<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, 1997
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
of incorporation or organization) Identification Number)
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 March 31, 1997.
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, 1997.
<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
This report, includes certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. West Suburban Bancorp, Inc. (the
"Company") intends such forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements contained in the Private
Securities Reform Act of 1995, and is including this statement for purposes of
indicating such intent. Forward-looking statements which are based on certain
assumptions and describe future plans, strategies and expectations of the
Company, are generally identifiable by use of the words "believe", "expect",
"intend", "anticipate", "estimate", "project" or similar expressions. The
Company's ability to predict results or the actual effect of future plans or
strategies is inherently uncertain. Factors which could have a material adverse
affect on the operations and future prospects of the Parent and the Subsidiaries
include, but are not limited to, changes in interest rates, general economic
conditions, legislative/regulatory changes, monetary and fiscal policies of the
U.S. Government, including policies of the U.S. Treasury and the Federal Reserve
Board, the quality or composition of the loan or investment portfolios, demand
for loan products, deposit flows, competition, demand for financial services in
the Company's market area and accounting principles, policies and guidelines.
These risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such statements. Further
information concerning the Company and its business, including additional
factors that could materially affect the Company's financial results, is
included in the Company's filings with the Securities and Exchange Commission.
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,
1997 1996
----------- -----------
<S> <C> <C>
Assets
Cash and due from banks $ 34,300 $ 38,520
Interest-bearing deposits in financial institutions 182 240
Federal funds sold 60,230 29,890
----------- -----------
Total cash and cash equivalents 94,712 68,650
Investment securities:
Available for sale (amortized cost of $160,123 in
1997; $159,614 in 1996) 157,516 158,578
Held to maturity (fair value of $167,935 in
1997; $170,202 in 1996) 170,005 170,191
Loans, less allowance for loan losses of $9,867 in 1997;
$9,603 in 1996 788,532 784,242
Premises and equipment, net 30,803 30,130
Other real estate 2,863 2,757
Accrued interest and other assets 21,151 21,056
----------- -----------
Total Assets $ 1,265,582 $ 1,235,604
=========== ===========
Liabilities and Shareholders' Equity
Deposits
Noninterest-bearing $ 95,912 $ 102,583
Interest-bearing 1,030,353 996,814
----------- -----------
Total deposits 1,126,265 1,099,397
FHLB advances 1,350
Accrued interest and other liabilities 17,308 16,519
----------- -----------
Total Liabilities 1,143,573 1,117,266
----------- -----------
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 82,058 77,439
Unrealized (loss) on securities available for sale, net of taxes (1,572) (624)
----------- -----------
Total Shareholders' Equity 122,009 118,338
----------- -----------
Total Liabilities and Shareholders' Equity $ 1,265,582 $ 1,235,604
=========== ===========
</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, 1997 AND 1996
(Dollars in thousands, except per share data)
(UNAUDITED)
1997 1996
------- --------
Interest Income
Loans, including fees $17,129 $ 17,915
------- --------
Investment securities:
Taxable 4,689 3,253
Nontaxable 538 463
------- --------
Total investment securities 5,227 3,716
Deposits in financial institutions 13 20
Federal funds sold 382 370
------- --------
Total interest income 22,751 22,021
------- --------
Interest Expense
Deposits 10,095 9,157
Other 196 90
------- --------
Total interest expense 10,291 9,247
------- --------
Net interest income 12,460 12,774
Provision for Loan Losses 295 458
------- --------
Net Interest Income After Provision for Loan Losses 12,165 12,316
------- --------
Other Operating Income
Service fees 848 863
Net realized gain on sales of securities available for
sale 1 351
Trust fees 105 105
Net gain on sale of loans originated for sale 60 29
Loan servicing 204 239
Net gain (loss) on sale of other real estate 1,476 (5)
Other 3,044 694
------- --------
Total other operating income 5,738 2,276
------- --------
Other Operating Expense
Salaries and employee benefits 4,536 3,740
Occupancy 717 716
Furniture and equipment 731 693
FDIC insurance premiums 84 76
Professional fees 254 284
Data processing 185 197
Other real estate 44 588
Other 1,244 1,380
------- --------
Total other operating expense 7,795 7,674
------- --------
Income Before Income Taxes 10,108 6,918
Income taxes 3,543 2,335
------- --------
Net Income $ 6,565 $ 4,583
======= ========
Net Income Per Share $ 15.18 $ 10.60
======= ========
Cash Dividends Declared Per Share $ 4.50 $ 4.00
======= ========
The accompanying notes are an integral part of the consolidated financial
statements.
4
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WEST SUBURBAN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities
Net income $ 6,565 $ 4,583
-------- --------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 780 721
Provision for loan losses 295 458
Provision for deferred income taxes 2,022 1,094
Net premium amortization and discount accretion of investment
securities 128 112
Net realized gain on sales of investment securities available
for sale (1) (351)
Gain on sale of loans held for sale (60) (29)
Proceeds from sale of loans held for sale 633 2,635
Origination of loans held for sale (1,339) (3,994)
(Gain) loss on sale of premises and equipment (5) 20
(Gain) loss on sale of other real estate (1,476) 5
Increase in accrued interest and other assets (1,625) (1,117)
Increase in accrued interest and other liabilities 707 3,940
-------- --------
Total adjustments 59 3,494
-------- --------
Net cash provided by operating activities 6,624 8,077
-------- --------
Cash flows from investing activities
Investment securities available for sale:
Proceeds from sales 13,306
Proceeds from maturities 5,002 8,914
Purchases (5,677) (27,210)
Investment securities held to maturity:
Proceeds from maturities 2,221 33,381
Purchases (1,999) (29,490)
Net (increase) decrease in loans (3,925) 1,251
Purchases of premises and equipment (1,452) (810)
Proceeds from sale of premises and equipment 5 5
Proceeds from sale of other real estate 1,476 536
-------- --------
Net cash used in investing activities ($ 4,349) ($ 117)
-------- --------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
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WEST SUBURBAN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (CONTINUED)
(Dollars in thousands)
(UNAUDITED)
1997 1996
-------- --------
Cash flows from financing activities
Net increase (decrease) in total deposits $ 26,867 ($11,967)
Decrease in FHLB advances (1,350)
Cash dividends paid (1,730) (1,621)
-------- --------
Net cash provided by (used in) financing activities 23,787 (13,588)
-------- --------
Net increase (decrease) in cash and cash equivalents 26,062 (5,628)
Cash and cash equivalents at beginning of period 68,650 88,346
-------- --------
Cash and cash equivalents at end of period $ 94,712 $ 82,718
======== ========
Supplemental cash flow information:
Cash paid during the period for:
Interest on deposits and other borrowings $ 10,155 $ 9,300
Transfer to other real estate $ 106 $ 362
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 1997 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 1997, the Company's unrealized loss, net of
taxes, on securities available for sale increased $1.0 million to a loss of $1.6
million at March 31, 1997 from a loss of $.6 million at December 31, 1996.
NOTE 3 - OUTSTANDING LINES OF CREDIT AVAILABLE - FOR BORROWERS (Dollars in
Thousands)
March 31, 1997 December 31, 1996
-------------- -----------------
Home equity lines $112,032 $108,526
Commercial loans in process 154,413 197,952
Visa credit lines 46,085 43,818
-------- --------
Total commitments $312,530 $350,296
======== ========
The Company had $8.2 million and $4.5 million of commitments to originate
residential mortgage loans as of March 31, 1997 and December 31, 1996,
respectively.
NOTE 4 - ADOPTION OF NEW ACCOUNTING STANDARDS
Effective January 1, 1997, the Company adopted Statement of Financial Accounting
Standards ("SFAS") 125, "Accounting for the Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities", which provides new accounting and
reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities. Those standards are based on a consistent
application of a "financial-components" approach that focuses on control. Under
that approach, after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has incurred,
derecognizes financial assets when control has been surrendered, and
derecognizes liabilities when extinguished. The
7
<PAGE>
adoption of SFAS 125 did not have a material impact on the Company's financial
condition or results of operations.
In December 1996, Financial Accounting Standards Board ("FASB") issued SFAS 127,
"Deferral of the Effective Date of Certain Provisions of SFAS 125", which defers
the effective date of certain of the provisions of SFAS 125 for one year.
In March 1997, the FASB issued SFAS 128, "Earnings Per Share", which establishes
new standards for computing and presenting earnings per share and requires dual
presentation of basic and diluted earnings per share. SFAS 128 is effective for
financial statements ending after December 15, 1997 and all prior periods will
be restated. The adoption of SFAS 128 will not have an impact on the Company's
earnings per share as the Company has no outstanding common stock equivalents.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BALANCE SHEET ANALYSIS
Asset Distribution. Total consolidated assets of the Company increased $30.0
million (2.4%) to $1,265.6 million at March 31, 1997 from $1,235.6 million at
December 31, 1996. Total cash and cash equivalents increased approximately
$26.1 million to $94.7 million at March 31, 1997 from $68.6 million at December
31, 1996. This was principally due to the increase in federal funds sold to
$60.2 million at March 31, 1997 from $29.9 million at December 31, 1996 as the
Company sought increased liquidity in an uncertain interest rate environment.
Aggregate holdings in investment securities decreased $1.3 million (.4%) to
$327.5 million at March 31, 1997 from $328.8 million at December 31, 1996. 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
provide liquidity, minimize exposure to interest rate risk and achieve an
acceptable rate of return.
Total loans increased $4.6 million (.6%) to $798.4 million at March 31, 1997
from $793.8 million at December 31, 1996. 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 for loan losses is an
amount that management believes is adequate to absorb losses on existing loans
that may become uncollectible, based on evaluations of the collectibility of
loans along with current and prior loan loss experience. In determining the
proper level for the allowance, management evaluates the adequacy of the
allowance based on current and 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 $.3
million to $9.9 million at March 31, 1997 from $9.6 million at December 31,
1996. The ratio of the allowance for loan losses to total loans outstanding
increased at March 31, 1997 to 1.24% compared to 1.21% at December 31, 1996. The
increase in this ratio was principally due to net charge-offs on loans declining
during the first quarter of 1997 when compared to the fourth quarter in 1996.
The allowance for loan losses as of March 31, 1997 was approximately 175% of the
level of nonperforming loans which was an increase over the 153% coverage ratio
of allowance for loan losses to nonperforming loans at December 31, 1996.
Nonperforming loans decreased $.7 million (10.0%) to $5.6 million at March 31,
1997 from $6.3 million at December 31, 1996. As of March 31, 1997 and December
31, 1996, total nonperforming loans to net loans were .7% and .8%, respectively.
The following table presents an analysis of the Company's nonperforming loans
for the periods stated (dollars in thousands):
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996 Dollar Change
-------------- ----------------- -------------
<S> <C> <C> <C>
Nonaccrual loans $2,365 $2,283 $82
Accruing loans 90 days past due 3,274 3,980 (706)
-------------- ----------------- -------------
Total nonperforming loans $5,639 $6,263 ($624)
============== ================= =============
Nonperforming loans as a percent
of net loans 0.7% 0.8% --
Other real estate $2,863 $2,757 $106
============== ================= =============
</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>
1997 1996
-------- -------------------------------------------
1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
-------- -------------------------------------------
<S> <C> <C> <C> <C> <C>
Provision-quarter $295 $321 $388 $338 $458
Provision-year 295 1,505 1,184 796 458
Net chargeoffs-quarter 31 407 189 118 88
Net chargeoffs-year to date 31 802 395 206 88
Allowance at period end 9,867 9,603 9,689 9,490 9,270
Allowance to period end total loans 1.24% 1.21% 1.22% 1.20% 1.21%
</TABLE>
Liability Distribution. Total liabilities increased $26.3 million (2.4%) to
$1,143.6 million at March 31, 1997 from $1,117.3 million at December 31, 1996.
This increase was primarily due to increases in certificate of deposit balances
arising from the Company offering competitive rates of return during promotional
efforts. The Company's intention is to use additional funds available for
investing purposes and to fund loan growth.
Balances in the Company's major categories of deposits are summarized in the
following table (dollars in thousands):
<TABLE>
<CAPTION>
Dollar Percent
March 31, 1997 December 31, 1996 Change Change
-------------- ----------------- ---------- ---------
<S> <C> <C> <C> <C>
Demand and other noninterest-bearing $95,912 $102,583 ($6,671) (6.5%)
NOW accounts 183,019 182,861 158 0.1%
Money market savings 348,671 342,872 5,799 1.7%
Time, $100,000 and over 83,209 86,343 (3,134) (3.6%)
Time, other 415,454 384,738 30,716 8.0%
-------------- ----------------- ---------- ---------
Total $1,126,265 $1,099,397 $26,868 2.4%
============== ================= ========== =========
</TABLE>
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 $3.7 million (3.1%) to
$122.0 million at March 31, 1997 from $118.3 million at December 31, 1996. This
increase was the result of the net retention of 1997 earnings of $4.7 million
decreased by the increase in unrealized loss on securities available for sale of
$1.0 million (net of taxes).
CAPITAL RESOURCES
The Company's capital ratios as well as those of its Subsidiaries as of March
31, 1997 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, 1997:
<TABLE>
<CAPTION>
Tier 1 Total
Risk-Based Risk-Based Leverage
Institution Capital Capital Capital
- ----------- ------- ------- -------
<S> <C> <C> <C>
West Suburban Bancorp, Inc. 12.56% 13.57% 10.02%
West Suburban Bank 10.36% 11.35% 8.17%
West Suburban Bank of Downers Grove/Lombard 16.26% 17.51% 11.25%
West Suburban Bank of Darien 13.13% 14.38% 9.28%
West Suburban Bank of Carol Stream/Stratford Square 11.01% 11.83% 8.40%
</TABLE>
At March 31, 1997, WSB Aurora maintained a core capital ratio of 11.21%, a
tangible capital ratio of 13.22% and a total risk-based capital ratio of 14.26%.
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, 1997 and December 31, 1996, each of the
Subsidiaries qualified as a "well-capitalized" institution.
LIQUIDITY
Effective liquidity management allows a banking institution to ensure the
availability of sufficient funds to accommodate the needs of borrowers and
depositors. 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, 1997 and December 31, 1996, liquid assets represented 19.9% and
18.4% 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
11
<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 March 31, 1997
(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 $ 182 $ 182
Federal funds sold 60,230 60,230
Investment securities 17,550 $ 55,798 $191,078 $ 63,095 327,521
Loans 293,410 352,728 469 149,427 796,034
------------------------------------------------------------------------------
Total interest-earning assets $371,372 $408,526 $191,547 $212,522 $1,183,967
==============================================================================
Rate sensitive liabilities:
Money market savings $348,671 $348,671
NOW accounts 183,019 183,019
Time deposits:
Less than $100,000 116,432 $196,860 $102,162 415,454
$100,000 and over 44,397 25,116 $13,696 83,209
------------------------------------------------------------------------------
Total interest-bearing liabilities $692,519 $221,976 $102,162 $13,696 $1,030,353
==============================================================================
Interest sensitivity gap ($321,147) $186,550 $89,385 $198,826
Cumulative interest sensitivity gap ($321,147) ($134,597) ($45,212) $153,614 $ 153,614
Cumulative interest-earning assets as a
percentage of cumulative
interest-bearing liabilities 53.6% 85.3% 95.6% 114.9%
Cumulative interest sensitivity gap as a
percentage of total assets (25.4)% (10.6)% (3.6)% 12.1%
</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,
1997 reflects cumulative net interest-earning assets compared to cumulative net
interest-bearing liabilities of 85.3% and cumulative net interest-earning assets
that reprice or mature within one year compared to total assets of negative
10.6%. 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, 1997 AND 1996
Net Income. The Company's net income for the three months ended March 31, 1997
and 1996 was approximately $6.6 million and $4.6 million, respectively. This
represents an increase of $2.0 million (43.2%) for the 1997 period when compared
to the same period in 1996. Management believes this was primarily due to the
increase in other operating income of $3.8 million resulting from gains
recognized in connection with
12
<PAGE>
the disposition of certain other real estate and the settlement of certain
litigation, each of which are one-time transactions. Total interest income
increased $.7 million. These increases were offset by an increase to total
interest expense of $1.0 million and income tax expense of $1.2 million.
Interest Income. Total interest income, on a tax equivalent basis, increased $.7
million for the three months ended March 31, 1997 compared to the same period in
1996. This increase resulted from an increase of $1.7 million due to growth in
average balances which was offset by a ($1.0) million decrease due to lower
interest rates. The Company's average interest-earning assets grew $102.2
million to $1,152.8 million at March 31, 1997 from $1,050.6 million at March 31,
1996. Yields on total interest-earning assets decreased primarily due to
decreases in average interest rates on the Company's loan portfolio and federal
funds sold portfolio. Interest on the Company's securities portfolio increased
primarily due to higher yields on U.S. government agencies and corporations and
higher average outstanding balances.
Interest Expense. Total interest expense increased $1.0 million for the three
months ended March 31, 1997 compared to the same period during 1996. Interest on
deposits increased $.9 million during this period. This increase was the result
of $1.2 million due to higher average balances which was offset by a ($.3)
million decrease due to lower interest rates. Average interest-bearing
liabilities increased $95.4 million to $1,000.6 million at March 31, 1997 from
$905.2 million at March 31, 1996 primarily due to certificate of deposit
promotions.
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, 1997 as compared to the same period in 1996 (dollars in
thousands):
<TABLE>
<CAPTION>
CHANGE IN:
Interest Income VOLUME RATE TOTAL
-------- --------- ---------
<S> <C> <C> <C>
Interest-bearing deposits in financial institutions ($7) ($7)
Federal funds sold 48 ($36) 12
Investment securities 1,317 201 1,518
Loans 383 (1,153) (770)
-------- --------- ---------
Total interest income 1,741 (988) 753
-------- --------- ---------
Interest Expense
Interest-bearing deposits 1,248 (310) 938
Borrowed funds 80 26 106
-------- --------- ---------
Total interest expense 1,328 (284) 1,044
-------- --------- ---------
Net interest income $413 ($704) ($291)
======== ========= =========
</TABLE>
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>
1997 1996
--------- ---------------------------------------------
March 31 Dec. 31 Sept. 30 June 30 March 31
--------- ---------------------------------------------
<S> <C> <C> <C> <C> <C>
Average loans $791,003 $781,372 $776,621 $771,189 $773,446
Average interest-earning assets 1,152,764 1,156,452 1,060,434 1,050,375 1,050,595
Average noninterest-bearing deposits 100,810 103,448 102,655 102,670 101,799
Average interest-bearing deposits 988,550 921,925 903,344 894,214 898,298
Average deposits 1,089,360 1,025,373 1,005,999 996,884 1,000,097
Average interest-bearing liabilities 1,000,613 932,685 914,467 904,326 905,176
</TABLE>
Provision for Loan Losses. The Company's provision for loan losses decreased $.2
million (35.6%) for the three months ended March 31, 1997 as compared to the
same period in 1996. The provision for loan losses is based on management's
determination that the allowance for loan losses (after giving effect to the
13
<PAGE>
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 operating income increased $3.5 million
(152.1%) for the three months ended March 31, 1997 compared to the same period
in 1996. This increase was primarily due to the settlement of a claim relating
to an investment that it made during the late 1980's and the sale of certain
property held as other real estate. As the property had previously been written
off, amounts received represented a gain recognized as other operating income.
The Company recorded $3.8 million of income relating to the foregoing two
matters. These increases to income were partially offset by decreases in gains
on sale of investment securities available for sale of $.4 million.
Other Operating Expense. Total other operating expense increased $.1 million
(1.6%) for the three months ended March 31, 1997 compared to the same period in
1996. Salary and employee benefits increased $.8 million primarily due to
increased salaries and severance payouts to two former executives of the
Company. Other real estate decreased $.5 million for the three months ended
March 31, 1997 compared to the same period in 1996. Management believes this was
primarily due to the Company selling the property held as other real estate.
Management anticipates reduced other real estate expense as a result of the
sale. Other operating expenses decreased $.1 million during this same period.
Income Taxes. Income tax expense increased $1.2 million (51.7%) for the three
months ended March 31, 1997 to $3.5 million from $2.3 million compared to the
same period in 1996. The increase was principally due to higher taxable income.
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 DEVELOPMENTS
During January 1997, the Company filed with the appropriate regulatory
authorities, applications to merge its four bank subsidiaries and its thrift
subsidiary into a single bank under the name "West Suburban Bank." The Company
has received approvals from the Federal Deposit Insurance Corporation, the
Office of the Illinois Commissioner of Banks and Real Estate, and the Office of
Thrift Supervision to merge its four bank subsidiaries and its thrift subsidiary
into one state chartered bank. The Company presently anticipates that the merger
of its Subsidiaries will be completed during the second quarter.
RECENT REGULATORY DEVELOPMENTS
Various bills have been introduced in the Congress that would allow bank holding
companies to engage in a wider range of nonbanking activities, including greater
authority to engage in securities and insurance activities. While the scope of
permissible nonbanking activities and the conditions under which the new powers
could be exercised varies among the bills, the expanded powers generally would
be available to a bank holding company only if the bank holding company and its
bank subsidiaries remain well-capitalized and well-managed. The bills also
impose various restrictions on transactions between the depository institution
subsidiaries of bank holding companies and their nonbank affiliates. These
restrictions are intended to protect the depository institutions from the risks
of the new nonbanking activities permitted to such affiliates.
14
<PAGE>
Additionally, legislation has been introduced in Illinois that would allow
Illinois banks to engage in insurance activities, subject to various
conditions, including restrictions on the manner in which insurance products
are marketed to bank customers and requirements that banks selling insurance
provide certain disclosures to customers. The Illinois legislature is also
considering legislation that would prohibit out-of-state banks from acquiring
an Illinois bank unless the Illinois bank has been in existence and
continuously operated for a period of at least five years.
At this time, the Company is unable to predict whether any of the pending
bills will be enacted and, therefore, is unable to predict the impact such
legislation may have on the operations of the Company and the Subsidiaries.
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, 1997.
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, 1997
/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> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 34,300
<INT-BEARING-DEPOSITS> 1,030,353
<FED-FUNDS-SOLD> 60,230
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 157,516
<INVESTMENTS-CARRYING> 170,005
<INVESTMENTS-MARKET> 167,935
<LOANS> 798,399
<ALLOWANCE> 9,867
<TOTAL-ASSETS> 1,265,582
<DEPOSITS> 1,126,265
<SHORT-TERM> 0
<LIABILITIES-OTHER> 17,308
<LONG-TERM> 0
0
0
<COMMON> 3,457
<OTHER-SE> 118,552
<TOTAL-LIABILITIES-AND-EQUITY> 1,265,582
<INTEREST-LOAN> 17,129
<INTEREST-INVEST> 5,227
<INTEREST-OTHER> 395
<INTEREST-TOTAL> 22,751
<INTEREST-DEPOSIT> 10,095
<INTEREST-EXPENSE> 10,291
<INTEREST-INCOME-NET> 12,460
<LOAN-LOSSES> 295
<SECURITIES-GAINS> 1
<EXPENSE-OTHER> 7,795
<INCOME-PRETAX> 10,108
<INCOME-PRE-EXTRAORDINARY> 10,108
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,565
<EPS-PRIMARY> 15.18
<EPS-DILUTED> 15.18
<YIELD-ACTUAL> .081
<LOANS-NON> 2,365
<LOANS-PAST> 3,274
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 9,603
<CHARGE-OFFS> 100
<RECOVERIES> 69
<ALLOWANCE-CLOSE> 9,867
<ALLOWANCE-DOMESTIC> 7,458
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,409
</TABLE>
