<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, 1999
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 class
of common stock as of the latest practicable date.
15,000,000 shares of Common Stock, no par value, were authorized and 432,495
shares of Common Stock were issued and outstanding as of June 30, 1999.
<PAGE>
WEST SUBURBAN BANCORP, INC.
Form 10-Q Quarterly Report
Table of Contents
PART I
<TABLE>
<CAPTION>
Page Number
<S> <C>
Item 1. Financial Statements............................................. 3
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk....... 14
PART II
Item 1. Legal Proceedings................................................ 16
Item 2. Changes in Securities and Use of Proceeds........................ 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
</TABLE>
THIS REPORT CONTAINS 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.
(TOGETHER WITH WEST SUBURBAN BANK, 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, AS AMENDED,
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 WEST SUBURBAN BANCORP, INC. ("WEST SUBURBAN") AND WEST
SUBURBAN BANK (THE "BANK") 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 BANK'S LOAN OR
SECURITIES 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.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, December 31,
1999 1998
----------------- ------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 37,813 $ 41,549
Interest-earning deposits in financial institutions 817 724
Federal funds sold 6,990 64,590
---------------- ------------------
Total cash and cash equivalents 45,620 106,863
Securities:
Available for sale (amortized cost of $199,384 in 1999; $204,947 in 1998) 197,545 205,624
Held to maturity (fair value of $177,520 in 1999; $172,590 in 1998) 179,323 171,679
---------------- ------------------
Total securities 376,868 377,303
---------------- ------------------
Loans, less allowance for loan losses of $10,897 in 1999; $9,998 in 1998 809,766 771,148
Premises and equipment, net 34,175 33,393
Other real estate 1,510 1,742
Accrued interest and other assets 20,777 18,504
---------------- ------------------
TOTAL ASSETS $1,288,716 $1,308,953
---------------- ------------------
---------------- ------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 115,005 $ 112,464
Interest-bearing 1,020,860 1,043,488
---------------- ------------------
Total deposits 1,135,865 1,155,952
Accrued interest and other liabilities 14,244 18,608
---------------- ------------------
TOTAL LIABILITIES 1,150,109 1,174,560
---------------- ------------------
Shareholders' equity:
Common Stock, no par value; 15,000,000 shares authorized; 432,495
shares issued and outstanding 3,457 3,457
Surplus 38,066 38,066
Retained earnings 98,191 92,461
Accumulated other comprehensive (loss) income (1,107) 409
---------------- ------------------
TOTAL SHAREHOLDERS' EQUITY 138,607 134,393
---------------- ------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,288,716 $1,308,953
---------------- ------------------
---------------- ------------------
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
<PAGE>
WEST SUBURBAN BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(Dollars in thousands, except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
-------------- ----------------
<S> <C> <C>
INTEREST INCOME
Loans, including fees $31,814 $32,853
-------------- ----------------
Securities:
Taxable 10,791 10,929
Nontaxable 831 974
-------------- ----------------
Total securities 11,622 11,903
Deposits in financial institutions 19 10
Federal funds sold 808 1,757
-------------- ----------------
Total interest income 44,263 46,523
-------------- ----------------
INTEREST EXPENSE
Deposits 18,166 21,448
Other 75 85
-------------- ----------------
Total interest expense 18,241 21,533
-------------- ----------------
NET INTEREST INCOME 26,022 24,990
PROVISION FOR LOAN LOSSES 1,039 488
-------------- ----------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 24,983 24,502
-------------- ----------------
NONINTEREST INCOME
Service fees 1,660 1,572
Trust fees 128 129
Net gain on sales of loans 298 321
Loan servicing 148 216
Net realized gain on sales of securities available for sale 89 322
Net gain on sales of other real estate 14 30
Litigation settlement 3,555
Other 2,139 2,333
-------------- ----------------
Total noninterest income 8,031 4,923
-------------- ----------------
NONINTEREST EXPENSE
Salaries and employee benefits 8,470 7,765
Occupancy 1,670 1,586
Furniture and equipment 1,652 1,653
FDIC insurance premiums 100 124
Professional fees 491 319
Data processing 386 512
Other real estate 39 105
Other 3,267 3,068
-------------- ----------------
Total noninterest expense 16,075 15,132
-------------- ----------------
INCOME BEFORE INCOME TAXES 16,939 14,293
INCOME TAXES 5,370 4,655
-------------- ----------------
NET INCOME 11,569 9,638
OTHER COMPREHENSIVE (LOSS) INCOME (1,516) 80
-------------- ----------------
COMPREHENSIVE INCOME $10,053 $ 9,718
-------------- ----------------
-------------- ----------------
EARNINGS PER SHARE-BASIC $26.75 $22.28
-------------- ----------------
-------------- ----------------
CASH DIVIDENDS DECLARED PER SHARE $13.50 $11.00
-------------- ----------------
-------------- ----------------
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
<PAGE>
WEST SUBURBAN BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998
(Dollars in thousands, except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
-------------- ------------------
<S> <C> <C>
INTEREST INCOME
Loans, including fees $16,023 $16,363
-------------- ------------------
Securities:
Taxable 5,407 5,461
Nontaxable 428 483
-------------- ------------------
Total securities 5,835 5,944
Deposits in financial institutions 10 5
Federal funds sold 305 1,082
-------------- ------------------
Total interest income 22,173 23,394
-------------- ------------------
INTEREST EXPENSE
Deposits 9,068 10,830
Other 37 44
-------------- ------------------
Total interest expense 9,105 10,874
-------------- ------------------
NET INTEREST INCOME 13,068 12,520
PROVISION FOR LOAN LOSSES 491 237
-------------- ------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 12,577 12,283
-------------- ------------------
NONINTEREST INCOME
Service fees 857 809
Trust fees 24 23
Net gain on sales of loans 108 131
Loan servicing 70 104
Net realized gain on sales of securities available for sale 23 273
Net gain on sales of other real estate 9 19
Other 1,054 1,149
-------------- ------------------
Total noninterest income 2,145 2,508
-------------- ------------------
NONINTEREST EXPENSE
Salaries and employee benefits 4,300 3,891
Occupancy 758 785
Furniture and equipment 827 775
FDIC insurance premiums 50 53
Professional fees 221 78
Data processing 206 222
Other real estate 8 58
Other 1,614 1,544
-------------- ------------------
Total noninterest expense 7,984 7,406
-------------- ------------------
INCOME BEFORE INCOME TAXES 6,738 7,385
INCOME TAXES 2,088 2,273
-------------- ------------------
NET INCOME 4,650 5,112
OTHER COMPREHENSIVE (LOSS) INCOME (1,196) (45)
-------------- ------------------
COMPREHENSIVE INCOME $ 3,454 $ 5,067
-------------- ------------------
-------------- ------------------
EARNINGS PER SHARE-BASIC $10.75 $11.81
-------------- ------------------
-------------- ------------------
CASH DIVIDENDS DECLARED PER SHARE $7.00 $6.00
-------------- ------------------
-------------- ------------------
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
<PAGE>
WEST SUBURBAN BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $11,569 $9,638
------------------ ------------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 1,839 1,704
Provision for loan losses 1,039 488
Benefit for deferred income taxes (324) (8)
Net premium amortization and discount accretion of securities 436 456
Net realized gain on sales of securities available for sale (89) (322)
Net gain on sales of loans held for sale (298) (321)
Proceeds from sales of loans held for sale 24,021 30,644
Origination of loans held for sale (23,723) (30,323)
(Gain) loss on sales of premises and equipment (10) 57
Net gain on sales of other real estate (14) (30)
Increase in accrued interest and other assets (946) (30)
Decrease in accrued interest and other liabilities (258) (2,020)
------------------ ------------------
Total adjustments 1,673 295
------------------ ------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 13,242 9,933
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available for sale:
Proceeds from sales 21,534 20,469
Proceeds from maturities 52,998 31,925
Purchases (69,491) (55,086)
Securities held to maturity:
Proceeds from maturities 62,104 105,964
Purchases (69,573) (122,964)
Purchase of minority interest in subsidiaries (26)
Net (increase) decrease in loans (39,825) 29,999
Purchases of premises and equipment (2,664) (2,508)
Proceeds from sales of premises and equipment 52
Proceeds from sales of other real estate 414 1,580
------------------ ------------------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (44,451) 9,353
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in total deposits (20,087) (17,502)
Cash dividends paid (9,947) (4,757)
------------------ ------------------
Net cash used in financing activities (30,034) (22,259)
------------------ ------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (61,243) (2,973)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 106,863 60,334
------------------ ------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 45,620 $ 57,361
------------------ ------------------
------------------ ------------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest on deposits and other borrowings $ 19,668 $ 25,044
Income taxes 3,767 2,435
Transfers from loans to other real estate 168 1,694
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
6
<PAGE>
WEST SUBURBAN BANCORP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of West
Suburban Bancorp, Inc. ("West Suburban") and West Suburban Bank (the "Bank" and
collectively with West Suburban, the "Company"). Significant intercompany
accounts and transactions have been eliminated. The unaudited interim
consolidated financial statements 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 1999 presentation.
NOTE 2 - SECURITIES
Debt and marketable equity securities are classified into one of two categories,
"held to maturity" or "available for sale." Held to maturity securities include
those debt securities where the Company has both the ability and positive intent
to hold them to maturity. Securities not meeting these criteria are classified
as available for sale. Held to maturity securities are carried at amortized
historical cost while available for sale securities are carried at fair value
with net unrealized gains and losses (net of tax) reported in accumulated other
comprehensive income as a separate component of shareholders' 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. The
Company does not engage in trading activities. The Company has not utilized
futures, forwards, swaps or option contracts to manage interest rate risk or
otherwise.
During the first six months of 1999, the Company's unrealized gain on securities
available for sale, net of taxes decreased $1.5 million to a loss of $1.1
million at June 30, 1999 from a $.4 million gain at December 31, 1998, net of
taxes.
NOTE 3 - OUTSTANDING LINES OF CREDIT AVAILABLE - (Dollars in thousands)
<TABLE>
<CAPTION>
JUNE 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
Home equity lines $172,580 $163,359
Commercial credit lines 114,568 129,996
Letters of credit 8,596 14,423
Visa credit lines 53,344 39,062
------------- -----------------
Total commitments $349,088 $346,840
------------- -----------------
------------- -----------------
</TABLE>
The Company had $5.3 million and $14.7 million of commitments to originate
residential mortgage loans as of June 30, 1999 and December 31, 1998,
respectively.
NOTE 4 - NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 133, "Accounting for
Derivative Instruments and Hedging Activities," which requires all
derivatives to be recorded on the balance sheet at fair value and establishes
"special accounting" for hedges. SFAS 133 is effective for 2001. The Company
has not yet determined if the adoption of SFAS 133 will have a material
effect on the Company's financial condition or results of operations.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CONDENSED BALANCE SHEET ANALYSIS
ASSET DISTRIBUTION. Total consolidated assets at June 30, 1999 decreased
approximately $20.3 million (1.5%) to $1,288.7 million at June 30, 1999 from
$1,309.0 million at December 31, 1998. The decrease in total assets was
primarily due to a decrease in deposits in 1999. The 1999 decrease in
deposits is similar to the $17.5 million decrease in total deposits that the
Company experienced during the first six months of 1998, as deposit levels
are often highest at year end and are followed by a seasonal decrease at the
beginning of the year. Total cash and cash equivalents decreased $61.3
million (57.3%) to $45.6 million at June 30, 1999 from $106.9 million at
December 31, 1998. Aggregate holdings in federal funds sold decreased $57.6
million to $7.0 million at June 30, 1999 from $64.6 million at December 31,
1998. The decrease in federal funds sold was primarily due to increases in
loans and decreases in deposits. Aggregate holdings in securities remained
stable at approximately $377 million at June 30, 1999 and December 31, 1998.
The Company's objectives in managing the securities portfolio are driven by
the dynamics of its entire balance sheet which includes managing the
portfolio to maximize yield over an entire interest rate cycle while
providing liquidity and minimizing market risk.
Total loans increased $39.6 million (5.1%) to $820.7 million at June 30, 1999
from $781.1 million at December 31, 1998. Real estate loans increased $18.0
million to $324.4 million at June 30, 1999 from $306.4 million at December
31, 1998, and indirect auto loans increased $27.4 million to $57.8 million at
June 30, 1999 from $30.4 million at December 31, 1998. These increases were
partially offset by decreases in installment and VISA loans. The Company has
developed an indirect auto loan department to enhance loan volume. The
Company continues to grow its indirect auto loan portfolio and has
experienced favorable results with low levels of past due loans. The Company
attempts to remain competitive in its market by offering competitive rates
and loan products. The Company will continue to maintain the same credit
evaluation standards while reviewing prospective new product and business
lines.
ALLOWANCE FOR LOAN LOSSES AND ASSET QUALITY. The Company maintains an
allowance for loan losses to absorb anticipated losses in the loan portfolio.
The allowance for loan losses is established after a determination of the
potential credit risk of the loans held by the Company. Management evaluates
the adequacy of the allowance based on past loan loss experience by reviewing
historical loan loss/recovery data, expected future net credit losses,
adverse situations that may affect the borrowers' ability to repay, estimated
value of any underlying collateral, and current and prospective business and
economic conditions. The allowance for loan losses increased $.9 million
(9.0%) to $10.9 million at June 30, 1999 from $10.0 million at December 31,
1998. This increase in the allowance for loan losses was primarily due to an
increase in loans outstanding. The ratio of the allowance for loan losses to
total loans outstanding increased at June 30, 1999 to 1.33% compared to 1.28%
at December 31, 1998. The Company's ratio of allowance for loan losses to
total loans remains slightly below the peer institutions' average at both
June 30, 1999 and December 31, 1998. Nonperforming loans decreased $7.2
million (38.8%) to $11.4 million at June 30, 1999 from $18.6 million at
December 31, 1998. As of June 30, 1999 and December 31, 1998, total
nonperforming loans to total loans were 1.4% and 2.4%, respectively. The
allowance for loan losses was approximately 96% and 54% of nonperforming
loans at June 30, 1999 and December 31, 1998, respectively.
As of June 30, 1999, the Company had $5.0 million in credit exposure to a
leasing company consisting of a warehouse line of credit with a principal
balance of $5.0 million. The warehouse line of credit is secured by leases
and various other assets. The leasing company was engaged in the business of
originating and servicing small equipment leases until May 1998 when it sold
substantially all its assets. Subsequently, various irregularities in the
leasing company's operations were discovered. In August 1998, the leasing
company made an assignment for the benefit of creditors. The Company remains
a secured creditor of the leasing company.
The Company has acquired certain leases that secure the warehouse line of
credit and has arranged for the continued servicing of all the acquired
leases. The Company is evaluating the retention or sale of all leases
acquired from the leasing company. The Company is also exploring other
possible ways to maximize realizations on the leases. A settlement has been
reached with an individual that provided a limited guarantee
8
<PAGE>
of certain of the obligations of the leasing company to the Company. The
settlement provided for an immediate payment in the second quarter of 1999 to
the Company as well as the possibility of additional payments in the future. In
addition, the Company owns Class B Notes issued in connection with lease
securitizations arranged by the leasing company. During the third quarter of
1998, the Company recognized a loss of $3.2 million representing the
other-than-temporary impairment of the entire carrying value of the Class B
Notes, which were classified as available for sale securities. The leases that
comprise the underlying assets of the Class B Notes are serviced by the
institution that serves as the indenture trustee of the trust pursuant to which
Class B Notes were issued.
The following table presents an analysis of the Company's nonperforming loans
and other real estate as of the dates indicated (dollars in thousands):
<TABLE>
<CAPTION>
JUNE 30, 1999 December 31, 1998 Dollar Change
---------------- --------------------- ------------------
<S> <C> <C> <C>
Nonaccrual loans $8,933 $14,979 ($6,046)
Accruing loans 90 days past due 2,452 3,621 (1,169)
---------------- --------------------- ------------------
Total nonperforming loans $11,385 $18,600 ($7,215)
---------------- --------------------- ------------------
---------------- --------------------- ------------------
Nonperforming loans as a percent
of total loans 1.4% 2.4%
Other real estate $1,510 $1,742 ($232)
</TABLE>
The following table presents an analysis of the Company's provision for loan
losses for the periods stated (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
--------------------------- -------------------------------------------------------------
2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Provision-quarter $491 $548 $888 $1,187 $237 $251
Provision-year to date 1,039 548 2,563 1,675 488 251
Net chargeoffs-quarter 24 116 512 1,158 156 511
Net chargeoffs-year to date 140 116 2,337 1,825 667 511
Allowance at period end 10,897 10,430 9,998 9,621 9,592 9,511
Allowance to period end total loans 1.33% 1.30% 1.28% 1.30% 1.30% 1.24%
</TABLE>
LIABILITY DISTRIBUTION. Total liabilities decreased $24.5 million (2.1%) to
$1,150.1 million at June 30, 1999 from $1,174.6 million at December 31, 1998.
The decrease in total liabilities was primarily due to decreases in deposits.
The decreases in deposits were primarily due to the reduction in certificates of
deposit balances as customers position themselves to take advantage of possible
increases in interest rates by not committing to medium or long term
certificates of deposit. Management is attempting to retain current and attract
new deposits by promoting a new certificate of deposit product referred to as a
certificate of deposit for the millennium. This account provides customers a
window of opportunity to convert to a higher yielding certificate of deposit or
cash out during the last two weeks of the year. The decrease in certificates of
deposit was partially offset by continued growth in money market checking
deposits as customers took advantage of this product which provides a higher
interest rate compared to other non-time deposit products without requiring a
long term deposit period. Management's goal is to promote its deposit products
when feasible while preserving the Company's net interest margin. The Company
attempts to remain well-positioned in its market by offering competitive rates
on its savings and certificate of deposit products.
Balances in the Company's major categories of deposits are summarized in the
following table (dollars in thousands):
<TABLE>
<CAPTION>
Percent
JUNE 30, 1999 December 31, 1998 Dollar change Change
--------------------- --------------------- ---------------- ----------
<S> <C> <C> <C> <C>
<CAPTION>
Demand and other noninterest-bearing $ 115,005 $ 112,464 $ 2,541 2.3%
NOW accounts 32,444 34,712 (2,268) (6.5)
Money market checking 108,596 99,304 9,292 9.4
Money market savings 488,864 501,128 (12,264) (2.4)
Time, $100,000 and over 77,293 81,041 (3,748) (4.6)
Time, other 313,663 327,303 (13,640) (4.2)
--------------------- --------------------- ----------------
Total $1,135,865 $1,155,952 ($20,087) (1.7)%
--------------------- --------------------- ----------------
--------------------- --------------------- ----------------
</TABLE>
9
<PAGE>
CAPITAL RESOURCES
Total shareholders' equity increased $4.2 million during the six months ended
June 30, 1999. This increase was a result of net income of $11.6 million, less
dividends declared of $5.9 million and a decline in the market value of
securities available for sale of $1.5 million, net of deferred taxes.
The Company's capital ratios as well as those of the Bank as of June 30, 1999
are presented below. All capital 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 the Bank (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 the Bank. Bank holding companies and their subsidiaries are
generally expected to operate at or above the minimum capital requirements. The
ratios shown below are in excess of regulatory minimums and should allow the
Company and the Bank to operate without significant capital adequacy concerns.
The following table sets forth selected regulatory capital ratios of the Company
and the Bank at June 30, 1999:
<TABLE>
<CAPTION>
Tier 1 Total
Risk-Based Risk-Based Leverage
Capital Capital Capital
--------------- ----------------- ---------------
<S> <C> <C> <C>
West Suburban Bancorp, Inc. 12.69% 13.69% 10.55%
West Suburban Bank 11.32% 12.33% 9.39%
</TABLE>
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 rates 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, 1999 and December 31, 1998, the Bank qualified as a
"well-capitalized" institution.
LIQUIDITY
Effective liquidity management ensures there is sufficient cash flow to satisfy
demand for credit, deposit withdrawals and attractive investment opportunities.
A large, stable, core deposit base and strong capital position are the solid
foundation for the Company's liquidity position. Liquidity is enhanced by a
securities portfolio structured to provide liquidity as needed. 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. As part of its plan to address Year
2000 issues, the Company will continue to closely monitor its liquidity levels
during late 1999 and early 2000.
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 securities available for sale. As of June
30, 1999 and December 31, 1998, these liquid assets represented 18.9% and 23.9%
of total assets, respectively. A more detailed discussion concerning these
assets is presented in the Asset Distribution section of this report.
10
<PAGE>
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
NET INCOME. The Company's net income for the six months ended June 30, 1999
and 1998 was approximately $11.6 million and $9.6 million, respectively. This
represents an increase of $2.0 million (20.0%) for the 1999 period when
compared to the same period in 1998. This was primarily due to the increase
in noninterest income in 1999 when compared to the same period in 1998.
During the first quarter of 1999, the Company recorded non-recurring other
income of $3.6 million representing the settlement of a lawsuit brought by
the Company in connection with an investment that was made in the late 1980's.
Net interest income increased $1.0 million during the first six months of 1999
compared to the same period in 1998. Partially offsetting these increases were
increases in the provision for loan losses which increased $.6 million and
noninterest expense which increased by $.9 million. Additionally, income tax
expense increased $.7 million.
INTEREST INCOME. Total interest income, on a tax equivalent basis, decreased
$2.3 million for the six months ended June 30, 1999 compared to the same period
in 1998. This decrease was primarily due to decreased yields on the Company's
loan portfolio and lower yields and balances on federal funds sold. Yields on
total average loans decreased primarily due to decreases in interest rates that
have been necessary to attract loans in the competitive market place. Yields on
the Company's securities portfolio declined as new purchases were invested in
lower yielding securities resulting from a declining interest rate environment
at the time the securities were purchased.
INTEREST EXPENSE. Total interest expense decreased $3.3 million for the six
months ended June 30, 1999 compared to the same period during 1998. Interest on
deposits, which accounted for substantially all of this decrease, declined due
to decreases in average rates notwithstanding an increase of $12.7 million in
average balances of interest-bearing deposits during the six months ended June
30, 1999.
The following table reflects the extent to which changes in the volume of
interest-earning assets and interest-bearing liabilities and changes in
interest rates have affected net interest income on a tax equivalent basis
for the six month period ended June 30, 1999, as compared to the same period
in 1998 (dollars in thousands):
<TABLE>
<CAPTION>
CHANGE DUE TO:
-------------------------------------------------------
VOLUME RATE TOTAL
--------------- -------------- ------------------
<S> <C> <C> <C>
INTEREST INCOME
Interest-bearing deposits in financial institutions $ 9 $ 9
Federal funds sold (686) ($263) (949)
Securities 329 (588) (259)
Loans 1,327 (2,430) (1,103)
--------------- -------------- ------------------
Total interest income 979 (3,281) (2,302)
--------------- -------------- ------------------
INTEREST EXPENSE
Interest-bearing deposits 207 (3,499) (3,292)
--------------- -------------- ------------------
Total interest expense 207 (3,499) (3,292)
--------------- -------------- ------------------
Net interest income $ 772 $218 $ 990
--------------- -------------- ------------------
--------------- -------------- ------------------
</TABLE>
The following table presents an analysis of the Company's year to date average
interest-earning assets, interest-bearing liabilities, and non-interest-bearing
deposits, as of the date indicated (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
---------------------------- ------------------------------------------
JUNE 30 March 31 Dec. 31 Sept. 30 June 30
---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Securities $393,896 $393,398 $387,635 $393,778 $382,510
Total loans 783,685 771,624 748,181 747,424 751,066
Interest-earning assets 1,213,259 1,209,778 1,194,502 1,195,606 1,198,477
Noninterest-bearing deposits 114,575 112,101 107,984 106,664 106,169
Interest-bearing deposits 1,037,284 1,034,106 1,024,523 1,024,082 1,024,263
Total deposits 1,151,859 1,146,207 1,132,507 1,130,746 1,130,432
Interest-bearing liabilities 1,041,388 1,039,452 1,027,343 1,026,921 1,027,171
</TABLE>
11
<PAGE>
PROVISION FOR LOAN LOSSES. The Company's provision for loan losses increased $.6
million (112.9%) for the six months ended June 30, 1999 compared to the same
period in 1998. This increase was intended to address the increase in loan
volume. Management monitors its nonperforming loans closely and will initiate
further increases or decreases to the provision for loan losses as warranted.
See the section entitled "Allowance for Loan Losses and Asset Quality."
NONINTEREST INCOME. Total noninterest income increased $3.1 million (63.1%) for
the six months ended June 30, 1999 compared to the same period in 1998. This was
primarily due to the Company recording non-recurring other income of $3.6
million representing the settlement of a lawsuit brought by the Company in
connection with an investment that was made in the late 1980's. This increase
was partially offset by decreases in gains on sale of securities available for
sale of $.2 million and other income of $.2 million.
NONINTEREST EXPENSE. Total noninterest expense increased $.9 million (6.2%) for
the six months ended June 30, 1999 compared to the same period in 1998. This
increase was primarily the result of salary and employee benefits increasing $.7
million due to the addition of the indirect automobile lending department and
the opening of the Eola Road branch in Aurora, Illinois.
INCOME TAXES. Income tax expense increased $.7 million (15.4%) for the six
months ended June 30, 1999 compared to the same period in 1998. The increase was
principally due to higher pre-tax income and less nontaxable interest income on
securities.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998
NET INCOME. The Company's net income for the three months ended June 30, 1999
and 1998 was approximately $4.6 million and $5.1 million, respectively. This
represents a decrease of $.5 million (9.1%) for the 1999 period when compared to
the same period in 1998. This was due to increases in the provision for loan
losses and noninterest expense of $.3 and $.6 million, respectively, in 1999
when compared to the same period in 1998. Additionally, noninterest income
decreased $.4 million during this period. Net interest income increased $.5
million during this period and income tax expense decreased $.2 million.
INTEREST INCOME. Total interest income decreased $1.2 million (5.2%) for the
three months ended June 30, 1999 compared to the same period in 1998. This
decrease was primarily due to decreased yields on the Company's loan portfolio
and lower yields and balances on the Company's federal funds sold.
INTEREST EXPENSE. Total interest expense decreased $1.8 million (16.3%) for the
three months ended June 30, 1999 compared to the same period during 1998. This
was due to lower costs and balances associated with certificates of deposit.
PROVISION FOR LOAN LOSSES. The Company's provision for loan losses increased $.3
million (107.2%) for the three months ended June 30, 1999 compared to the same
period in 1998. This increase in the provision for loan losses was due to an
increase in loans outstanding. The provision for loan losses was established
based on management's belief that the allowance for loan losses (after giving
effect to the provision) was adequate.
NONINTEREST INCOME. Total noninterest income decreased $.4 million (14.5%) for
the three months ended June 30, 1999 compared to the same period in 1998. This
was primarily due to declines in gains on sales of securities available for sale
of $.3 million.
NONINTEREST EXPENSE. Total noninterest expense increased $.6 million (7.8%) for
the three months ended June 30, 1999 compared to the same period in 1998. This
increase was primarily the result of salary and employee benefits increasing $.4
million, as discussed previously.
INCOME TAXES. Income tax expense decreased $.2 million (8.1%) for the three
months ended June 30, 1999 compared to the same period in 1998. The decrease was
principally due to lower pre-tax income.
12
<PAGE>
OTHER CONSIDERATIONS
GENERAL. Earnings of bank 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 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 subsidiary's business and earnings.
RECENT REGULATORY DEVELOPMENTS/YEAR 2000. The federal banking regulators issued
guidelines establishing minimum safety and soundness standards for achieving
Year 2000 compliance. The guidelines, which took effect October 15, 1998 and
apply to all FDIC-insured depository institutions, establish standards for
developing and managing Year 2000 project plans, testing remediation efforts and
planning for contingencies. The guidelines are based upon guidance previously
issued by the agencies under the auspices of the Federal Financial Institutions
Examination Council (the "FFIEC"), but are not intended to replace or supplant
the FFIEC guidance which will continue to apply to all federally insured
depository institutions.
The guidelines were issued under Section 39 of the Federal Deposit Insurance
Act, as amended (the "FDIA"), which requires the federal banking regulators to
establish standards for the safe and sound operation of federally insured
depository institutions. Under Section 39 of the FDIA, if an institution fails
to meet any of the standards established in the guidelines, the institution's
primary federal regulator may require the institution to submit a plan for
achieving compliance. If an institution fails to submit an acceptable compliance
plan, or fails in any material respect to implement a compliance plan that has
been accepted by its primary federal regulator, the regulator is required to
issue an order directing the institution to cure the deficiency. Such an order
is enforceable in court in the same manner as a cease and desist order. Until
the deficiency cited in the regulator's order is cured, the regulator may
restrict the institution's rate of growth, require the institution to increase
its capital, restrict the rates the institution pays on deposits or require the
institution to take any action the regulator deems appropriate under the
circumstances. In addition to the enforcement procedures established in Section
39 of the FDIA, noncompliance with the standards established by the guidelines
may also be grounds for other enforcement action by the federal banking
regulators, including cease and desist orders and civil money penalty
assessments.
During 1996, West Suburban initiated the process of preparing its computer
systems and applications for the Year 2000. This process involved updating or
replacing certain of the Company's computer hardware components and software
applications and communicating with vendors and external service providers to
confirm that their applications are Year 2000 compliant. The Company has tested
and replaced, as necessary, its critical computer hardware components and
software applications and intends to continue its testing procedures in order to
ensure that its computer hardware components and software applications are Year
2000 compliant and that the operations of the Company will not be adversely
effected. The Company has completed its testing of all critical computer
hardware components and software applications.
The Company has received acknowledgment from its external service providers for
its critical computer hardware components and software applications that these
systems are Year 2000 compliant. Along with these acknowledgments, the Company
has utilized an external agency for an independent review of the Company's Year
2000 status.
The Company has invested approximately $2.2 million to replace hardware
components and software applications. These investments were not directly
related to Year 2000 but were more directly related to enhancing technology and
the discontinuation of vendor service and support for certain hardware
components and software applications.
The Company estimates that its Year 2000 expenses will not exceed $.1 million.
Costs related to Year 2000 are expensed as incurred.
The Company identifies, measures and monitors the risks involved in its banking
activities and related operations. The Company has recognized many risks and
uncertainties and given the unique circumstance of the Year 2000 issue, the
Company is unable to determine the ultimate effect that the risks will have on
the
13
<PAGE>
Company. The Company believes that its significant testing, planning,
communication and coordination will mitigate potential material disruption.
While the effort is wide ranging and intended to fully address all Year 2000
issues, nevertheless, the Company believes that it is important to be prepared
should something occur which destroys data bases or systems due to Year 2000
programming errors. The Company's Year 2000 Coordinator and the Disaster
Recovery Coordinator have carefully analyzed related disaster recovery and
contingency planning requirements to help ensure support exists, should a Year
2000 problem arise.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company attempts to maintain a conservative position with regard to interest
rate risk by 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 its interest rate is subject to change or upon 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. However, the net interest margin does vary 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, 1999
(dollars in thousands) (rates are not on a taxable equivalent basis):
<TABLE>
<CAPTION>
Three Over three Six
months months to months to One year to Over
or less six months one year five years five years Total
--------- ------------ ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Rate sensitive assets:
Interest-bearing deposits in financial
institutions $717 $100 $817
Federal funds sold 6,990 6,990
Securities 18,290 22,595 $20,587 $267,979 $47,417 376,868
Loans 270,530 61,232 104,259 303,158 72,551 811,730
--------- ------------ ----------- ------------ ------------- -------------
Total $296,527 $83,927 $124,846 $571,137 $119,968 $1,196,405
--------- ------------ ----------- ------------ ------------- -------------
--------- ------------ ----------- ------------ ------------- -------------
Rate sensitive liabilities:
Money market savings $488,864 $488,864
Money market checking 108,596 108,596
NOW accounts 32,444 32,444
Time deposits
Less than $100,000 68,947 $48,227 $107,343 $89,055 $91 313,663
$100,000 and over 26,528 15,262 15,884 19,619 77,293
--------- ------------ ----------- ------------ ------------- -------------
Total $725,379 $63,489 $123,227 $108,674 $91 $1,020,860
--------- ------------ ----------- ------------ ------------- -------------
--------- ------------ ----------- ------------ ------------- -------------
Interest sensitivity gap ($428,852) $20,438 $1,619 $462,463 $119,877
Cumulative interest sensitivity gap (428,852) (408,414) (406,795) 55,668 175,545 $175,545
Cumulative net interest-earning assets
to cumulative net interest-bearing
liabilities 40.9% 48.2% 55.4% 105.5% 117.2%
Cumulative interest sensitivity gap to
total assets (33.3%) (31.7%) (31.6%) 4.3% 13.6%
</TABLE>
The above tables may 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.
14
<PAGE>
In addition to the gap analysis above, the Company also measures rate
sensitivity through a net interest income analysis. The net interest income
analysis measures the change in net interest income in the event of hypothetical
changes in interest rates. This analysis assesses the risk of changes in net
interest income in the event of a sudden and sustained 1.0% to 2.0% increase or
decrease in market interest rates. This analysis is subject to the assumptions
made by the Company. These assumptions include the following:
- Balance sheet volume reflects the current balances and does not
project future growth or changes. This establishes the base case from
which all percentage changes are calculated.
- The replacement rate for loan and deposit items that mature is the
current rate offered by the Company. The replacement rate for
investments is the current market rate.
- The repricing rate for balance sheet data is determined by utilizing
individual account statistics provided by the Company's data
processing systems.
- The maturity and repricing dates for balance sheet data are determined
by utilizing individual account statistics provided by the Company's
data processing systems.
Listed below are the Company's projected changes in net interest income over a
twelve month horizon for the various rate shock levels as of June 30, 1999 and
December 31, 1998 (dollars in thousands):
<TABLE>
<CAPTION>
Net Interest Income
-----------------------------------------------------------
JUNE 30, 1999 Amount Dollar Percent
- ---------------------- ------------------ ---------------- ---------------
<S> <C> <C> <C>
+200 bp $42,832 ($8,728) (16.9)%
+100 bp 47,367 (4,193) (8.1)
Base 51,560
- -100 bp 55,521 3,961 7.7
- -200 bp 57,526 5,966 11.6
</TABLE>
<TABLE>
<CAPTION>
Net Interest Income
-----------------------------------------------------------
December 31, 1998 Amount Dollar Percent
- ---------------------- ------------------ ---------------- ---------------
<S> <C> <C> <C>
+200 bp $41,437 ($6,730) (14.0)%
+100 bp 44,952 (3,215) (6.7)
Base 48,167
- -100 bp 51,206 3,039 6.3
- -200 bp 52,318 4,151 8.6
</TABLE>
15
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company or the Bank
are a party other than ordinary course, routine litigation incidental to their
respective businesses.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
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 12, 1999.
B. The following individuals were elected to serve as directors of the
Company for a term of one year at the Annual Meeting. The votes for
and against such individuals are set forth below:
<TABLE>
<CAPTION>
FOR AGAINST
------- -------
<S> <C> <C>
1. Kevin J. Acker 339,887 4,681
2. Duane G. Debs 339,785 4,127
3. David S. Bell 320,304 7,927
4. Peggy P. LoCicero 321,322 6,579
5. Charles P. Howard 323,468 3,914
Broker-No Votes: 0
</TABLE>
C. Ratification of Crowe Chizek LLP as the Company's independent auditors.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
------- ------- -------
<S> <C> <C>
336,380 3,979 3,067
</TABLE>
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 filed a report on Form 8-K and Form
8-K/A during the three months ended June 30, 1999. The Company hereby
incorporates by reference the information called for by Item 6 of this
Form 10-Q from the Form 8-K, dated April 5, 1999 and the Form 8-K/A,
dated April 30, 1999 filed by the Company with the SEC in connection
with the dismissal of Deloitte & Touche LLP as the Company's
independent auditors and the engagement of Crowe, Chizek and Company
LLP as the Company's independent auditors for the fiscal year ending
December 31, 1999.
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: August 11, 1999
/s/ Kevin J. Acker
------------------------------------
KEVIN J. ACKER
CHAIRMAN OF THE BOARD
/s/ Duane G. Debs
-------------------------------------
DUANE G. DEBS
PRESIDENT AND CHIEF FINANCIAL OFFICER
17
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Sequential
Page No.
----------
<S> <C> <C>
27. Financial Data Schedule 19
</TABLE>
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 37,813
<SECURITIES> 376,868
<RECEIVABLES> 819,832
<ALLOWANCES> 10,897
<INVENTORY> 0
<CURRENT-ASSETS> 505,300
<PP&E> 34,175
<DEPRECIATION> 1,839
<TOTAL-ASSETS> 1,288,716
<CURRENT-LIABILITIES> 912,095
<BONDS> 0
0
0
<COMMON> 3,457
<OTHER-SE> 135,150
<TOTAL-LIABILITY-AND-EQUITY> 1,288,716
<SALES> 0
<TOTAL-REVENUES> 52,294
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 16,075
<LOSS-PROVISION> 1,039
<INTEREST-EXPENSE> 18,241
<INCOME-PRETAX> 16,939
<INCOME-TAX> 5,370
<INCOME-CONTINUING> 11,569
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,569
<EPS-BASIC> 26.75
<EPS-DILUTED> 26.75
</TABLE>
