<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 September 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 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 September 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 September 30, 1995.
Page 1 of 22;
Exhibit Index appears at page 18.
<PAGE>
WEST SUBURBAN BANCORP, INC.
Form 10-Q Quarterly Report
Table of Contents
PART I
Page Number
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . 10
PART II
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . 18
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . . . 18
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . . 18
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . 18
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . 18
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 18
Form 10-Q Signature Page . . . . . . . . . . . . . . . . . . . . . . . . 19
2
<PAGE>
<TABLE>
<CAPTION>
PART I
ITEM 1. FINANCIAL STATEMENTS
WEST SUBURBAN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(UNAUDITED)
SEPTEMBER 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
ASSETS
Cash and due from banks $52,335 $48,134
Interest-bearing deposits in financial institutions 125 14
Federal funds sold 45,540 1,895
------------- ------------
Total cash and cash equivalents 98,000 50,043
Investment securities:
Available for sale (amortized cost of $98,674 in
1995 and $125,630 in 1994) 97,014 117,448
Held to maturity (fair value of $122,533 in
1995 and $102,403 in 1994) 122,600 108,559
Loans, less allowance for loan losses of $8,754 in 1995 and
$8,445 in 1994 752,447 709,205
Premises and equipment, net 28,076 26,652
Other real estate 7,447 10,458
Accrued interest and other assets 16,521 19,130
------------- ------------
TOTAL ASSETS $1,122,105 $1,041,495
------------- ------------
------------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing $107,898 $100,771
Interest-bearing 891,066 822,486
------------- ------------
Total deposits 998,964 923,257
FHLB advances --- 9,940
Accrued interest and other liabilities 16,543 10,327
------------- ------------
TOTAL LIABILITIES 1,015,507 943,524
------------- ------------
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 66,145 61,378
Unrealized loss on securities available for sale, net of taxes (1,070) (4,930)
------------- ------------
TOTAL SHAREHOLDERS' EQUITY 106,598 97,971
------------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,122,105 $1,041,495
------------- ------------
------------- ------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
WEST SUBURBAN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Dollars in Thousands, Except Per Share Data)
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
--------- --------
<S> <C> <C>
INTEREST INCOME
Loans, including fees $49,999 $38,649
Investment securities:
U.S. government agencies and corporations 5,381 3,835
Corporate 3,508 4,919
States and political subdivisions 953 1,621
U.S. Treasury 598 522
Deposits in financial institutions 44 84
Federal funds sold 1,105 520
--------- --------
Total interest income 61,588 50,150
--------- --------
INTEREST EXPENSE
Deposits 27,193 19,384
Other 362 182
--------- --------
Total interest expense 27,555 19,566
--------- --------
Net interest income 34,033 30,584
PROVISION FOR LOAN LOSSES 1,388 1,643
--------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 32,645 28,941
--------- --------
OTHER INCOME
Service fees 2,653 2,562
Net gain on sale of investment securities available for sale 35 336
Net gain on sale of mortgage-backed securities available for sale --- 1,188
Trust fees 222 229
Net gain on sale of loans originated for sale 47 208
Loan servicing 702 652
Other 1,925 2,267
--------- --------
Total other income 5,584 7,442
--------- --------
OTHER EXPENSE
Salaries and employee benefits 9,767 9,261
Occupancy 1,856 1,592
Premises and equipment 1,772 1,598
FDIC insurance premiums 1,060 1,490
Professional fees 985 738
Other 7,186 5,210
--------- --------
Total other expense 22,626 19,889
--------- --------
INCOME BEFORE INCOME TAXES 15,603 16,494
Applicable income taxes 5,971 6,505
--------- --------
NET INCOME $9,632 $9,989
--------- --------
--------- --------
EARNINGS PER SHARE $22.27 $23.10
--------- --------
--------- --------
CASH DIVIDENDS DECLARED PER SHARE $11.25 $10.50
--------- --------
--------- --------
</TABLE>
The accompanying notes are an imtegral part of the consolidated financial
statements.
4
<PAGE>
WEST SUBURBAN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Dollars in Thousand)
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
INTEREST INCOME
Loans, including fees $17,249 $13,533
Investment securities:
U.S. government agencies and corporations 1,674 1,639
Corporate 1,100 1,357
States and political subdivisions 331 347
U.S. Treasury 200 200
Deposits in financial institutions 16 4
Federal funds sold 806 220
-------- --------
Total interest income 21,376 17,300
-------- --------
INTEREST EXPENSE
Deposits 9,730 7,059
Other 48 52
-------- --------
Total interest expense 9,778 7,111
-------- --------
Net interest income 11,598 10,189
PROVISION FOR LOAN LOSSES 463 543
-------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 11,135 9,646
-------- --------
OTHER INCOME
Service fees 877 882
Net (loss) gain on sale of investment securities available for sale (44) 9
Net gain on mortgage-backed securities available for sale --- 23
Trust fees 28 53
Net gain on sale of loans originated for sale 23 8
Loan servicing 230 214
Other 697 731
-------- --------
Total other income 1,811 1,920
OTHER EXPENSE -------- --------
Salaries and employee benefits 3,311 2,921
Occupancy 657 517
Premises and equipment 582 486
FDIC insurance premiums 25 503
Professional fees 282 93
Other 3,265 1,439
-------- --------
Total other expense 8,122 5,959
-------- --------
INCOME BEFORE INCOME TAXES 4,824 5,607
Applicable income taxes 1,586 2,317
-------- --------
NET INCOME $3,238 $3,290
-------- --------
-------- --------
EARNINGS PER SHARE $7.49 $7.61
-------- --------
-------- --------
CASH DIVIDENDS DECLARED PER SHARE $3.75 $3.50
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
WEST SUBURBAN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Dollars in Thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $9,632 $9,989
-------- --------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,975 1,801
Provision for loan losses 1,388 1,643
Provision for deferred income taxes 1,746 1,905
Provision for loss on other real estate 1,544 ---
Premium amortization and discount accretion of investment
securities, net 387 1,282
Net realized gain on sales of investment securities available
for sale (35) (336)
Net gain on sale mortgage-backed securities available for sale --- (1,188)
Gain on sale of loans held for sale (47) (208)
Sale of loans originated for sale 2,303 7,968
Loans originated for sale (2,910) (11,881)
(Gain) loss on sale of premises and equipment (29) 267
Gain on sale of other real estate (18) (393)
Decrease (Increase) in other assets 2,609 (2,489)
Increase in other liabilities 4,820 922
-------- --------
Total adjustments 13,733 (707)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 23,365 9,282
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of investment securities available for sale 9,087 54,162
Proceeds from sales of mortgage-backed securities available for sale --- 15,973
Proceeds from maturities of investment securities 31,693 48,440
Purchases of investment securities (30,891) (138,615)
Proceeds from repayments of mortgage-backed securities 14 2,644
Net (increase) decrease in loans (44,772) 6,284
Purchases of premises and equipment (3,399) (2,392)
Proceeds from sale of premises and equipment 29 23
Proceeds from sale of other real estate 1,821 7,355
-------- --------
NET CASH (USED IN) INVESTING ACTIVITIES (36,418) (6,126)
-------- --------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE>
WEST SUBURBAN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (CONTINUED)
(Dollars in Thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand deposits, NOW
accounts and savings accounts $34,492 ($8)
Net increase in certificates of deposit 41,215 19,677
Decrease in FHLB advances (9,940) (6,220)
Repayment of REMIC --- (3,541)
Cash dividends paid (4,757) (4,231)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 61,010 5,677
--------- ---------
Net increase in cash and cash equivalents 47,957 8,833
Cash and cash equivalents at beginning of period 50,043 44,497
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $98,000 $53,330
--------- ---------
--------- ---------
Supplemental cash flow information:
Cash paid during the year for:
Interest on deposits and other borrowings $26,400 $19,718
Income taxes $5,806 $4,885
Transfers from loans to other real estate $796 $1,823
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
7
<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 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 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 nine months of 1995, the Company's unrealized loss, net of
taxes, on securities available for sale declined $3.8 million (78.3%) from $4.9
million at December 31, 1994 to $1.1 million at September 30, 1995.
NOTE 3 - OUTSTANDING LINES OF CREDIT AVAILABLE - (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 December 31, 1994
------------------ -----------------
<S> <C> <C>
Home equity lines $94,614 $98,029
Commercial loans in process 145,900 135,018
Visa credit lines 50,190 48,443
------------------ -----------------
Total commitments $290,704 $281,490
------------------ -----------------
------------------ -----------------
</TABLE>
The Company had $4.7 million and $2.6 million of commitments to originate
residential mortgage loans as of September 30, 1995 and December 31, 1994,
respectively.
NOTE 4 - OTHER REAL ESTATE
Other real estate includes properties acquired in partial or total settlement of
problem loans. The properties are recorded at the lower of cost or fair value
less estimated selling costs at the date acquired. Losses arising at the time of
acquisition of such properties are charged to the allowance for loan losses. Any
subsequent decline in value is charged to current operations. During the three
months ended September 30, 1995, the Company recognized a $1.5 million write-
down related to a property held as other real estate. The revenue
8
<PAGE>
received from, and expenses incurred in maintaining such properties are also
included in current operations. For the three month and nine month periods ended
September 30, 1995, other operating expenses include $.6 million and $1.1
million, respectively, relating to operating a property held as other real
estate. The amounts the Company could ultimately recover from other real estate
could differ materially from the amounts used in determining the net carrying
value of the assets because of future market factors beyond the Company's
control or changes in the Company's strategy for recovering its investment.
Management believes the net carrying value at September 30, 1995 is a reasonable
estimate of the ultimate value of other real estate.
NOTE 5 - ADOPTION OF NEW ACCOUNTING STANDARDS
As of January 1, 1995, the Company adopted the provisions of SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan" as amended by SFAS 118,
"Accounting by Creditors for Impairment of Loan-Income Recognition and
Disclosures." SFAS 114 requires creditors to establish a valuation allowance
when it is probable that all the principal and interest due under the
contractual terms of a loan will not be collected. The impairment is measured
based on the present value of expected future cash flows discounted at a loan's
effective interest rate, the observable market price of a loan or the fair value
of collateral if the loan is collateral dependent. SFAS 118 allows existing
income recognition practices to continue.
Under the Company's impaired loan accounting policy, all commercial and
commercial real estate loans are subject to impairment recognition on a
quarterly basis. The Company generally considers loans 90 days or more past due
and all nonaccrual loans to be impaired. Interest income on impaired loans will
be recognized in a manner consistent with prior income recognition policies. For
all impaired loans other than nonaccrual loans, income is recorded on an accrual
basis. Interest income on impaired nonaccrual loans is recognized on a cash
basis.
The adoption of SFAS 114 and SFAS 118 did not have a material effect on the
Company's financial position or results of operations since the Company has
historically established valuation allowances generally based on the fair value
of collateral securing an impaired loan.
9
<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 $6.4
million (2.8%) to $219.6 million at September 30, 1995 from $226.0 million at
December 31, 1994. During the first nine months of 1995, sales and maturities of
investment securities totaled $40.8 million, of which $30.9 million was
reinvested in investment securities. Excess funds were invested in federal funds
sold which provide the Company with additional liquidity to fund growth in the
loan portfolio. 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 an ongoing basis.
Total loans increased $43.6 million (6.1%) during the first nine 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. The Company will attempt to
remain competitive in its market by offering competitive rates on its loan
products. Although the Company promotes its loan products when appropriate,
management's policy is to not compromise its credit evaluation standards or its
net interest margins to attract new business.
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 historical loan loss
experience and other factors which, in management's judgement, merit
consideration in estimating loan losses. Other factors considered by management
include the level of 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
$.3 million to $8.7 million at September 30, 1995 from $8.4 million at December
31, 1994. The ratio of the allowance for loan losses to total loans outstanding
decreased at September 30, 1995 to 1.15% compared to 1.18% at December 31, 1994.
This decrease was attributable in part to the growth in the portfolio during the
first nine months of 1995. Nonperforming loans increased $7.4 million (156.5%)
to $12.1 million at September 30, 1995 from $4.7 million at December 31, 1994.
Nonperforming loans decreased $1.1 million during the third quarter of 1995. As
of September 30, 1995 and December 31, 1994, total nonperforming loans to net
loans were 1.6% and .7%, respectively. This increase was principally due to the
classification of one $8.0 million commercial loan as nonperforming. Although
interest payments on this loan are current, 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 such necessary.
The following table is an analysis of the Company's nonperforming loans for the
periods stated (dollars in thousands).
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 December 31, 1994 Dollar Change
-------------------- ----------------- -------------
<S> <C> <C> <C>
Nonaccrual loans $412 $279 $133
Accruing loans 90 days past due 11,712 4,448 7,264
-------- -------- --------
Total nonperforming loans $12,124 $4,727 $7,397
-------- -------- --------
-------- -------- --------
Nonperforming loans as a percent
of net loans 1.6% .7% ---
Other real estate $7,447 $10,458 $3,011
-------- -------- --------
-------- -------- --------
</TABLE>
10
<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
--------------------------------------- --------------------------------
3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr.
--------------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
Provision-quarter $463 $462 $463 $573 $543
Provision-year 1,388 925 463 2,216 1,643
Net chargeoffs-quarter 831 114 133 369 215
Net chargeoffs-year 1,078 247 133 895 526
Allowance at period end 8,754 9,123 8,762 8,445 8,241
Allowance to period end total loans 1.15% 1.23% 1.21% 1.18% 1.19%
</TABLE>
LIABILITY DISTRIBUTION. Total liabilities increased $72.0 million (7.6%) to
$1,015.5 million at September 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 $75.7 million (8.2%) to $999.0 million at September
30, 1995 from $923.3 million at December 31, 1994. Balances on demand and other
noninterest-bearing and NOW accounts decreased by $.3 million (.1%) from $279.8
million at December 31, 1994 to $279.5 million at September 30, 1995. Money
market savings deposits increased $34.8 million (11.0%) from $317.4 million at
December 31, 1994 to $352.2 million at September 30, 1995. Balances on time
deposits increased by $41.2 million (12.6%) from $326.1 million at December 31,
1994 to $367.3 million at September 30, 1995. The increase is the result of
successful marketing, the establishment of two new locations and the shifting of
deposits by current and new customers into savings and higher yielding
certificates of deposit. The proceeds from the increases in deposits were used
to meet loan demand and to repay FHLB advances.
Balances in the Company's major categories of deposits are summarized in the
following table (dollars in thousands):
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994 Dollar Change Percent Change
------------------ ----------------- ------------- --------------
<S> <C> <C> <C> <C>
Demand and other
noninterest-bearing $107,898 $100,771 $7,127 7.1%
NOW accounts 171,620 179,025 (7,405) (4.1)%
Money market savings 352,149 317,379 34,770 11.0%
Time, $100,000 and over 50,798 47,693 3,105 6.5%
Time, other 316,499 278,389 38,110 13.7%
------------------ ----------------- ------------- --------------
Total $998,964 $923,257 $75,707 8.2%
------------------ ----------------- ------------- --------------
------------------ ----------------- ------------- --------------
</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 $8.6 million (8.8%) to
$106.6 million at September 30, 1995 from $98.0 million at December 31, 1994.
This increase was directly the result of the net retention of 1995 earnings of
$4.8 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 September 30, 1995.
CAPITAL RESOURCES
The Company's capital ratios as well as those of its subsidiaries as of
September 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 consist of tier 1 capital), a
minimum leverage ratio (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 its bank
11
<PAGE>
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 September 30, 1995:
<TABLE>
<CAPTION>
Tier 1 Total
Risk-Based Risk-Based Leverage
Institution Capital Capital Capital
- ----------- ------- ------- -------
<S> <C> <C> <C>
West Suburban Bancorp, Inc. 12.40% 13.42% 9.87%
West Suburban Bank 10.49% 11.47% 8.52%
West Suburban Bank of Downers Grove/Lombard 13.70% 14.86% 9.64%
West Suburban Bank of Darien 11.70% 12.74% 8.51%
West Suburban Bank of Carol Stream/Stratford Square 11.11% 11.98% 7.42%
</TABLE>
At September 30, 1995, WSB Aurora maintained a core capital ratio of 10.83%, a
tangible capital ratio of 12.27% and a total risk-based capital ratio of 13.24%.
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 September 30, 1995 and December 31, 1994,
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 costs.
These assets include interest-bearing deposits in financial institutions,
federal funds sold and investment securities available for sale. As of September
30, 1995 and December 31, 1994, liquid assets represented 17.4% and 16.1% of
total assets, respectively. The Company experienced an increase in cash and cash
equivalents of $48.0 million (95.8%) from $50.0 million at December 31, 1994 to
$98.0 million at September 30, 1995. This was primarily due to a large increase
in Federal funds sold of $43.7 million from $1.9 million at December 31, 1994 to
$45.6 million at September 30, 1995. The Company also maintains lines of credit
in order to meet liquidity needs.
12
<PAGE>
RATE SENSITIVITY GAPS
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 September 30, 1995,
reflects cumulative interest rate sensitive assets as a percentage of cumulative
interest rate sensitive liabilities of 102.1% for those assets and liabilities
that reprice or mature within one year.
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 margins 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 the rate sensitive
assets and liabilities that are subject to repricing as of September 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 $125 $--- $--- $--- $125
Federal funds sold 45,540 --- --- --- 45,540
Investment securities 17,115 55,230 105,921 41,348 219,614
Loans 275,783 396,731 470 87,806 760,790
-------------------------------------------------------------------
Total $338,563 $451,961 $106,391 $129,154 $1,026,069
-------------------------------------------------------------------
-------------------------------------------------------------------
Rate sensitive liabilities:
Money market savings $352,149 $--- $--- $--- $352,149
NOW accounts 171,620 --- --- --- 171,620
Time deposits:
Less than $100,000 72,580 140,233 103,686 --- 316,499
$100,000 and over 23,003 14,595 --- 13,200 50,798
-------------------------------------------------------------------
Total $619,352 $154,828 $103,686 $13,200 $891,066
-------------------------------------------------------------------
-------------------------------------------------------------------
Interest sensitivity gap ($280,789) $297,133 $2,705 $115,954 $---
Cumulative interest sensitivity gap ($280,789) $16,344 $19,049 $135,003 $135,003
Cumulative interest-earning assets as a
percentage of cumulative interest-bearing
liabilities 54.7% 102.1% 102.2% 115.2%
Cumulative interest sensitivity gap as a
percentage of total assets (25.0%) 1.5% 1.7% 12.0%
</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
13
<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 are well within the Company's target range of
acceptable gap values for the three month to twelve month time frames.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
NET INCOME. The Company's net income for the nine months ended September 30,
1995 and 1994 was approximately $9.6 million and $10.0 million, respectively.
This represents a decrease of $.4 million (3.6%) for the 1995 period when
compared to the 1994 period. This decline was primarily due to increased
expenses related to other real estate during 1995 and $1.2 million gain from the
one-time sale of the mortgage-backed securities portfolio which occurred during
1994. The Company's net interest income increased $3.4 million (11.3%) to $34.0
million for the nine months ended September 30, 1995 from $30.6 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.
INTEREST INCOME. Total interest income, on a tax equivalent basis, increased
$11.5 million for the nine months ended September 30, 1995 compared to the same
period in 1994. This increase resulted from an increase of $3.4 million that
resulted from volume increases and $8.1 million that resulted from rate
increases. The principal component of this increase was interest on loans which
rose by $11.3 million. Of this increase, $7.4 million was attributable to higher
interest rates and $3.9 million was due to greater volume.
INTEREST EXPENSE. Total interest expense increased $8.0 million for the nine
months ended September 30, 1995 compared to the same period during 1994. The
largest component of this increase was interest on deposits which increased $7.8
million during this time. Of this increase $5.9 million was due to higher
interest rates while $1.9 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 nine-
month period ended September 30, 1995 as compared to the same period in 1994
(dollars in thousands):
<TABLE>
<CAPTION>
CHANGE
DUE TO:
INTEREST INCOME VOLUME RATE TOTAL
------- ------- ------
<S> <C> <C> <C>
Interest-bearing deposits in financial institutions ($24) ($16) ($40)
Federal funds sold 359 226 585
Investment securities (867) 445 (422)
Loans 3,906 7,430 11,336
------- ------- ------
Total interest income 3,374 8,085 11,459
------- ------- ------
INTEREST EXPENSE
Interest-bearing deposits 1,918 5,891 7,809
Borrowed funds 113 67 180
------- ------- ------
Total interest expense 2,031 5,958 7,989
------- ------- ------
Net interest income $1,343 $2,127 $3,470
------- ------- ------
------- ------- ------
</TABLE>
14
<PAGE>
The following table presents an analysis of the Company's interest-earning
assets and interest-bearing liabilities volumes for the periods stated (dollars
in thousands).
<TABLE>
<CAPTION>
1995 1994
------------------------------------------------------ ----------------------------------
3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr.
------------------------------------------------------ ----------------------------------
<S> <C> <C> <C> <C> <C>
Average loans $730,563 $724,421 $716,970 $683,537 $673,750
Average interest-earning assets 976,971 956,677 941,531 928,675 918,519
Average noninterest-bearing deposits 99,250 96,742 94,415 96,428 101,679
Average interest-bearing deposits 842,041 824,055 808,883 800,405 791,436
Average deposits 941,291 920,797 903,298 896,833 893,115
Average interest-bearing liabilities 849,448 833,416 823,383 808,155 796,625
</TABLE>
PROVISION FOR LOAN LOSSES. The Company's provision for loan losses decreased $.2
million (15.5%) for the nine months ended September 30, 1995 to $1.4 million
from $1.6 million for the same period in 1994. The Company charged-off $1.4
million while recovering $.3 million during the nine months ended September 30,
1995 compared to charge-offs of $.8 million and recoveries of $.3 million during
the same period in 1994. The Company's charge-off totals increased primarily due
to one loan. Management believes that the allowance for loan losses is adequate
to cover potential losses.
OTHER INCOME. Total other income decreased $1.9 million (25.0%) for the nine
months ended September 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 the 1994 period. 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 net gains on the
sales of investment securities available for sale. The Company also recognized a
$.4 million gain on the sale of other real estate during 1994.
OTHER EXPENSE. Total other expense increased $2.7 million (13.8%) for the nine
months ended September 30, 1995 compared to 1994. Salary and employee benefits
increased $.5 million due to expenses primarily relating to the opening of new
facilities and the employee stock ownership plan expenses. Other operating
expenses increased $2.0 million during this same period. This increase reflects
a $1.5 million write down of an other real estate property during the third
quarter. In addition, the Company incurred approximately $1.1 million in
expenses related to this property during the nine months ended September 30,
1995 compared to nominal expenses during the same period in 1994. The Company
intends to continue its efforts to sell this property. FDIC Insurance premiums
declined $.4 million (28.9%) due to the receipt by the Company's subsidiaries of
reimbursement credits of approximately $.5 million as a result of being well-
capitalized institutions and the overfunding of the insurance reserve of the
Bank Insurance Fund of the FDIC. These decreases were offset by increases in
professional fees and occupancy expense.
INCOME TAX EXPENSE. Income tax expense decreased $.5 million (8.2%) for the nine
months ended September 30, 1995 to $6.0 million from $6.5 million compared to
the same period in 1994. The Company's effective tax rate was 38.3% for the nine
months ended September 30, 1995 compared to 39.4% for the same period in 1994.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
NET INCOME. The Company's net income for the three months ended September 30,
1995 and 1994 remained stable. The Company's net interest margin increased $1.4
million (13.8%) to $11.6 million for the three months ended September 30, 1995
from $10.2 million for the same period in 1994.
INTEREST INCOME. Total interest income increased $4.1 million (23.6%) for the
three months ended September 30, 1995 compared to the same period in 1994. This
increase is attributable to the loan portfolio which grew
15
<PAGE>
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 $2.7 million (37.5%) for the
three months ended September 30, 1995 compared to the same period during 1994.
Interest on deposits accounted for all of this increase.
OTHER INCOME. Total other income decreased $.1 million (5.7%) for the three
months ended September 30, 1995 compared to the same period in 1994. This
decrease was primarily due to a net decline in income from the sale of
investment securities available for sale.
OTHER EXPENSE. Total other expense increased $2.2 million (36.3%) for the three
months ended September 30, 1995 compared to the same period in 1994. Salary and
employee benefits increased $.4 million during this period. Other operating
expenses increased $1.8 million during this period. This is principally due to
the reason described in an earlier section of this report. FDIC Insurance
premiums declined $.5 million and professional fees and occupancy expense
increased.
INCOME TAXES. Income taxes decreased by $.7 million for three months ended
September 30, 1995 to $1.6 million from $2.3 million for the same period in 1994
due to lower income before taxes.
16
<PAGE>
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.
RECENT REGULATORY DEVELOPMENTS
On August 8, 1995, the FDIC amended its regulations to change the range of
deposit insurance assessments charged to members of the Bank Insurance Fund (the
"BIF"), such as the bank subsidiaries, from the then-prevailing range of .23% to
.31% of deposits, to a range of .04% to .31% of deposits. The change in FDIC
assessments has significantly decreased the amount of deposit insurance
assessments that well-capitalized and well-managed BIF-insured institutions,
such as the bank subsidiaries, pay to the FDIC. Additionally, because the change
in BIF-assessments was applied retroactively to June 1, 1995, BIF-member
institutions, including the bank subsidiaries, became entitled to a refund of
the difference between the amount of assessments previously paid at the higher
assessment rates for the period from June 30, 1995 through September 30, 1995,
and the amount that would have been paid for that period at the new rates.
During the third quarter of 1995, the bank subsidiaries received a refund of $.5
million on account of such assessment overpayments. The FDIC did not, however,
change the assessment rates charged to members of the Savings Association
Insurance Fund (the "SAIF"), such as WSB Aurora, and SAIF-insured institutions
continue to pay assessments ranging from .23% to .31% of deposits. As a result
of the change in the assessment rates charged to BIF-member institutions, well-
capitalized and well-managed SAIF member institutions, such as WSB Aurora, pay
significantly higher deposit insurance assessments than well-capitalized and
well-managed BIF-member institutions, such as the bank subsidiaries.
The FDIC was able to change the range for BIF-member deposit insurance
assessments to their current levels because the ratio of the insurance reserves
of the BIF to total BIF-insured deposits equals or exceeds the statutorily
designated reserve ratio of 1.25%. Because the SAIF does not meet this
designated reserve ratio, the FDIC is prohibited by federal law from reducing
the deposit insurance assessments charged to SAIF-member institutions to the
same levels currently charged to BIF-member institutions. Legislative proposals
pending before the Congress would recapitalize the SAIF to the designated
reserve ratio by imposing a special assessment against SAIF-insured
institutions, payable January 1, 1996, sufficient in the aggregate to increase
the ratio of the insurance reserves of the SAIF to total SAIF-insured deposits
to 1.25%. It is anticipated that this special assessment, if enacted as
proposed, would equal approximately .85% of the deposits of each SAIF-insured
institution. At such time as the SAIF meets the designated reserve ratio of
1.25%, the assessment rates charged SAIF-member institutions can be reduced to
levels consistent with those charged to BIF-member institutions.
Legislation has also been introduced in Congress that would, among other things,
require federal thrift institutions to convert to state or national banks and
merge the BIF and the SAIF into a single deposit insurance fund administered by
the FDIC. At this time, it is not possible to predict whether, or in what form,
any such legislation will be adopted or the impact such legislation would have
on the Company or its subsidiaries.
17
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company or any of
its subsidiaries are 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
None
ITEM 5. OTHER INFORMATION
None
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 September 30, 1995.
18
<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: November 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
19
<PAGE>
EXHIBIT 11
WEST SUBURBAN BANCORP, INC.
COMPUTATION OF NET INCOME PER SHARE
FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30
(UNAUDITED)
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------------- ---------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1) Net income $9,632 $9,989 $3,238 $3,290
2) Common shares outstanding 432,495 432,495 432,495 432,495
3) Net income per common share $22.27 $23.10 $7.49 $7.61
</TABLE>
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 52,335
<INT-BEARING-DEPOSITS> 891,066
<FED-FUNDS-SOLD> 45,540
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 97,014
<INVESTMENTS-CARRYING> 122,600
<INVESTMENTS-MARKET> 122,533
<LOANS> 761,201
<ALLOWANCE> 8,754
<TOTAL-ASSETS> 1,122,105
<DEPOSITS> 998,964
<SHORT-TERM> 0
<LIABILITIES-OTHER> 16,543
<LONG-TERM> 0
<COMMON> 3,457
0
0
<OTHER-SE> 103,141
<TOTAL-LIABILITIES-AND-EQUITY> 1,122,105
<INTEREST-LOAN> 49,999
<INTEREST-INVEST> 10,440
<INTEREST-OTHER> 1,149
<INTEREST-TOTAL> 61,588
<INTEREST-DEPOSIT> 27,193
<INTEREST-EXPENSE> 27,555
<INTEREST-INCOME-NET> 34,033
<LOAN-LOSSES> 1,388
<SECURITIES-GAINS> 35
<EXPENSE-OTHER> 22,626
<INCOME-PRETAX> 15,603
<INCOME-PRE-EXTRAORDINARY> 15,603
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,632
<EPS-PRIMARY> 22.27
<EPS-DILUTED> 22.27
<YIELD-ACTUAL> 7.4
<LOANS-NON> 412
<LOANS-PAST> 11,712
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 8,445
<CHARGE-OFFS> 1,350
<RECOVERIES> 271
<ALLOWANCE-CLOSE> 8,754
<ALLOWANCE-DOMESTIC> 8,003
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 751
</TABLE>
