<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, 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: (630) 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, 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 June 30, 1996.
<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...................................................17
Item 2. Changes in Securities...............................................17
Item 3. Defaults Upon Senior Securities.....................................17
Item 4. Submission of Matters to a Vote of Security Holders.................17
Item 5. Other Information...................................................17
Item 6. Exhibits and Reports on Form 8-K....................................17
Form 10-Q Signature Page......................................................18
2
<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,
1996 1995
------------- -------------
<S> <C> <C>
ASSETS
Cash and due from banks $55,862 $50,094
Interest-bearing deposits in financial institutions 318 141
Federal funds sold 830 38,110
------------- -------------
Total cash and cash equivalents 57,010 88,345
Investment securities:
Available for sale (amortized cost of $131,956 in
1996; $134,139 in 1995) 129,215 134,519
Held to maturity (fair value of $127,303 in
1996; $116,199 in 1995) 129,665 116,037
Loans, less allowance for loan losses of $9,490 in 1996;
$8,900 in 1995 779,725 760,687
Premises and equipment, net 30,205 29,206
Other real estate 7,899 8,317
Accrued interest and other assets 20,912 17,238
------------- -------------
TOTAL ASSETS $1,154,631 $1,154,349
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing $105,250 $104,821
Interest-bearing 905,261 924,968
------------- -------------
Total deposits 1,010,511 1,029,789
FHLB advances 10,745 ----
Federal funds purchased 960 ----
Accrued interest and other liabilities 17,672 14,392
------------- -------------
TOTAL LIABILITIES 1,039,888 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 74,814 68,416
Unrealized (loss) gain on securities available for sale,
net of taxes (1,594) 229
------------- -------------
TOTAL SHAREHOLDERS' EQUITY 114,743 110,168
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,154,631 $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 SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Dollars in thousands, except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
INTEREST INCOME
Loans, including fees $35,182 $32,750
------------- -------------
Investment securities:
Taxable 6,528 6,514
Nontaxable 956 621
------------- -------------
Total investment securities 7,484 7,135
Deposits in financial institutions 38 28
Federal funds sold 695 299
------------- -------------
Total interest income 43,399 40,212
------------- -------------
INTEREST EXPENSE
Deposits 17,898 17,463
Other 247 314
------------- -------------
Total interest expense 18,145 17,777
------------- -------------
Net interest income 25,254 22,435
PROVISION FOR LOAN LOSSES 796 925
------------- -------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 24,458 21,510
------------- -------------
OTHER OPERATING INCOME
Service fees 1,784 1,776
Net realized gain on sales of securities available for sale 369 79
Trust fees 128 194
Net gain on sale of loans originated for sale 71 24
Loan servicing 465 472
Other 2,646 1,228
------------- -------------
Total other operating income 5,463 3,773
------------- -------------
OTHER OPERATING EXPENSE
Salaries and employee benefits 7,194 6,456
Occupancy 1,348 1,199
Furniture and equipment 1,335 1,190
FDIC insurance premiums 151 1,035
Professional fees 508 703
Other real estate 1,243 1,333
Other 2,876 2,588
------------- -------------
Total other operating expense 14,655 14,504
------------- -------------
INCOME BEFORE INCOME TAXES 15,266 10,779
Income taxes 5,408 4,385
------------- -------------
NET INCOME $9,858 $6,394
------------- -------------
------------- -------------
NET INCOME PER SHARE $22.79 $14.78
------------- -------------
------------- -------------
CASH DIVIDENDS DECLARED PER SHARE $8.00 $7.50
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
WEST SUBURBAN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
INTEREST INCOME
Loans, including fees $17,266 $17,153
------------- -------------
Investment securities:
Taxable 3,275 3,277
Nontaxable 493 317
------------- -------------
Total investment securities 3,768 3,594
Deposits in financial institutions 18 15
Federal funds sold 326 258
------------- -------------
Total interest income 21,378 21,020
------------- -------------
INTEREST EXPENSE
Deposits 8,741 9,459
Other 157 95
------------- -------------
Total interest expense 8,898 9,554
------------- -------------
Net interest income 12,480 11,466
PROVISION FOR LOAN LOSSES 338 462
------------- -------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 12,142 11,004
------------- -------------
OTHER OPERATING INCOME
Service fees 921 919
Net realized gain on sales of securities available for sale 18 125
Trust fees 23 56
Net gain on sale of loans originated for sale 43 15
Loan servicing 226 239
Other 1,956 629
------------- -------------
Total other operating income 3,187 1,983
------------- -------------
OTHER OPERATING EXPENSE
Salaries and employee benefits 3,454 3,179
Occupancy 633 609
Furniture and equipment 641 555
FDIC insurance premiums 75 517
Professional fees 225 378
Other real estate 537 544
Other 1,417 1,398
------------- -------------
Total other operating expense 6,982 7,180
------------- -------------
INCOME BEFORE INCOME TAXES 8,347 5,807
Income taxes 3,073 2,379
------------- -------------
NET INCOME $5,274 $3,428
------------- -------------
------------- -------------
NET INCOME PER SHARE $12.19 $7.92
------------- -------------
------------- -------------
CASH DIVIDENDS DECLARED PER SHARE $4.00 $3.75
------------- -------------
------------- -------------
</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 SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $9,858 $6,394
------------- -------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,476 1,304
Provision for loan losses 796 925
Provision for deferred income taxes 1,635 2,078
Net premium amortization and discount accretion of
investment securities 239 251
Net realized gain on sales of investment securities
available for sale (369) (79)
Gain on sale of loans held for sale (71) (24)
Sale of loans held for sale 5,465 1,613
Origination of loans held for sale (5,841) (669)
Loss (gain) on sale of premises and equipment 28 (27)
Gain on sale of other real estate (20) (17)
(Increase) decrease in accrued interest and other assets (5,237) 1,598
Increase (decrease) in accrued interest and other
liabilities 3,098 (547)
------------- -------------
Total adjustments 1,199 6,406
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 11,057 12,800
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment securities available for sale:
Proceeds from sales 20,649 4,592
Proceeds from maturities 12,460 14,069
Purchases (29,675) (4,092)
Investment securities held to maturity:
Proceeds from maturities 36,682 2,633
Purchases (50,131) (5,717)
Net increase in loans (19,885) (26,081)
Purchases of premises and equipment (2,515) (2,788)
Proceeds from sale of premises and equipment 11 27
Proceeds from sale of other real estate 936 1,520
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES ($31,468) ($15,837)
------------- -------------
</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 SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (CONTINUED)
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in demand deposits, NOW accounts
and savings accounts ($2,915) ($2,212)
Net (decrease) increase in certificates of deposit (16,362) 33,946
Increase in Federal funds purchased 960 ----
Increase (decrease) in FHLB advances 10,745 (9,940)
Cash dividends paid (3,352) (3,136)
------------- -------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (10,924) 18,658
------------- -------------
Net (decrease) increase in cash and cash equivalents (31,335) 15,621
Cash and cash equivalents at beginning of period 88,345 50,043
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $57,010 $65,664
------------- -------------
------------- -------------
Supplemental cash flow information:
Cash paid during the period for:
Interest on deposits and other borrowings $19,477 $17,222
Income taxes $4,821 $3,601
Transfer to other real estate $498 $729
</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 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 six months of 1996, the Company's unrealized loss, net of
taxes, on securities available for sale increased $1.8 million to a loss of $1.6
million at June 30, 1996 from a gain of ($.2) million at December 31, 1995.
NOTE 3 - OUTSTANDING LINES OF CREDIT AVAILABLE - (Dollars in thousands)
JUNE 30, 1996 December 31, 1995
------------------ ----------------------
Home equity lines $64,702 $88,804
Commercial loans in process 170,784 187,181
Visa credit lines 48,717 49,074
------------------ ----------------------
Total commitments $284,203 $325,059
------------------ ----------------------
------------------ ----------------------
The Company had $7.2 million and $4.4 million of commitments to originate
residential mortgage loans as of June 30, 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 ultimately recovers from
the sale of other real estate could differ materially from the amounts used in
determining the net carrying value of the assets because the amounts ultimately
recovered are affected by market factors beyond
8
<PAGE>
the Company's control or changes in the Company's strategy for marketing the
assets. Management believes the net carrying value of its other real estate at
June 30, 1996 is a reasonable estimate of the amount that the Company will
ultimately recover upon disposition 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 121 has not had a material impact on the Company's
financial condition or 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's financial condition or its results of
operations.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BALANCE SHEET ANALYSIS
ASSET DISTRIBUTION. Total assets at June 30, 1996 remained nearly unchanged from
total assets at December 31, 1995. Total cash and cash equivalents decreased
approximately $31.3 million (35.5%) to $57.0 million at June 30, 1996 from $88.3
million at December 31, 1995. This was principally due to the decrease in
Federal funds sold of approximately $37.3 million to $.8 million at June 30,
1996 from $38.1 million at December 31, 1995. Aggregate holdings in investment
securities increased $8.3 million (3.3%) to $258.9 million at June 30, 1996 from
$250.6 million at December 31, 1995. This was due to the Company shifting a
portion of its Federal funds sold balances into investment securities, increased
loan demand, and reduction in customer certificates of deposit. The Company's
objectives in managing its securities portfolio are driven by the dynamics of
the entire balance sheet which includes monitoring the maturity structure of its
portfolio, along with 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 increased $19.7 million (2.6%) to $789.3 million at June 30, 1996
from $769.6 million at December 31, 1995. The Company benefitted from continued
growth in the commercial sector arising from the strength of the economy, along
with successful marketing of its products. The Company will attempt to remain
competitive in its market by offering competitive rates on its loan products
while not compromising its credit evaluation standards or net interest margins
to attract new business.
ALLOWANCE FOR LOAN LOSSES AND ASSET QUALITY. 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 $.6 million to $9.5 million at June 30, 1996
from $8.9 million at December 31, 1995. The ratio of the allowance for loan
losses to total loans outstanding increased at June 30, 1996 to 1.20% compared
to 1.16% at December 31, 1995. Nonperforming loans decreased $.3 million (2.3%)
to $11.6 million at June 30, 1996 from $11.9 million at December 31, 1995. As of
June 30, 1996 and December 31, 1995, total nonperforming loans to net loans were
1.5% 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>
JUNE 30, 1996 December 31, 1995 Dollar Change
------------------- ----------------------- ----------------
<S> <C> <C> <C>
Nonaccrual loans $147 $488 ($341)
Accruing loans 90 days past due 11,478 11,405 73
------------------- ----------------------- ----------------
Total nonperforming loans $11,625 $11,893 ($268)
------------------- ----------------------- ----------------
------------------- ----------------------- ----------------
Nonperforming loans as a percent
of net loans 1.5% 1.6% ---
Other real estate $ 7,899 $8,317 ($418)
------------------- ----------------------- ----------------
------------------- ----------------------- ----------------
</TABLE>
10
<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
------------------- ------------------------------
2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr.
------------------- ------------------------------
<S> <C> <C> <C> <C> <C>
Provision-quarter $338 $458 $462 $463 $462
Provision-year 796 458 1,850 1,388 925
Net chargeoffs-quarter 118 88 316 832 101
Net chargeoffs-year to date 206 88 1,395 1,079 247
Allowance at period end 9,490 9,270 8,900 8,754 9,123
Allowance to period end total loans 1.20% 1.21% 1.16% 1.15% 1.23%
</TABLE>
LIABILITY DISTRIBUTION. Total liabilities decreased $4.3 million (.4%) to
$1,039.9 million at June 30, 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 FHLB advances of $10.7 million the excess of which was
used to fund increased loan demand. The Company also experienced increases in
Federal funds purchased and other liabilities of $1.0 and $3.3 million,
respectively.
Balances in the Company's major categories of deposits are summarized in the
following table (dollars in thousands):
<TABLE>
<CAPTION>
Dollar Percent
June 30, 1996 December 31, 1995 Change Change
---------------- ------------------ ------------- ----------
<S> <C> <C> <C> <C>
Demand and other noninterest-bearing $105,250 $104,821 $429 0.4 %
NOW accounts 178,161 191,626 (13,465) (7.0)%
Money market savings 350,833 340,714 10,119 3.0 %
Time, $100,000 and over 59,942 68,063 (8,121) (11.9)%
Time, other 316,325 324,565 (8,240) (2.5)%
---------------- ------------------ ------------- ----------
Total $1,010,511 $1,029,789 ($19,278) (1.9)%
---------------- ------------------ ------------- ----------
---------------- ------------------ ------------- ----------
</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 $4.5 million (4.2%) to
$114.7 million at June 30, 1996 from $110.2 million at December 31, 1995. This
increase was the result of the net retention of 1996 earnings of $6.3 million
offset by the increase in unrealized loss on securities available for sale of
$1.8 million (net of taxes) to a loss of $1.6 million at June 30, 1996 from a
gain of ($.2) million at December 31, 1995.
CAPITAL RESOURCES
The Company's capital ratios as well as those of its subsidiaries as of June 30,
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.
11
<PAGE>
The following table sets forth selected regulatory capital ratios of the Company
and the bank subsidiaries at June 30, 1996:
<TABLE>
<CAPTION>
Tier 1 Total
Risk-Based Risk-Based Leverage
Institution Capital Capital Capital
----------- ------- ------- -------
<S> <C> <C> <C>
West Suburban Bancorp, Inc. 12.08% 13.10% 10.05%
West Suburban Bank 10.27% 11.25% 8.52%
West Suburban Bank of Downers Grove/Lombard 14.71% 15.96% 10.38%
West Suburban Bank of Darien 11.91% 13.04% 8.85%
West Suburban Bank of Carol Stream/Stratford Square 11.31% 12.20% 8.09%
</TABLE>
At June 30, 1996 WSB Aurora maintained a core capital ratio of 10.81%, a
tangible capital ratio of 12.86% and a total risk-based capital ratio of 13.87%.
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, 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 June 30, 1996 and December 31, 1995, liquid assets represented 16.1% and
19.3% of total assets, respectively. A more detailed discussion concerning these
assets is presented under the Asset Distribution section of this report.
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
12
<PAGE>
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 June 30, 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 $318 $--- $--- $--- $318
Federal funds sold 830 --- --- --- 830
Investment securities 14,651 48,291 154,643 41,295 258,880
Loans 290,594 357,897 501 140,076 789,068
------------------------------------------------------------------------------
Total interest-earning assets $306,393 $406,188 $155,144 $181,371 $104,909
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Rate sensitive liabilities:
Money market savings $350,833 $--- $--- $--- $350,833
NOW accounts 178,161 --- --- --- 178,161
Time deposits:
Less than $100,000 99,655 129,775 86,895 --- 316,325
$100,000 and over 32,003 16,140 --- 11,799 59,942
------------------------------------------------------------------------------
Total interest-bearing deposits $660,652 $145,915 $86,895 $11,799 $905,261
Federal funds purchased 960 --- --- --- 960
FHLB advances 10,745 --- --- --- 10,745
------------------------------------------------------------------------------
Total interest-bearing liabilities $672,357 $145,915 $86,895 $11,799 $916,966
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Interest sensitivity gap ($365,964) $260,273 $68,249 $169,572 $---
Cumulative interest sensitivity gap ($365,964) ($105,691) ($37,442) $132,130 $132,130
Cumulative interest-earning assets as a
percentage of cumulative
interest-bearing liabilities 45.6% 87.1% 95.9% 114.4%
Cumulative interest sensitivity gap as a
percentage of total assets (31.7%) (9.2)% (3.2)% 11.4%
</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 June 30,
1996 reflects cumulative net interest-earning assets compared to cumulative net
interest-bearing liabilities of 87.1% and cumulative net interest-earning assets
that reprice or mature within one year compared to total assets of negative
9.2%. 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.
13
<PAGE>
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
NET INCOME. The Company's net income for the six months ended June 30, 1996 and
1995 was approximately $9.9 million and $6.4 million, respectively. This
represents an increase of $3.5 million (54.2%) for the 1996 period when compared
to the same period in 1995. The Company's net interest income increased $2.8
million (12.6%) to $25.3 million for the six months ended June 30, 1996 from
$22.5 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 $.3 million
during this period. The Company also recorded other income of approximately $1.1
million from a refund of the over funding of a terminated benefits plan of WSB
Aurora. These increases to income were partially offset by increases to total
other operating expenses of $.2 million and to income tax expense of $1.0
million.
INTEREST INCOME. Total interest income, on a tax equivalent basis, increased
$3.4 million for the six months ended June 30, 1996 compared to the same period
in 1995. This increase resulted from increases of $3.7 million from volume
increases offset by ($.3) million from rate changes. The principal component of
this increase was interest on loans which rose by $2.5 million. Of this
increase, $2.2 million was attributable to higher volume and $.3 million was due
to increases in interest rates.
INTEREST EXPENSE. Total interest expense increased $.4 million for the six
months ended June 30, 1996 compared to the same period during 1995. Interest on
deposits increased $.4 million during this time. Of this increase $1.4 million
was due to higher average balances which was offset by ($1.0) million due to
changes in 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 June 30, 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 $6 $10
Federal funds sold 405 (9) 396
Investment securities 1,105 (577) 528
Loans 2,145 327 2,472
--------- ---------- ----------
Total interest income 3,659 (253) 3,406
--------- ---------- ----------
INTEREST EXPENSE
Interest-bearing deposits 1,436 (1,001) 435
Borrowed funds 59 (124) (65)
--------- ---------- ----------
Total interest expense 1,495 (1,125) 370
--------- ---------- ----------
Net interest income $2,164 $872 $3,036
--------- ---------- ----------
--------- ---------- ----------
</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 on a
cumulative basis as of the date indicated (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
------------------------------ --------------------------------------------------
June 30 March 31 Dec. 31 Sept. 30 June 30
------------------------------ --------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average loans $ 771,189 $ 773,446 $736,397 $730,563 $724,421
Average interest-earning assets 1,050,375 1,050,595 993,596 976,971 956,677
Average noninterest-bearing deposits 102,670 101,799 100,269 99,250 96,742
Average interest-bearing deposits 894,214 898,298 855,657 842,041 824,055
Average deposits 996,884 1,000,097 955,926 941,291 920,797
Average interest-bearing liabilities 904,326 905,176 862,262 849,448 833,416
</TABLE>
PROVISION FOR LOAN LOSSES. The Company's provision for loan losses decreased $.1
million (13.9%) for the six months ended June 30, 1996 compared to the same
period in 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. 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 $1.7 million (44.8%) for
the six months ended June 30, 1996 compared to the same period in 1995. This
increase was primarily due to the recording of $1.1 million of income from a
refund of the over funding of a terminated benefits plan of WSB Aurora. The
Company also experienced a gain on investment securities available for sale of
$.3 million during this period.
OTHER OPERATING EXPENSE. Total other expense increased $.2 million (1.0%) for
the six months ended June 30, 1996 compared to the same period in 1995. Salary
and employee benefits increased $.7 million due primarily to increased salaries
associated with the opening of new facilities. Other operating expenses
increased $.3 million during this same period. FDIC insurance premiums declined
$.9 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. Professional fees declined $.2
million during this same period. Occupancy expense and furniture and equipment
expense increased $.1 million for the six months ended June 30, 1996. These
increases were primarily due to expenses incurred with the opening and operation
of new facilities.
INCOME TAXES. Income tax expense increased $1.0 million (23.3%) for the six
months ended June 30, 1996 to $5.4 million from $4.4 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 six months of 1995 for
potential adjustments to prior years' income tax returns.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
NET INCOME. The Company's net income for the three months ended June 30, 1996
and 1995 was approximately $5.3 million and $3.4 million, respectively which
represents an increase of $1.9 million (53.9%) for the 1996 period when compared
to the same period in 1995. The Company's net interest income increased $1.0
million (8.8%) to $12.5 million for the three months ended June 30, 1996 from
$11.5 million for the same period ended in 1995. This increase was primarily due
to decreases in deposit interest expense of $.7 million. The Company also
recorded income of approximately $1.1 million from the refund of the over
funding of a terminated benefits plan of WSB Aurora. The Company also
experienced decreases to total other operating expenses of $.2 million. The
increases to income were partially offset by an increase to income tax expense
of $.7 million.
15
<PAGE>
INTEREST INCOME. Total interest income increased $.4 million for the three
months ended June 30, 1996 compared to the same period in 1995 and resulted from
increased volume in the loan and securities portfolio.
INTEREST EXPENSE. Total interest expense decreased $.7 million for the three
months ended June 30, 1996 compared to the same period during 1995 and resulted
from lower certificate of deposit balances.
PROVISION FOR LOAN LOSSES. The Company's provision for loan losses decreased $.1
million (26.8%) for the three months ended June 30, 1996 compared to the same
period in 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.
OTHER OPERATING INCOME. Total other income increased $1.2 million for the three
months ended June 30, 1996 compared to the same period in 1995. This increase
was primarily due to the recording of $1.1 million of income from the refund of
the over funding of a terminated benefits plan of WSB Aurora. This gain was
partially offset by the recording of a lower gain on investment securities
available for sale of $.1 million during this period.
OTHER OPERATING EXPENSE. Total other expense decreased $.2 million (2.8%) for
the three months ended June 30, 1996 compared to the same period in 1995. Salary
and employee benefits increased $.3 million due primarily to increased salaries
associated with the opening of new facilities. 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. Professional fees declined $.2
million during this same period. Furniture and equipment expense increased $.1
million for the three months ended June 30, 1996. This increase was primarily
due to expenses incurred with the opening and operation of new facilities. Other
operating expenses increased $.1 million during this period.
INCOME TAXES. Income tax expense increased $.7 million for the three months
ended June 30, 1996 to $3.1 million from $2.4 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 six months of 1995 for potential
adjustments to prior years' income tax returns.
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.
16
<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
A. The Annual Meeting of Shareholders was held on May 8, 1996.
B. The following individuals were elected to serve as directors of the
Company for a term of one year at the Annual Meeting. The votes for
and against such individuals are set forth below:
FOR AGAINST
--- -------
1. Kevin J. Acker 1,659,347 4,217
2. John A. Clark 1,660,007 6,008
3. David Bell 1,643,158 3,192
4. Peggy LoCicero 1,638,715 4,796
5. Charles P. Howard 1,636,002 2,455
Broker-No Votes: 108,424
C. Ratification of Deloitte & Touche, LLP as the Company's independent
auditors.
FOR AGAINST ABSTAIN
--- ------- -------
1,657,580 4,395 10,951
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 June 30, 1996.
17
<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, 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
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> $55,862
<INT-BEARING-DEPOSITS> 905,261
<FED-FUNDS-SOLD> 830
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 129,215
<INVESTMENTS-CARRYING> 129,665
<INVESTMENTS-MARKET> 127,303
<LOANS> 789,215
<ALLOWANCE> 9,490
<TOTAL-ASSETS> 1,154,631
<DEPOSITS> 1,010,511
<SHORT-TERM> 11,705
<LIABILITIES-OTHER> 17,672
<LONG-TERM> 0
0
0
<COMMON> 3,457
<OTHER-SE> 111,286
<TOTAL-LIABILITIES-AND-EQUITY> 1,154,631
<INTEREST-LOAN> 35,182
<INTEREST-INVEST> 7,484
<INTEREST-OTHER> 733
<INTEREST-TOTAL> 43,399
<INTEREST-DEPOSIT> 17,898
<INTEREST-EXPENSE> 18,145
<INTEREST-INCOME-NET> 25,254
<LOAN-LOSSES> 796
<SECURITIES-GAINS> 369
<EXPENSE-OTHER> 14,655
<INCOME-PRETAX> 15,266
<INCOME-PRE-EXTRAORDINARY> 5,408
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,858
<EPS-PRIMARY> 22.79
<EPS-DILUTED> 22.79
<YIELD-ACTUAL> 8.4
<LOANS-NON> 147
<LOANS-PAST> 11,478
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 8,900
<CHARGE-OFFS> 317
<RECOVERIES> 111
<ALLOWANCE-CLOSE> 9,490
<ALLOWANCE-DOMESTIC> 7,402
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,088
</TABLE>
