<PAGE>
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, 1995
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 Number)
of incorporation or organization)
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, 1995.
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, 1995.
<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. . . . . . . . . . . . . . . . . . . . . . . . . .14
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . . . . . .14
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . . . . .14
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . .14
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . . . .14
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . .15
Form 10-Q Signature Page . . . . . . . . . . . . . . . . . . . . . . . . . . .16
<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,
1995 1994
---------------- ----------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 36,357 $ 48,134
Interest-bearing deposits in financial institutions 127 14
Federal funds sold 29,180 1,895
--------------- -------------
Total cash and cash equivalents 65,664 50,043
Investment securities:
Available for sale (amortized cost of $109,267 in
1995 and $125,630 in 1994) 106,463 117,448
Held to maturity (fair value of $110,988 in
1995 and $102,403 in 1994) 111,729 108,559
Loans, less allowance for loan losses of $9,123 in 1995 and
$8,445 in 1994 732,712 709,205
Premises and equipment, net 28,136 26,652
Other real estate 9,684 10,458
Accrued interest and other assets 17,533 19,130
--------------- -------------
TOTAL ASSETS $1,071,921 $1,041,495
--------------- -------------
--------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing $ 96,977 $ 100,771
Interest-bearing 858,013 822,486
--------------- -------------
Total deposits 954,990 923,257
FHLB advances --- 9,940
Accrued interest and other liabilities 11,966 10,327
--------------- -------------
TOTAL LIABILITIES 966,956 943,524
--------------- -------------
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 64,529 61,378
Unrealized loss on securities available for sale, net of taxes (1,087) (4,930)
--------------- -------------
TOTAL SHAREHOLDERS' EQUITY 104,965 97,971
--------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,071,921 $1,041,495
--------------- -------------
--------------- -------------
</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, 1995 AND 1994
(Dollars in Thousands, Except Per Share Data)
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
--------------- --------------
<S> <C> <C>
INTEREST INCOME
Loans, including fees $32,750 $25,116
Investment securities:
U.S. government agencies and corporations 3,707 2,195
Corporate 2,409 3,562
States and political subdivisions 621 1,274
U.S. Treasury 398 322
Deposits in financial institutions 28 80
Federal funds sold 299 301
--------------- --------------
Total interest income 40,212 32,850
INTEREST EXPENSE --------------- --------------
Deposits 17,463 12,326
Other 314 130
--------------- --------------
Total interest expense 17,777 12,456
--------------- --------------
Net interest income 22,435 20,394
PROVISION FOR LOAN LOSSES 925 1,100
--------------- --------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 21,510 19,294
--------------- --------------
OTHER INCOME
Service fees 1,776 1,680
Net gain on sale of investment securities available for sale 79 329
Net gain on sale of mortgage-backed securities available for sale --- 1,163
Trust fees 194 176
Net gain on sale of loans originated for sale 24 199
Loan servicing 472 438
Other 1,228 1,536
--------------- --------------
Total other income 3,773 5,521
--------------- --------------
OTHER EXPENSE
Salaries and employee benefits 6,456 6,340
Occupancy 1,199 1,076
Premises and equipment 1,190 1,112
FDIC insurance premiums 1,035 987
Professional fees 703 645
Other 3,921 3,769
--------------- --------------
Total other expense 14,504 13,929
--------------- --------------
INCOME BEFORE INCOME TAXES 10,779 10,886
APPLICABLE INCOME TAXES 4,385 4,187
--------------- --------------
NET INCOME $6,394 $ 6,699
--------------- --------------
--------------- --------------
EARNINGS PER SHARE $14.78 $ 15.49
--------------- --------------
--------------- --------------
</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, 1995 AND 1994
(Dollars in Thousands, Except Per Share Data)
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
INTEREST INCOME
Loans, including fees $17,153 $12,970
Investment securities:
U.S. government agencies and corporations 1,872 1,513
Corporate 1,205 1,436
States and political subdivisions 317 495
U.S. Treasury 200 200
Deposits in financial institutions 15 42
Federal funds sold 258 125
-------------- --------------
Total interest income 21,020 16,781
-------------- --------------
INTEREST EXPENSE
Deposits 9,459 6,452
Other 95 51
-------------- --------------
Total interest expense 9,554 6,503
-------------- --------------
Net interest income 11,466 10,278
PROVISION FOR LOAN LOSSES 462 513
-------------- --------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 11,004 9,765
-------------- --------------
OTHER INCOME
Service fees 919 856
Net gain on sale of investment securities available for sale 125 95
Net gain on mortgage-backed securities available for sale --- 1,163
Trust fees 56 57
Net gain on sale of loans originated for sale 15 28
Loan servicing 239 216
Other 629 1,007
-------------- --------------
Total other income 1,983 3,422
-------------- --------------
OTHER EXPENSES
Salaries and employee benefits 3,179 3,288
Occupancy 609 527
Premises and equipment 555 534
FDIC insurance premiums 517 493
Professional fees 378 232
Other 1,942 1,996
-------------- --------------
Total other expense 7,180 7,070
-------------- --------------
INCOME BEFORE INCOME TAXES 5,807 6,117
Applicable income taxes 2,379 2,356
-------------- --------------
NET INCOME $ 3,428 $ 3,761
-------------- --------------
-------------- --------------
EARNINGS PER SHARE $ 7.92 $ 8.70
-------------- --------------
-------------- --------------
</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, 1995 AND 1994
(Dollars in Thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $6,394 $6,699
-------------- --------------
-------------- --------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,304 1,197
Provision for loan losses 925 1,100
Provision for deferred income taxes 2,078 1,619
Premium amortization of investment securities, net 251 957
Net realized gain on sales of investment securities available
for sale (79) (329)
Net gain on sale mortgage-backed securities available for sale --- (1,163)
Gain on sale of loans held for sale (24) (199)
Sale of loans originated for sale 1,613 7,336
Loans originated for sale (669) (11,548)
(Gain) loss on sale of premises and equipment (27) 266
Gain on sale of other real estate (17) (378)
Decrease (Increase) in other assets 1,598 (3,511)
Decrease in other liabilities (547) (545)
-------------- --------------
Total adjustments 6,406 (5,198)
-------------- --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 12,800 1,501
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of investment securities available for sale 4,592 53,183
Proceeds from sales of mortgage-backed securities available for sale --- 14,941
Proceeds from maturities of investment securities 16,695 34,043
Purchases of investment securities (9,809) (118,618)
Proceeds from repayments of mortgage-backed securities 7 2,037
Net (increase) decrease in loans (26,081) 13,542
Purchases of premises and equipment (2,788) (1,139)
Proceeds from sale of premises and equipment 27 23
Proceeds from sale of other real estate 1,520 6,194
-------------- --------------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (15,837) 4,206
-------------- --------------
</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, 1995 AND 1994 (CONTINUED)
(Dollars in Thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in demand deposits, NOW accounts
and savings accounts ($ 2,212) $10,020
Net increase in certificates of deposit 33,946 777
Decrease in FHLB advances (9,940) (8,220)
Repayment of REMIC --- (3,541)
Cash dividends paid (3,136) (2,717)
------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 18,658 (3,681)
------------ ------------
Net increase in cash and cash equivalents 15,621 2,026
Cash and cash equivalents at beginning of period 50,043 44,497
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $65,664 $46,523
------------ ------------
------------ ------------
Supplemental cash flow information:
Cash paid during the year for:
Interest on deposits and other borrowings $17,222 $12,755
Income taxes $ 3,601 $ 2,204
Transfers from loans to other real estate $ 729 $ 783
</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 consolidated financial statements include the accounts of West Suburban
Bancorp, Inc. (the "Parent") and its wholly-owned subsidiaries (collectively,
the "Subsidiaries" and together with the Parent, the "Company"): West Suburban
Bank; West Suburban Bank of Downers Grove/Lombard; West Suburban Bank of Darien;
West Suburban Bank of Carol Stream/Stratford Square; and West Suburban Bank of
Aurora, F.S.B. ("WSB Aurora"). Significant intercompany accounts and
transactions have been eliminated. The unaudited interim consolidated financial
statements include the accounts of the Company and its 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 the Company. 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. The
results for the interim periods are not necessarily indicative of the results to
be expected for the entire fiscal year. Certain amounts reported in prior
periods have been reclassified to conform to the 1995 presentation.
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 or available for sale securities. The
Company does not invest in trading securities. Securities held to maturity are
classified as such only when the Company determines it has both the ability and
positive intent to hold these securities to maturity. All other securities are
classified as available for sale. Held to maturity securities are carried at
amortized cost while available for sale securities are carried at fair value
with net unrealized gains and losses (net of taxes) reported as a separate
component of equity. Gains or losses on disposition are based on the net
proceeds and the adjusted carrying amount of the securities sold, using the
specific identification method.
During the first six months of 1995, the Company's unrealized loss, net of taxes
on securities available for sale declined $3.8 million (78.0%) from $4.9 million
at December 31, 1994 to $1.1 million at June 30, 1995.
NOTE 3 - OUTSTANDING LINES OF CREDIT AVAILABLE - (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, 1995 DECEMBER 31, 1994
--------------- -------------------
<S> <C> <C>
Home equity lines $96,537 $98,029
Commercial loans in process 136,760 135,018
Visa credit lines 49,560 48,443
--------------- -------------------
Total commitments $282,857 $281,490
--------------- -------------------
--------------- -------------------
</TABLE>
The Company had $6.3 million and $2.6 million of commitments to originate
residential mortgage loans as of June 30, 1995 and December 31, 1994,
respectively.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BALANCE SHEET ANALYSIS
ASSET DISTRIBUTION. Aggregate holdings in investment securities decreased $7.8
million (3.5%) to $218.2 million at June 30, 1995 from $226.0 million at
December 31, 1994. During the first six months of 1995, sales and maturities of
investment securities totaled $21.3 million, of which $9.8 million was
reinvested in investment securities. Excess funds were invested in federal funds
sold which have relatively high yields and provide the Company with additional
liquidity should it be needed to fund loan growth. The Company continues to seek
high quality securities for its portfolio and monitors its portfolio in relation
to economic conditions and the interest rate environment on a daily basis.
Total loans increased $24.2 million (3.4%) during the first six months of 1995.
The increase in loans primarily resulted from increased commercial and
residential mortgage loan demand due to the stabilization of short-term interest
rates and decreases in long-term interest rates.
ALLOWANCE FOR LOAN LOSSES AND ASSET QUALITY. Management attempts to maintain the
allowance for loan losses at a level adequate to absorb anticipated loan losses.
The amount of the allowance is established based upon past loan loss experience
and other factors which, in management's judgement, merit consideration in
estimating loan losses. Other factors considered by management include the
growth and the composition of the loan portfolio, the relationship of the
allowance for loan losses to outstanding loans and economic conditions in the
Company's market area. The allowance for loan losses increased $.7 million to
$9.1 million at June 30, 1995 from $8.4 million at December 31, 1994. The ratio
of the allowance to total loans outstanding increased at June 30, 1995 to 1.23%
compared to 1.18% at December 31, 1994. This increase was attributable in part
to provisions to the allowance which were partially offset by net charge-offs of
$.2 million during the first six months of 1995. Nonperforming loans increased
$8.5 million (179.2%) to $13.2 million at June 30, 1995 from $4.7 million at
December 31, 1994. Nonperforming loans increased $7.5 million during the second
quarter of 1995. As of June 30, 1995 and December 31, 1994, total nonperforming
loans to net loans was 1.8% and .7% respectively. This increase was principally
due to one $8.0 million commercial loan for which interest payments are current
although the loan matured in March of 1995. Management is monitoring this loan
closely and will take additional actions, including adjusting the allowance if
it deems necessary.
The following table is an analysis of the Company's non-performing loans for the
periods stated (dollars in thousands).
<TABLE>
<CAPTION>
------------- ----------------- -------------
JUNE 30, 1995 DECEMBER 31, 1994 DOLLAR CHANGE
------------- ----------------- -------------
<S> <C> <C> <C>
Nonaccrual loans $ 664 $ 279 $ 385
Accruing loans 90 days
past due 12,531 4,448 8,083
------------- ----------------- -------------
Total nonperforming loans $13,195 $ 4,727 $8,468
------------- ----------------- -------------
------------- ----------------- -------------
Nonperforming Loans
as a percent of net loans 1.8% .7% ---
Other real estate $ 9,684 $10,458 $ 774
------------- ----------------- -------------
------------- ----------------- -------------
</TABLE>
7
<PAGE>
The following table is an analysis of the Company's Provision for Loan Losses
for the periods stated (dollars in thousands).
<TABLE>
<CAPTION>
1995 1994
---------------------------------------------
2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr.
---------------------------------------------
<S> <C> <C> <C> <C> <C>
Provision-quarter $462 $463 $573 $543 $513
Provision-year 925 463 2,216 1,643 110
Net chargeoffs-quarter 114 133 369 215 50
Net chargeoffs-year 247 133 895 526 311
Allowance at period end 9,123 8,762 8,445 8,241 7,913
Allowance to period end loans 1.23% 1.21% 1.18% 1.19% 1.15%
</TABLE>
LIABILITY DISTRIBUTION. Total liabilities increased $23.4 million (2.5%) to
$966.9 million at June 30, 1995 from $943.5 million at December 31, 1994. This
increase was primarily due to increases in deposits which were partially offset
by the repayment of $9.9 million of FHLB advances.
Total deposits increased $31.7 million (3.4%) to $955.0 million at June 30, 1995
from $923.3 million at December 31, 1994. Balances on demand and other
noninterest-bearing and NOW accounts decreased by $18.8 million (6.7%) from
$279.8 million at December 31, 1994 to $261.0 million at June 30, 1995. Money
market savings deposits increased $16.6 million (5.2%) from $317.4 million at
December 31, 1994 to $334.0 million at June 30, 1995. While balances on time
deposits increased by $33.9 million (10.4%) from $326.1 million at December 31,
1994 to $360.0 million at June 30, 1995. Customers shifted their deposits into
savings and higher yielding certificates of deposit. The proceeds from the
increases in deposits were used to meet loan demand along with paying down FHLB
advances.
Balances in the Company's major categories of deposits are summarized in the
following table (dollars in thousands):
<TABLE>
<CAPTION>
------------- ----------------- ------------- --------------
June 30, 1995 December 31, 1994 Dollar Change Percent Change
------------- ----------------- ------------- --------------
<S> <C> <C> <C> <C>
Demand and other
noninterest-bearing $96,977 $100,771 ($3,794) (3.8)%
Now accounts 164,011 179,025 (15,014) (8.4)%
Money market savings 333,974 317,379 16,595 5.2%
Time, $100,000 and over 47,475 47,693 (218) (0.5)%
Time, other 312,553 278,389 34,164 12.3%
------------- ----------------- ------------- --------------
Total 955,020 923,288 31,733 3.4%
------------- ----------------- ------------- --------------
------------- ----------------- ------------- --------------
</TABLE>
The Company attempts to remain highly competitive in its market by offering
competitive rates on its savings and certificate of deposit products. Although
the Company promotes its savings products when appropriate, management does not
intend to compromise its net interest margin to attract deposits.
SHAREHOLDERS' EQUITY. Shareholders' equity increased $7.0 million (7.1%) to
$105.0 million at June 30, 1995 from $98.0 million at December 31, 1994. This
increase was directly the result of the net retention of 1995 earnings of $3.2
million and the decline of unrealized loss on securities available for sale of
$3.8 million (net of taxes) from $4.9 million at December 31, 1994 to $1.1
million at June 30, 1995.
CAPITAL RESOURCES
The Company's capital ratios as well as those of its subsidiaries as of June 30,
1995 are presented below. All such ratios are in excess of the regulatory
capital requirements which call for a minimum total risk-based capital ratio of
8% for the Company and each of its subsidiaries (at least one half of the
minimum total risk based capital must be comprised of tier 1 capital), a minimum
leverage ratio of 3% for the most highly rated banks that do not expect
significant growth, (all other institutions are required to maintain a minimum
leverage capital ratio of 4% to 5% depending on their particular circumstances
and risk profiles) for the Company and
8
<PAGE>
its bank subsidiaries and a minimum tangible capital ratio and core capital
ratio of 1.5% and 3%, respectively, for the Company's thrift subsidiary. Bank
holding companies and their subsidiaries are generally expected to operate at or
above the minimum capital requirements and the ratios shown below are in excess
of regulatory minimums and should allow the Company and its subsidiaries to
operate without capital adequacy concerns.
The following table sets forth selected regulatory capital ratios of the Company
and the bank subsidiaries at June 30, 1995:
<TABLE>
<CAPTION>
Tier 1 Total
Risk-Based Risk-Based Leverage
Institution Capital Capital Capital
----------- ------- ------- -------
<S> <C> <C> <C>
West Suburban Bancorp, Inc. 11.61% 12.67% 9.79%
West Suburban Bank 11.08% 12.20% 8.86%
West Suburban Bank of Downers Grove/Lombard 13.44% 14.51% 9.80%
West Suburban Bank of Darien 11.34% 12.42% 8.48%
West Suburban Bank of Carol Stream/Stratford Square 11.07% 11.97% 8.13%
</TABLE>
At June 30, 1995, WSB Aurora maintained a core capital ratio of 10.55%, a
tangible capital ratio of 12.37% and a total risk-based capital ratio of 13.40%.
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
provided the federal banking regulators with broad power to take prompt
corrective action to resolve the problems of undercapitalized institutions. The
extent of the regulators' powers depends on whether the institution in question
is "well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" or "critically undercapitalized." Depending
upon the capital category to which an institution is assigned, the regulators'
corrective powers include: requiring the submission of a capital restoration
plan; placing limits on asset growth and restrictions on activities; requiring
the institution to issue additional capital stock (including additional voting
stock) or to be acquired; restricting transactions with affiliates; restricting
the interest rate the institution may pay on deposits; ordering a new election
of directors of the institution; requiring that senior executive officers or
directors be dismissed; prohibiting the institution from accepting deposits from
correspondent banks; requiring the institution to divest certain subsidiaries;
prohibiting the payment of principal or interest on subordinated debt; and
ultimately, appointing a receiver for the institution.
Management has been advised that as of June 30, 1995, December 31, 1994 and
1993, each of the subsidiaries qualified as a "well-capitalized" institution.
LIQUIDITY
Effective liquidity management allows a banking institution to accommodate the
changing net funds flow requirements of customers who may deposit or withdraw
funds or modify their credit requirements. The Company manages its liquidity
position through continuous monitoring of profitability trends, asset quality,
interest rate sensitivity and maturity schedules of earning assets and
supporting liabilities.
Generally, the Company uses cash and cash equivalents to meet its liquidity
needs. Additional liquidity is provided by maintaining assets which mature
within a short time-frame or which may be quickly converted to cash without
significant loss.
These assets include interest-bearing deposits in financial institutions,
federal funds sold and investment securities available for sale. As of June 30,
1995 and December 31, 1994, liquid assets represented 16.1% of total assets. The
Company experienced an increase in cash and cash equivalents of $15.6 million
(31.2%) from $50.0 million at December 31, 1994 to $65.6 million at June 30,
1995. This was primarily due to a large increase in Federal funds sold of $27.3
million from $1.9 million at December 31, 1994 to $29.2 million at June 30,
1995. This increase was partially offset by a decrease in cash and due from
banks of $11.8 million (24.5%) from $48.1 million at December 31, 1994 to $36.3
million at June 30, 1995 as the Company continues its goals
9
<PAGE>
of maximizing liquidity and net interest income. The Company has available lines
of credit to draw upon should the need be deemed necessary.
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 or upon its maturity. The consolidated
interest rate sensitivity position of the Company at June 30, 1995, reflects
cumulative interest rate sensitive assets compared to interest rate sensitive
liabilities of 104.8% and cumulative interest rate sensitive assets that reprice
or mature within one year compared to similarly sensitive liabilities of 3.3%.
Movements in general market interest rates are a key element in changes in the
net interest margin. During a period of rising interest rates, a negative gap
would tend to adversely affect net interest income. Conversely, a positive gap
would tend to positively affect net interest income when assets reprice more
quickly than liabilities. The Company's policy is to manage its balance sheet so
that fluctuations in net interest margin are minimized regardless of the level
of interest rates, although the net interest margin does vary somewhat due to
management's response to increasing competition from other financial
institutions.
Listed below are the balances in the major categories of rate sensitive assets
and liabilities that are subject to repricing as of June 30, 1995 (dollars in
thousands):
<TABLE>
<CAPTION>
Over three
Three months to Over one
months twelve year to Over
or less months five years five years Total
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Rate sensitive assets:
Interest-bearing deposits in financial institutions $127 $--- $--- $--- $127
Federal funds sold 29,180 --- --- --- 29,180
Investment securities 15,852 57,144 101,957 43,239 218,192
Loans 271,677 390,240 497 79,421 741,835
-----------------------------------------------------------------
Total $316,836 $447,384 $102,454 $122,660 $989,334
-----------------------------------------------------------------
-----------------------------------------------------------------
Rate sensitive liabilities:
Money market savings $333,974 $--- $--- $--- $333,974
NOW accounts 164,011 --- --- --- 164,011
Time deposits:
Less than $100,000 60,416 136,802 115,335 --- 312,553
$100,000 and over 19,272 14,564 --- 13,639 47,475
-----------------------------------------------------------------
Total $577,673 $151,366 $115,335 $13,639 $858,013
-----------------------------------------------------------------
-----------------------------------------------------------------
Interest sensitivity gap ($260,837) $296,018 ($12,881) $109,021 $---
Cumulative interest sensitivity gap ($260,837) $35,181 $22,300 $131,321 $131,321
Cumulative net interest-earning assets as a
percentage of net interest-bearing liabilities 54.8% 104.8% 102.6% 115.3%
Cumulative interest sensitivity gap as a
percentage of total assets (24.3%) 3.3% 2.1% 12.2%
</TABLE>
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
10
<PAGE>
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, 1995 AND 1994
NET INCOME. The Company's net income for the six months ended June 30, 1995 and
1994 was approximately $6.4 million and $6.7 million, respectively. This
represents a decrease of $.3 million (4.6%) for the 1995 period when compared to
the 1994 period. The results of the 1994 period reflected income from the one-
time sale of the mortgage-backed securities portfolio which occurred during
1994. The Company's net interest income increased $2.0 million (10.0%) to $22.4
million for the six months ended June 30, 1995 from $20.4 million for the same
period ended in 1994. This increase was primarily due to an increase in the
average yield and balances of the loan portfolio, which has been described in an
earlier section of this report.
INTEREST INCOME. Total interest income, on a tax equivalent basis, increased
$7.4 million for the six months ended June 30, 1995 compared to the same period
in 1994. This increase resulted from an increase of $1.7 million that resulted
from volume increases and $5.7 million that was due to rate increases. The
principal component of this increase was interest on loans which increased $7.6
million. Of this increase, $5.1 million was the result of higher interest
rates and $2.5 million was due to higher balances. This increase was in part,
offset by a decrease in average balances on all other interest-earning assets.
INTEREST EXPENSE. Total interest expense increased $5.3 million for the six
months ended June 30, 1995 compared to the same period during 1994. The largest
component of this increase was interest on deposits which increased $5.1 million
during this time. Of this increase $4.2 million was due to higher interest rates
while $.9 million was due to higher average balances.
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 on a tax equivalent basis for the six-
month period ended June 30, 1995 as compared to the same period in 1994 (dollars
in thousands):
<TABLE>
<CAPTION>
CHANGE
DUE TO:
VOLUME RATE TOTAL
-------- -------- --------
<S> <C> <C> <C>
INTEREST INCOME
Interest-bearing deposits in financial institutions ($24) ($29) ($53)
Federal funds sold (200) 198 (2)
Investment securities (590) 391 (199)
Loans 2,545 5,077 7,622
------- ------ ------
Total interest income 1,731 5,637 7,368
------- ------ ------
INTEREST EXPENSE
Interest-bearing deposits 940 4,197 5,137
Borrowed funds 149 34 183
------- ------ ------
Total interest expense 1,089 4,231 5,320
------- ------ ------
Net interest income $642 $1,406 $2,048
------- ------ ------
------- ------ ------
</TABLE>
PROVISION FOR LOAN LOSSES. The Company's provision for loan losses decreased $.2
million (15.9%) for the six months ended June 30, 1995 to $.9 million from $1.1
million for the same period in 1994 as a result of the Company's analysis of the
overall credit risk in its loan portfolio. The Company charged-off $.4 million
while recovering $.2 million during the six months ended June 30, 1995 compared
to charge-offs of $.5 million and recoveries of $.2 million during the same
period in 1994.
11
<PAGE>
OTHER INCOME. Total other income decreased $1.7 million (31.7%) for the six
months ended June 30, 1995 compared to the same period in 1994. This decrease
was primarily due to a one-time gain of $1.2 million on the sale of the
mortgage-backed securities portfolio during 1994. Furthermore, the Company
experienced decreased income from loan sales in the secondary market of
approximately $.2 million and a net decline of $.3 million in income from net
gain on the sales of investment securities.
OTHER EXPENSE. Total other expense increased $.6 million (4.1%) for the six
months ended June 30, 1995 compared to 1994. Salary and employee benefits
increased $.1 million due to increased salary expenses with the opening of new
facilities and profit-sharing expenses. Other operating expenses increased $.2
million during this period. This increase was principally due to increased
maintenance costs on computer equipment along with increased seasonal costs
related to property held as Other Real Estate. Professional fees increased $.1
million for the six months ended June 30, 1995 compared to the same period
during 1994.
INCOME TAX EXPENSE. Income tax expense increased $.2 million (4.7%) for the six
months ended June 30, 1995 to $4.4 million from $4.2 million compared to the
same period in 1994 due to the Company's thrift subsidiary recording the final
settlement of the previously unresolved issue it had with the Internal Revenue
Service.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1994
NET INCOME. The Company's net income for the three months ended June 30, 1995
and 1994 was approximately $3.4 million and $3.7 million, respectively. This
represents a decrease of $.3 million (8.9%) for the period. This decrease in
other income was primarily due to an one-time gain on the sale of the mortgage-
backed securities portfolio that occurred in 1994. The Company's net interest
margin increased $1.2 million (11.6%) to $11.5 million for the six months ended
June 30, 1995 from $10.3 million for the same period in 1994.
INTEREST INCOME. Total interest income increased $4.2 million (25.3%) for the
three months ended June 30, 1995 compared to the same period in 1994. This
increase is attributable to the loan portfolio which grew in both yield and
volume. The Company's investment portfolio remained stable as liquid funds were
invested in Federal funds sold.
INTEREST EXPENSE. Total interest expense increased $3.1 million (46.9%) for the
three months ended June 30, 1995 compared to the same period during 1994. The
largest component of this increase was interest on deposits which increased $3.0
million during this time.
OTHER INCOME. Total other income decreased $1.4 million (42.1%) for the three
months ended June 30, 1995 compared to the same period in 1994. This decrease
was primarily due to a one-time gain on the sale of the mortgage-backed
securities portfolio of $1.2 million during 1994. The Company also experienced a
net decline in income from the sale of OREO property of $.3 million.
OTHER EXPENSE. Total other expense increased $.1 million (1.6%) for the three
months ended June 30, 1995 compared to 1994. Occupancy expense accounted for
most of this increase.
12
<PAGE>
IMPACT OF NEW ACCOUNTING STANDARDS
In May 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan," which requires that impaired loans, as defined, be
measured based on the present value of expected future cash flows discounted at
the loan's effective interest rate or, as a practical expedient, at the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. SFAS No. 114 was amended in October, 1994 by SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosures," to allow a creditor to use existing methods for recognizing
interest income on an impaired loan. SFAS No. 114 and No. 118 were adopted as
of January 1, 1995. Neither standard has had a material impact on the Company.
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.
13
<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 10, 1995.
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:
<TABLE>
<CAPTION>
FOR AGAINST
--- -------
<S> <C> <C>
1. Kevin J. Acker 1,710,999 5,141
2. John A. Clark 1,713,261 4,833
3. David Bell 1,689,372 24,686
4. Peggy LoCicero 1,693,313 7,146
5. Charles P. Howard 1,689,372 6,217
</TABLE>
Broker-No Votes: 74,415
C. Ratification of Deloitte & Touche as the Company's independent
auditors.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C>
1,697,079 5,534 22,710
</TABLE>
ITEM 5. OTHER INFORMATION
None
14
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
11 Computation of Earnings Per Share
27 Financial Data Schedule
B. Reports on Form 8-K - The Company did not file a report on Form 8-K during
the three months ended June 30, 1995.
15
<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 14, 1995
/s/ Kevin J. Acker
------------------------------------
KEVIN J. ACKER
CHAIRMAN OF THE BOARD
/s/ Duane G. Debs
------------------------------------
DUANE G. DEBS
CHIEF ACCOUNTING OFFICER AND
CHIEF FINANCIAL OFFICER
16
<PAGE>
EXHIBIT 11
WEST SUBURBAN BANCORP, INC.
COMPUTATION OF NET INCOME PER SHARE
FOR THE SIX MONTHS ENDED JUNE 30
(UNAUDITED)
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30,
1995 1994 1995 1994
------------------------ --------------------------
<S> <C> <C> <C> <C>
1) Net income $6,394 $6,699 $3,428 $3,761
2) Common shares outstanding 432,495 432,495 432,495 432,495
3) Net income per common share
share $14.78 $15.49 $7.92 $8.70
</TABLE>
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 36,357
<SECURITIES> 218,192
<RECEIVABLES> 751,338
<ALLOWANCES> 9,123
<INVENTORY> 0
<CURRENT-ASSETS> 764,220
<PP&E> 28,136
<DEPRECIATION> 1,304
<TOTAL-ASSETS> 1,071,921
<CURRENT-LIABILITIES> 729,039
<BONDS> 0
<COMMON> 3,457
0
0
<OTHER-SE> 101,508
<TOTAL-LIABILITY-AND-EQUITY> 1,071,921
<SALES> 0
<TOTAL-REVENUES> 43,985
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 14,504
<LOSS-PROVISION> 925
<INTEREST-EXPENSE> 17,777
<INCOME-PRETAX> 10,779
<INCOME-TAX> 4,385
<INCOME-CONTINUING> 6,394
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,394
<EPS-PRIMARY> 14.78
<EPS-DILUTED> 14.78
</TABLE>
