<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 March 31, 1996
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 March 31, 1996.
1,000,000 shares of Common Stock, Class B, no par value, were authorized and
85,480 shares were issued and outstanding as of March 31, 1996.
Page 1 of 20 pages;
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. . . . . . . . . . . . . . . . .9
PART II
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . . . . . 16
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . . . . 16
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . 16
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . 16
Form 10-Q Signature Page . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
WEST SUBURBAN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------------- -------------------
<S> <C> <C>
ASSETS
Cash and due from banks $46,004 $50,094
Interest-bearing deposits in financial institutions 132 141
Federal funds sold 36,582 38,110
------------------- -------------------
Total cash and cash equivalents 82,718 88,345
Investment securities:
Available for sale (amortized cost of $140,187 in
1996 and $134,139 in 1995) 138,438 134,519
Held to maturity (fair value of $109,886 in
1996 and $116,199 in 1995) 112,174 116,037
Loans, less allowance for loan losses of $9,270 in 1996 and
$8,900 in 1995 760,004 760,687
Premises and equipment, net 29,269 29,206
Other real estate 8,138 8,317
Accrued interest and other assets 17,311 17,238
------------------- -------------------
TOTAL ASSETS $1,148,052 $1,154,349
------------------- -------------------
------------------- -------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing $105,823 $104,821
Interest-bearing 911,999 924,968
------------------- -------------------
Total deposits 1,017,822 1,029,789
Accrued interest and other liabilities 18,491 14,392
------------------- -------------------
TOTAL LIABILITIES 1,036,313 1,044,181
------------------- -------------------
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 71,269 68,416
Unrealized (loss) gain on securities available for sale, net of taxes (1,053) 229
------------------- -------------------
TOTAL SHAREHOLDERS' EQUITY 111,739 110,168
------------------- -------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,148,052 $1,154,349
------------------- -------------------
------------------- -------------------
</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 THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Dollars in thousands, except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------------- -------------------
<S> <C> <C>
INTEREST INCOME
Loans, including fees $17,915 $15,597
------------------- -------------------
Investment securities:
Taxable 3,253 3,236
Nontaxable 463 305
------------------- -------------------
Total investment securities 3,716 3,541
Deposits in financial institutions 20 13
Federal funds sold 370 41
------------------- -------------------
Total interest income 22,021 19,192
------------------- -------------------
INTEREST EXPENSE
Deposits 9,157 8,004
Other 90 219
------------------- -------------------
Total interest expense 9,247 8,223
------------------- -------------------
Net interest income 12,774 10,969
PROVISION FOR LOAN LOSSES 458 463
------------------- -------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 12,316 10,506
------------------- -------------------
OTHER OPERATING INCOME
Service fees 863 857
Net realized gain (loss) on sales of securities available for sale 351 (46)
Trust fees 105 137
Net gain on sale of loans originated for sale 29 9
Loan servicing 239 232
Other 689 600
------------------- -------------------
Total other operating income 2,276 1,789
------------------- -------------------
OTHER OPERATING EXPENSE
Salaries and employee benefits 3,740 3,277
Occupancy 716 589
Furniture and equipment 693 635
FDIC insurance premiums 76 517
Professional fees 284 324
Other real estate 706 789
Other 1,459 1,191
------------------- -------------------
Total other operating expense 7,674 7,322
------------------- -------------------
INCOME BEFORE INCOME TAXES 6,918 4,973
Income taxes 2,335 2,006
------------------- -------------------
NET INCOME $4,583 $2,967
------------------- -------------------
------------------- -------------------
NET INCOME PER SHARE $10.60 $6.86
------------------- -------------------
------------------- -------------------
CASH DIVIDENDS DECLARED PER SHARE $4.00 $3.75
------------------- -------------------
------------------- -------------------
</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 THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------------- -------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $4,583 $2,967
------------------- -------------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 721 642
Provision for loan losses 458 463
Provision for deferred income taxes 1,094 1,058
Net premium amortization and discount accretion of investment
securities 112 135
Net realized (gain) loss on sales of investment securities available
for sale (351) 46
Gain on sale of loans held for sale (29) (9)
Sale of loans held for sale 2,635 294
Origination of loans held for sale (3,994) (996)
Loss (gain) on sale of premises and equipment 20 (13)
Loss on sale of other real estate 5 ----
(Increase) decrease in other assets (1,117) 1,549
Increase in other liabilities 3,940 833
------------------- -------------------
Total adjustments 3,494 4,002
------------------- -------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,077 6,969
------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment securities available for sale:
Proceeds from sales 13,306 1,992
Proceeds from maturities 8,914 3,725
Purchases (27,210) ----
Investment securities held to maturity:
Proceeds from maturities 33,381 182
Purchases (29,490) (2,000)
Net decrease (increase) in loans 1,251 (5,753)
Purchases of premises and equipment (810) (909)
Proceeds from sale of premises and equipment 5 13
Proceeds from sale of other real estate 536 527
------------------- -------------------
NET CASH USED IN INVESTING ACTIVITIES (117) (2,223)
------------------- -------------------
</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 THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (CONTINUED)
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------------- -------------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand deposits, NOW accounts
and savings accounts $6,357 ($25,310)
Net (decrease) increase in certificates of deposit (18,324) 7,988
Increase in federal funds purchased ---- 1,590
Decrease in FHLB advances ---- (4,240)
Cash dividends paid (1,621) (1,514)
------------------- -------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES (13,588) (21,486)
------------------- -------------------
Net increase in cash and cash equivalents (5,628) (16,740)
Cash and cash equivalents at beginning of period 88,346 50,043
------------------- -------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 82,718 33,303
------------------- -------------------
------------------- -------------------
Supplemental cash flow information:
Cash paid during the period for:
Interest on deposits and other borrowings $9,300 $7,969
Transfers from loans to other real estate $362 $654
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
6
<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 1996 presentation.
NOTE 2 - 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 three months of 1996, the Company's unrealized loss, net of
taxes, on securities available for sale increased $1.3 million from a gain of
$.2 million at December 31, 1995 to a loss of ($1.1) million at March 31, 1996.
NOTE 3 - OUTSTANDING LINES OF CREDIT AVAILABLE - (Dollars in thousands)
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
------------------- -----------------------
<S> <C> <C>
Home equity lines 83,127 88,804
Commercial loans in process 167,303 187,181
Visa credit lines 50,161 49,074
------------------- -----------------------
Total commitments 300,591 325,059
------------------- -----------------------
------------------- -----------------------
</TABLE>
The Company had $8.1 million and $4.4 million of commitments to originate
residential mortgage loans as of March 31, 1996 and December 31, 1995,
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. The revenue
received from, and expenses incurred in, maintaining such properties are also
included in current operations. 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
7
<PAGE>
Company's strategy for recovering its investment. Management believes the net
carrying value of its other real estate at March 31, 1996 is a reasonable
estimate of the ultimate value of the other real estate.
NOTE 5 - ADOPTION OF NEW ACCOUNTING STANDARDS
In March 1995, Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", which requires
that long-lived assets and certain identifiable intangibles that are used in
operations be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of assets might not be
recoverable. SFAS 121 is effective for financial statements issued for fiscal
years beginning after December 15, 1995. The Company adopted SFAS 121 on January
1, 1996. The adoption of SFAS has not had a material impact on the Company's
financial condition and its results of operations.
In May 1995, FASB issued SFAS 122, "Accounting for Mortgage Servicing Rights",
which requires certain accounting for mortgage servicing rights and the
valuation and recognition of impairment of mortgage servicing rights. SFAS 122
is effective for fiscal years beginning after December 15, 1995. The Company
adopted SFAS 122 on January 1, 1996. The adoption of SFAS 122 has not had a
material impact on the Company and its results of operations.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BALANCE SHEET ANALYSIS
ASSET DISTRIBUTION. Total assets decreased slightly to $1,148.0 million at March
31, 1996 from $1,154.3 million at December 31, 1995. Total cash and cash
equivalents decreased by $5.6 million to $82.7 million at March 31, 1996 from
$88.3 million at December 31, 1995. Aggregate holdings in investment securities
remained level for the three month period at March 31, 1996. The Company's
objectives in managing its securities portfolio are driven by the dynamics of
the entire balance sheet and general economic conditions including the interest
rate environment. In managing its portfolio, the Company seeks to minimize
credit risk while achieving an acceptable rate of return.
Total loans decreased $.3 million to $769.3 million at March 31, 1996 from
$769.6 million at December 31, 1995. 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 allowance is an amount that management believes will be adequate to absorb
losses on existing loans that may become uncollectible, based on evaluations of
the collectibility of loans and prior loan loss experience. In determining the
proper level for the allowance, management evaluates the adequacy of the
allowance based on past loan loss experience, known and inherent risks in the
loan portfolio, adverse situations that may affect the borrowers' ability to
repay, estimated value of any underlying collateral and current and prospective
economic conditions. The allowance for loan losses increased $.4 million to $9.3
million at March 31, 1996 from $8.9 million at December 31, 1995. The ratio of
the allowance for loan losses to total loans outstanding increased at March 31,
1996 to 1.21% compared to 1.16% at December 31, 1995. Nonperforming loans
decreased $1.9 million (15.8%) to $10.0 million at March 31, 1996 from $11.9
million at December 31, 1995. As of March 31, 1996 and December 31, 1995, total
nonperforming loans to net loans were 1.3% and 1.6%, respectively.
The following table presents an analysis of the Company's nonperforming loans
for the periods stated (dollars in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1996 December 31, 1995 Dollar Change
---------------------- ------------------------- ----------------
<S> <C> <C> <C>
Nonaccrual loans $348 $488 (140)
Accruing loans 90 days past due 9,666 11,405 (1,739)
---------------------- ------------------------- ----------------
Total nonperforming loans 10,014 11,893 (1,879)
---------------------- ------------------------- ----------------
---------------------- ------------------------- ----------------
Nonperforming loans as a percent
of net loans 1.3% 1.6% ---
Other real estate $8,138 $8,317 ($179)
---------------------- ------------------------- ----------------
---------------------- ------------------------- ----------------
</TABLE>
9
<PAGE>
The following table presents an analysis of the Company's Provision for Loan
Losses for the periods stated (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
----------- ---------------------------------------------------
1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
----------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C>
Provision-quarter $458 $462 $463 $462 $463
Provision-year 458 1,850 1,388 925 463
Net chargeoffs-quarter 88 316 832 101 146
Net chargeoffs-year 88 1,395 1,079 247 146
Allowance at period end 9,270 8,900 8,754 9,123 8,762
Allowance to period end total loans 1.21% 1.16% 1.15% 1.23% 1.21%
</TABLE>
LIABILITY DISTRIBUTION. Total liabilities decreased $7.9 million (.8%) to
$1,036.3 million at March 31, 1996 from $1,044.2 million at December 31, 1995.
This decrease was primarily due to decreases in deposits which were partially
offset by increases in other liabilities.
Balances in the Company's major categories of deposits are summarized in the
following table (dollars in thousands):
<TABLE>
<CAPTION>
Dollar Percent
March 31, 1996 December 31, 1995 Change Change
----------------- -------------------- --------------- -----------
<S> <C> <C> <C> <C>
Demand and other noninterest-bearing $105,823 $104,821 1,002 1.0%
NOW accounts 182,497 191,626 (9,129) (4.8)%
Money market savings 355,197 340,714 14,483 4.3%
Time, $100,000 and over 53,228 68,063 (14,835) (21.8)%
Time, other 321,077 324,565 (3,488) (1.1)%
----------------- -------------------- --------------- -----------
Total $1,017,822 $1,029,789 ($11,967) (1.20)%
----------------- -------------------- --------------- -----------
----------------- -------------------- --------------- -----------
</TABLE>
The net increase in short term deposits and decrease in certificates of deposit
is primarily due to increased competition for savings with investors closely
monitoring the interest rate environment.
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 $1.5 million (1.4%) to
$111.7 million at March 31, 1996 from $110.2 million at December 31, 1995. This
increase was the result of the net retention of 1996 earnings of $2.8 million
offset by the increase in unrealized loss on securities available for sale of
$1.3 million (net of taxes) to a loss of $1.1 million at March 31, 1996 from a
gain of ($.2) million at December 31, 1995.
CAPITAL RESOURCES
The Company's capital ratios as well as those of its subsidiaries as of March
31, 1996 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 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.
10
<PAGE>
The following table sets forth selected regulatory capital ratios of the Company
and the bank subsidiaries at March 31, 1996:
<TABLE>
<CAPTION>
Tier 1 Total
Risk-Based Risk-Based Leverage
Institution Capital Capital Capital
- ----------- -------- -------- --------
<S> <C> <C> <C>
West Suburban Bancorp, Inc. 12.03% 13.04% 9.78%
West Suburban Bank 10.91% 11.97% 8.53%
West Suburban Bank of Downers Grove/Lombard 14.59% 15.83% 9.79%
West Suburban Bank of Darien 12.70% 13.87% 8.38%
West Suburban Bank of Carol Stream/Stratford Square 12.88% 13.88% 7.98%
</TABLE>
At March 31, 1996 WSB Aurora maintained a core capital ratio of 10.70%, a
tangible capital ratio of 13.95% and a total risk-based capital ratio of 15.09%.
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 March 31, 1996 and December 31, 1995, 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 March 31,
1996 and December 31, 1995, liquid assets represented 19.3% of total assets. The
Company experienced a decrease in cash and cash equivalents of $5.6 million
(6.4%) to $82.7 million at March 31, 1996 from $88.3 million at December 31,
1995. This was primarily due to a decrease in cash and due from banks of $4.1
million from $50.1 million at December 31, 1995 to $46.0 million at March 31,
1996. Federal funds sold declined $1.5 million from $38.1 million at December
31, 1995 to $36.6 million at March 31, 1996. Investment securities available for
sale increased $3.9 million from $134.5 million at December 31, 1995 to $138.4
million at March 31, 1996.
11
<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.
Movements in general market interest rates are a key element in changes in the
net interest margin. 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 March 31, 1996
(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 $132 $--- $--- $--- $132
Federal funds sold 36,582 --- --- --- 36,582
Investment securities 17,705 49,684 139,966 43,257 250,612
Loans 268,449 376,834 496 123,147 768,926
-------------------------------------------------------------------------
Total $322,868 $426,518 $140,462 $166,404 $1,056,252
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Rate sensitive liabilities:
Money market savings $355,198 $--- $--- $--- $355,198
NOW accounts 182,496 --- --- --- 182,496
Time deposits:
Less than $100,000 123,826 107,433 89,818 --- 321,077
$100,000 and over 29,645 11,687 --- 11,896 53,228
-------------------------------------------------------------------------
Total $691,165 $119,120 $89,818 $11,896 $911,999
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Interest sensitivity gap ($368,297) $307,398 $50,644 $154,508 $---
Cumulative interest sensitivity gap ($368,297) ($60,899) ($10,255) $144,253 $144,253
Cumulative interest-earning assets as a
percentage of cumulative interest-bearing
liabilities 46.7% 92.5% 98.9% 115.8%
Cumulative interest sensitivity gap as a
percentage of total assets (32.1%) (5.3)% (0.9)% 12.6%
</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 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 consolidated interest
rate sensitivity position of the Company within the one year window at March 31,
1996 reflects cumulative net interest-earning assets compared to cumulative net
interest-bearing liabilities of 92.5% and cumulative net interest-earning
12
<PAGE>
assets that reprice or mature within one year compared to similarly sensitive
liabilities of negative 5.3%. 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 THREE MONTHS ENDED MARCH 31, 1996 AND 1995
NET INCOME. The Company's net income for the three months ended March 31, 1996
and 1995 was approximately $4.6 million and $3.0 million, respectively. This
represents an increase of $1.6 million (54.5%) for the 1996 period when compared
to the same period in 1995. The Company's net interest income increased $1.8
million (16.5%) to $12.8 million for the three months ended March 31, 1996 from
$11.0 million for the same period ended in 1995. This increase was primarily due
to increases in the loan portfolio. The Company also experienced a net increase
in gains on sale of investment securities available for sale of $.4 million
during this period. These increases to income were partially offset by increases
to total other operating expenses of $.4 million and income tax expense of $.3
million.
INTEREST INCOME. Total interest income, on a tax equivalent basis, increased
$2.9 million for the three months ended March 31, 1996 compared to the same
period in 1995. This increase resulted from an increase of $2.1 million from
volume increases and $.8 million from rate increases. The principal component of
this increase was interest on loans which rose by $2.3 million. Of this
increase, $1.3 million was attributable to higher volume and $1.0 million was
due to increases in interest rates.
INTEREST EXPENSE. Total interest expense increased $1.0 million for the three
months ended March 31, 1996 compared to the same period during 1995. Interest on
deposits increased $1.1 million during this time. Of this increase $1.0 million
was due to higher average balances while $.1 million was due to higher interest
rates.
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 period
ended March 31, 1996 as compared to the same period in 1995 (dollars in
thousands):
<TABLE>
<CAPTION>
CHANGE IN:
INTEREST INCOME VOLUME RATE TOTAL
-------------- -------------- ------------
<S> <C> <C> <C>
Interest-bearing deposits in financial institutions $4 $3 $7
Federal funds sold 334 (5) 329
Investment securities 476 (217) 259
Loans 1,315 1,033 2,348
-------------- -------------- ------------
Total interest income 2,129 814 2,943
-------------- -------------- ------------
INTEREST EXPENSE
Interest-bearing deposits 1,009 144 1,153
Borrowed funds (111) (18) (129)
-------------- -------------- ------------
Total interest expense 898 126 1,024
-------------- -------------- ------------
Net interest income $1,231 $688 $1,919
-------------- -------------- ------------
-------------- -------------- ------------
</TABLE>
13
<PAGE>
The following table presents an analysis of the Company's interest-earning
assets and interest-bearing liabilities volumes for the periods stated on a
cumulative basis as of the date indicated (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
------------- ---------------------------------------------------
March 31 Dec. 31 Sept. 30 June 30 March 31
------------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average loans $773,446 $736,397 $730,563 $724,421 $716,970
Average interest-earning assets 1,050,595 993,596 976,971 956,677 941,531
Average noninterest-bearing deposits 101,799 100,269 99,250 96,742 94,415
Average interest-bearing deposits 898,298 855,657 842,041 824,055 808,883
Average deposits 1,000,097 955,926 941,291 920,797 903,298
Average interest-bearing liabilities 905,176 862,262 849,448 833,416 823,383
</TABLE>
PROVISION FOR LOAN LOSSES. The Company's provision for loan losses remained
level at approximately $.5 million for the three month periods ended March 31,
1996 and 1995. The provision for loan losses is based on management's
determination that the allowance for loan losses (after giving effect to the
provision) was adequate and general economic conditions in the Company's primary
market. A more detailed discussion concerning the allowance for loan losses is
presented in the Allowance for Loan Losses and Asset Quality section of this
report.
OTHER OPERATING INCOME. Total other income increased $.5 million (27.2%) for
the three months ended March 31, 1996 compared to the same period in 1995. This
increase was primarily due to the gain on sales of investment securities
available for sale of $.4 million during this period.
OTHER OPERATING EXPENSE. Total other expense increased $.4 million (4.8%) for
the three months ended March 31, 1996 compared to the same period in 1995.
Salary and employee benefits increased $.5 million due primarily to the opening
of new facilities. Other operating expenses increased $.3 million during this
same period. This was primarily due to increases in postage and freight and
supplies expense. FDIC insurance premiums declined $.4 million due to changes in
the rate structure for deposit insurance and the determination that the
Company's bank subsidiaries qualify to pay the lowest deposit insurance rates
available from the FDIC. Occupancy expense and furniture and equipment expense
increased $.1 million for the three months ended March 31, 1996. These increases
were primarily due to expenses incurred with the opening and operation of new
facilities.
INCOME TAXES. Income tax expense increased $.3 million (16.4%) for the three
months ended March 31, 1996 to $2.3 million from $2.0 million compared to the
same period in 1995. The increase was principally due to higher taxable income
and was offset by provisions made during the first three months of 1995 for
potential adjustments to prior years' income tax returns.
14
<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.
15
<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
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 March 31, 1996.
16
<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: May 14, 1996
/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
17
<PAGE>
INDEX OF EXHIBITS
Sequential
Page No.
27. Financial Data Schedule 19
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 46,004
<INT-BEARING-DEPOSITS> 911,999
<FED-FUNDS-SOLD> 36,582
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 138,438
<INVESTMENTS-CARRYING> 112,174
<INVESTMENTS-MARKET> 109,886
<LOANS> 769,274
<ALLOWANCE> 9,270
<TOTAL-ASSETS> 1,148,052
<DEPOSITS> 1,017,822
<SHORT-TERM> 0
<LIABILITIES-OTHER> 18,491
<LONG-TERM> 0
0
0
<COMMON> 3,457
<OTHER-SE> 108,282
<TOTAL-LIABILITIES-AND-EQUITY> 1,148,052
<INTEREST-LOAN> 17,915
<INTEREST-INVEST> 3,716
<INTEREST-OTHER> 390
<INTEREST-TOTAL> 22,021
<INTEREST-DEPOSIT> 9,157
<INTEREST-EXPENSE> 9,247
<INTEREST-INCOME-NET> 12,774
<LOAN-LOSSES> 458
<SECURITIES-GAINS> 351
<EXPENSE-OTHER> 7,674
<INCOME-PRETAX> 6,918
<INCOME-PRE-EXTRAORDINARY> 6,918
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,583
<EPS-PRIMARY> 10.60
<EPS-DILUTED> 10.60
<YIELD-ACTUAL> 8.6
<LOANS-NON> 348
<LOANS-PAST> 9,666
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 8,900
<CHARGE-OFFS> 145
<RECOVERIES> 57
<ALLOWANCE-CLOSE> 9,270
<ALLOWANCE-DOMESTIC> 7,699
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,571
</TABLE>
