2%) for the six months ended
June 30, 1994. Interest-bearing deposits increased $13.8 million
(1.8%) during this period. Money market savings accounted for
most of the increase in interest-bearing deposits, although NOW
accounts and certificates of deposit also increased. Management
believes this to be a shift from short- term to longer-term
savings resulting from recent increases in interest rates. If
interest rates continue to increase, management expects growth in
long-term deposits to continue.
The Company will attempt to continue to remain highly competitive
in its market by offering competitive rates of return on its
savings and certificate of deposit instruments. Although the
Company promotes its savings products when appropriate,
management does not intend to compromise its net interest margin
to attract deposits.
SHAREHOLDERS' EQUITY
Shareholder's equity increased $1.6 million (1.7%) from $95.8
million at December 31, 1993 to $97.4 million at June 30, 1994.
This increase was primarily the result of net income of $6.7
million reduced by dividend declarations of $2.9 million and
holding losses on securities available for sale of $2.2 million
(net of taxes), which reduce capital as a result of adopting
SFAS 115 as of January 1, 1994.
8
<PAGE>
RATE SENSITIVITY GAPS AND NET INTEREST MARGIN
The Company attempts to maintain a conservative posture with
regard to interest rate risk actively managing its
asset/liability gap positions and constantly monitoring the
direction and magnitude of gaps and risk. The Company attempts to
moderate the effects of changes in interest rates by adjusting
its asset and liability mix to achieve desired relationships
between rate sensitive assets and rate sensitive liabilities.
Rate sensitive assets and liabilities are those instruments that
reprice within a given time period. An asset or liability
reprices when it is subject to change in its interest rate.
The consolidated rate sensitivity position of the Company at June
30,1994 reflects cumulative interest rate sensitive assets
compared to interest rate sensitive liabilities of 109.4% and a
cumulative net position to total assets of positive 6.3%
considering a twelve month time frame.
Movements in general market interest rates are a key element in
changes in the net interest margin. During a period of falling
interest rates, a negative gap would tend to result in an
increase in net interest income. Conversely during a period of
rising interest rates, a positive gap would tend to adversely
affect net interest income. The Company's policy is to manage
its balance sheet so that fluctuations in net interest margin are
minimized regardless of the level of, or movements in, interest
rates. The net interest margin has varied somewhat due to
management's response to increasing competition from other
financial institutions. As interest rates have stabilized over
the past few months, the net interest margin has done
likewise.
Listed below are the balances in the major categories of
rate sensitive assets and liabilities that are subject to
repricing as of June 30, 1994 (dollars in thousands):
<TABLE>
<CAPTION>
Over Over
three one
Three months year
months to to Over
or twelve five five Total
less months years years
<S> <C> <C> <C> <C> <C>
Rate sensitive assets:
Interest-bearing
deposits in financial
institutions $116 -- -- -- $116
Federal funds sold 14,110 -- -- -- 14,110
Investment securities 32,117 72,634 76,864 39,332 220,947
Loans 241,512 368,251 52,624 20,879 683,266
Total 287,855 440,885 129,488 60,211 $918,439
Rate sensitive
liabilities:
Money market savings $321,277 -- -- -- $321,277
Now accounts 177,300 -- -- -- 177,300
Time deposits:
Less than $100,000 53,920 $97,411 $119,615 -- 270,946
$100,000 and over 11,165 7,668 14,663 -- 33,496
Nondeposit
liabilities -- 10 -- -- 10
Total $563,662$105,089 $134,278 -- $803,029
Interest sensitivity
gap ($275,807)$335,796 ($4,790) $60,211
Cumulative interest
sensitivity gap ($275,807) $59,989 $55,199 $115,410
Cumulative net
interest-earning assets
as a percentage of net
interest-bearing
liabilities 51.1% 109.0% 106.9% 114.4%
Cumulative interest
sensitivity gap as a
percentage of total
assets -27.6% 6.0% 5.5% 11.5%
</TABLE>
9
<PAGE>
The above table does not necessarily indicate the future impact
of general interest rate movements on the Company's net interest
income because the repricing of certain assets and liabilities
is discretionary and is subject to competitive and other
pressures. As a result, assets and liabilities indicated as
repricing within the same period may in fact reprice at different
times and at different rate levels. Assets and liabilities are
reported in the earliest time frame in which maturity or
repricing may occur. The percentage indicated for the cumulative
net interest-earning assets as a percentage of net
interest-bearing liabilities is well within the Company's target
range of acceptable gap values for the three month to twelve
month time frame.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND
1993
Net income- The Company's net income for the six months ended
June 30, 1994 was $6.7 million compared to $6.9 million at June
30, 1993. This represents a decrease of $.2 million (3.2%)
compared to the same period in 1993. This decrease was
primarily attributable to the initial benefit of adopting SFAS
No. 109 during 1993. The Company's net interest margin increased
$.5 million (2.6%) from $19.9 million at June 30, 1993 to $20.4
million at June 30, 1994. This increase primarily resulted from a
lower cost of funds, thereby maintaining the net interest margin
spread.
Interest Income- Total interest income, on a tax equivalent
basis, decreased $.7 million for the six months ended June 30,
1994 compared to the same period in 1993. The largest component
of this decrease was interest on corporate securities which
decreased $2.5 million. Of this decrease, $2.3 million was the
result of lower average balances during the period and $.2
million was the result of a decline in interest rates. This
decrease was partially offset by an increase in interest on
loans of $.4 million along with interest on securities held in
state and political subdivisions, plus U.S. government agencies
and corporations of $.4 million and $1.3 million, respectively.
Provision for loan losses- The Company's provision for loan
losses decreased $.5 million (29.2%) for the six months ended
June 30, 1994 when compared to the same period in 1993. Lower
bad debt exposure levels coupled with increased collection
efforts accounted for this decrease.
Total other income- Total other income increased $.5 million
(9.4%) for the six months ended June 30, 1994 compared to 1993.
This was primarily due to the increase in net gain on sale of
investment securities available for sale. This component
increased $1.4 million over this period, principally due to the
sale of the mortgage-backedsecurities held by the Company in
connection with the termination of the REMIC. These gains were
partially offset by losses incurred by the Company on the sale of
equipment, along with a declining residential mortgage loan
refinance market which has led to lower income from loan sales.
Total other expense- Total other expenses increased $1.0 million
(8.0%)from $12.9 million for the six months ended June 30,1993
to $13.9 million for the six months ended June 30, 1994. This
increase was principally due to increased professional fees and
expenses incurred in connection with the operation of other real
estate during this period. The increase in professional fees is
due primarily to costs related to certain other real estate owned
and increased legal fees associated with the disputed tax returns
of the Company's thrift subsidiary, West Suburban Bank of
Aurora, FSB("WSB Aurora"). As described in another section of
this report, one of those properties held in other real estate in
the second quarter of 1994 was sold. Therefore, management
expects professional fees expense to decline over the remainder
of the fiscal year. Salaries and employee benefits increased $.2
million (3.3%) for the six months ended June 30, 1994 compared to
the same period in 1993. This increase was principally due to the
costs associated with the opening of two new facilities. FDIC
insurance premiums increased slightly for the six month period
ended June 30, 1994 as compared to June 30, 1993 primarily due
to an increase in average deposit balances held during the 1994
period. Additionally, WSB Aurora received a credit toward its
premiums during the 1993 period.
Income tax expense- Income tax expense increased $.3 million
(7.3%) for the six months ended June 30, 1994 compared to 1993,
primarily due to increased corporate tax rates during the 1994
period.
10
<PAGE>
Total Interest Expense- Total interest expense decreased $1.3
million for the six months ended June 30, 1994 compared to the
same period during 1993. The largest component of this decrease
was interest on deposits which decreased $.9 million largely due
to a decline in interest rates. Management believes that this
trend will reverse, in the short-term.
The following table reflects the extent to which changes in the
volume of interest-earning assets and interest-bearing
liabilities and changes in interest rates have affected net
interest income for the six-month period ended June 30, 1994 as
compared to the same period in 1993 (dollars in thousands):
Change due to:
<TABLE>
<CAPTION>
Volume Rate Total
<S> <C> <C> <C>
Interest income
Interest-bearing
deposits in financial
institutions ($135) $149 $14
Federal funds sold 114 25 139
Investment securities (323) (317) (640)
Mortgage-backed
securities (429) (87) (516)
Loans 1,241 (817) 424
Total interest income 468 (1,047) (579)
Interest expense
Interest-bearing deposits 12 (935) (923)
Borrowed funds (353) (18) (371)
Total interest expense (341) (953) (1,294)
Net interest income $809 ($94) $715
</TABLE>
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1994
AND 1993
The Company experienced an increase in net income of $.4 million
(11.7%) for the three months ended June 30, 1994 compared to the
same period in 1993. The Company's net interest margin increased
$.3 million (2.6%)from $10.0 million for the three months ended
June 30,1993 to $10.3 million for the same period in 1994. This
was primarily due to an improvement in the Company's cost of
funds. Total other income increased $.9 million (34.7%) for the
three months ended June 30, 1994 compared to the same period in
1993. Increases in income were offset by an increase in salary
and employee benefits, FDIC Insurance premiums and income taxes.
OTHER CONSIDERATIONS
Earnings of bank and thrift holding companies and their
subsidiaries are affected by general economic conditions and also
by the fiscal and monetary policies of federal regulatory
agencies,including the Board of Governors of the Federal Reserve
System. Such policies have affected the operating results of all
commercial banks and thrifts in the past and are expected to do
so in the future. The Company cannot accurately predict the
nature or the extent of any effects which fiscal or monetary
policies may have on its subsidiaries' business and
earnings.
The Internal Revenue Service (the "IRS") is currently
examining the income tax returns of WSB Aurora for 1988, 1989 and
1990. The IRS has proposed certain adjustments to the income tax
returns of WSB Aurora for 1988, 1989 and 1990. The periods under
examination are prior to the acquisition of WSB Aurora by the
Company. The Company continues to contest the adjustments
proposed by the IRS. However,in the event that the IRS is
successful in whole or in part, the Company believes any
adjustments which might result would not have a material
effect on the Company's financial position.
11
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the
Company or any of its subsidiaries is a party other than
ordinary routine litigation incidental to their respective
businesses.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A. The Annual Meeting of Shareholders was held on May 11,
1994.
B. The following individuals were elected to serve as
directors of the Company for a term of one year at the
Annual Meeting. The votes for and against such
individuals are set forth below:
FOR AGAINST
1. Kevin J. Acker 1,616,189 2,366
2. John A. Clark 1,599,409 19,144
3. James Bell 1,584,174 29,788
4. Peggy LoCicero 1,577,883 10,840
5. Charles P. Howard 1,584,790 21,884
Broker-No Votes 57,515
C. Approval of the Amendment to the Articles of
Incorporation of the Company which limits the liability
of the Company's directors.
FOR AGAINST ABSTAIN
1,547,946 33,796 38,922
D. Ratification of Deloitte & Touche as the Company's
independent auditors.
FOR AGAINST ABSTAIN
1,606,322 7,449 6,894
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. None
B. None
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
WEST SUBURBAN BANCORP,INC.
(Registrant)
Date: August 12, 1994
/S/ John A. Clark
John A. Clark
President and CEO
/S/ Duane G. Debs
Duane G. Debs
Chief Accounting Officer
13
