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WEST SUBURBAN BANCORP INC
10-Q, 2000-08-11
STATE COMMERCIAL BANKS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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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, 2000

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

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WEST SUBURBAN BANCORP, INC.
(Exact name of Registrant as specified in its charter)

Registrant's telephone number, including area code: (630) 629-4200

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    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 August 1, 2000.

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WEST SUBURBAN BANCORP, INC.

Form 10-Q Quarterly Report

Table of Contents

				Page Number
PART I
Item 1.		Financial Statements		3
Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations		11
Item 3.		Quantitative and Qualitative Disclosures About Market Risk		18
PART II
Item 1.		Legal Proceedings		21
Item 2.		Changes in Securities and Use of Proceeds		21
Item 3.		Defaults Upon Senior Securities		21
Item 4.		Submission of Matters to a Vote of Security Holders		21
Item 5.		Other Information		21
Item 6.		Exhibits and Reports on Form 8-K		21
Form 10-Q Signature Page				22

    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, heightened competition, including increased competition from insurance and securities firms, demand for financial services in the Company's market area, our implementation of new technologies, our ability to develop and maintain secure and reliable electronic systems 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.

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PART I

ITEM 1.  FINANCIAL STATEMENTS

WEST SUBURBAN BANCORP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(UNAUDITED)

					June 30, 2000			December 31, 1999
Assets
	Cash and due from banks				$	40,318		$	49,838
	Federal funds sold					7,918			47,395
	Commercial paper					—			69,849
		Total cash and cash equivalents				48,236			167,082
	Securities
		Available for sale (amortized cost of $156,743 in 2000; $167,068 in 1999)				152,569			163,453
		Held to maturity (fair value of $168,923 in 2000; $170,637 in 1999)				173,218			174,375
			Total securities			325,787			337,828
	Loans, less allowance for loan losses of $11,459 in 2000; $10,759 in 1999					944,616			845,706
	Premises and equipment, net					37,302			35,709
	Other real estate					2,041			3,488
	Accrued interest and other assets					20,184			18,249
			Total assets		$	1,378,166		$	1,408,062
Liabilities and shareholders' equity
	Deposits
		Noninterest-bearing			$	130,556		$	124,563
		Interest-bearing				1,093,036			1,129,692
			Total deposits			1,223,592			1,254,255
	Accrued interest and other liabilities					15,488			18,174
			Total liabilities			1,239,080			1,272,429
	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				100,077			96,288
		Accumulated other comprehensive loss				(2,514	)		(2,178	)
			Total shareholders' equity			139,086			135,633
			Total liabilities and shareholders' equity		$	1,378,166		$	1,408,062

See accompanying notes to condensed consolidated financial statements.

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WEST SUBURBAN BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Dollars in thousands, except per share data)
(UNAUDITED)

					2000			1999
Interest income
	Loans, including fees				$	37,919		$	31,814
	Securities
		Taxable				9,397			10,791
		Exempt from federal income tax				744			831
	Federal funds sold					660			827
	Commercial paper					167			—
			Total interest income			48,887			44,263
Interest expense
	Deposits					21,284			18,241
			Total interest expense			21,284			18,241
Net interest income						27,603			26,022
Provision for loan losses						750			1,039
Net interest income after provision for loan losses						26,853			24,983
Noninterest income
	Service fees on deposit accounts					1,718			1,660
	Net gain on sales of loans held for sale					13			298
	Loan servicing fees					114			148
	Net realized (loss) gain on sales of securities available for sale					(7	)		89
	Net gain on sales of other real estate					51			14
	Litigation settlement					—			3,555
	Other					2,241			2,267
			Total noninterest income			4,130			8,031
Noninterest expense
	Salaries and employee benefits					8,955			8,470
	Occupancy					1,735			1,670
	Furniture and equipment					2,282			2,038
	Other real estate					58			39
	Other					3,779			3,858
			Total noninterest expense			16,809			16,075
Income before income tax expense						14,174			16,939
Income tax expense						4,114			5,370
Net income					$	10,060		$	11,569
Earnings per share (432,495 shares outstanding)					$	23.26		$	26.75

See accompanying notes to condensed consolidated financial statements.

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WEST SUBURBAN BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(Dollars in thousands, except per share data)
(UNAUDITED)

					2000			1999
Interest income
	Loans, including fees				$	19,878		$	16,023
	Securities
		Taxable				4,704			5,407
		Exempt from federal income tax				366			428
	Federal funds sold					365			315
			Total interest income			25,313			22,173
Interest expense
	Deposits					11,180			9,105
			Total interest expense			11,180			9,105
Net interest income						14,133			13,068
Provision for loan losses						375			491
Net interest income after provision for loan losses						13,758			12,577
Noninterest income
	Service fees on deposit accounts					873			857
	Net gain on sales of loans held for sale					3			108
	Loan servicing fees					56			70
	Net realized gain on sales of securities available for sale					—			23
	Net gain on sales of other real estate					23			9
	Other					1,003			1,078
			Total noninterest income			1,958			2,145
Noninterest expense
	Salaries and employee benefits					4,478			4,300
	Occupancy					866			758
	Furniture and equipment					1,158			1,033
	Other real estate					39			8
	Other					1,916			1,885
			Total noninterest expense			8,457			7,984
Income before income tax expense						7,259			6,738
Income tax expense						2,213			2,088
Net income					$	5,046		$	4,650
Earnings per share (432,495 shares outstanding)					$	11.67		$	10.75

See accompanying notes to condensed consolidated financial statements.

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WEST SUBURBAN BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Dollars in thousands)
(UNAUDITED)

				Common Stock			Surplus			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders' Equity
Balance, January 1, 1999				$	3,457		$	38,066		$	92,461		$	409		$	134,393
	Net income				—			—			11,569			—			11,569
	Change in accumulated other comprehensive income (loss)				—			—			—			(1,516	)		(1,516	)
Cash dividends declared—$13.50 per share					—			—			(5,839	)		—			(5,839	)
Balance, June 30, 1999				$	3,457		$	38,066		$	98,191		$	(1,107	)	$	138,607
				Common Stock			Surplus			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders' Equity
Balance, January 1, 2000				$	3,457		$	38,066		$	96,288		$	(2,178	)	$	135,633
	Net income				—			—			10,060			—			10,060
	Change in accumulated other comprehensive income				—			—			—			(336	)		(336	)
Cash dividends declared—$14.50 per share					—			—			(6,271	)		—			(6,271	)
Balance, June 30, 2000				$	3,457		$	38,066		$	100,077		$	(2,514	)	$	139,086

See accompanying notes to condensed consolidated financial statements.

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WEST SUBURBAN BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Dollars in thousands)
(UNAUDITED)

					2000			1999
Cash flows from operating activities
	Net income				$	10,060		$	11,569
	Adjustments to reconcile net income to net cash provided by operating activities
		Depreciation				2,069			1,839
		Provision for loan losses				750			1,039
		Deferred income tax benefit				(357	)		(324	)
		Net premium discount accretion and amortization of securities				(14	)		436
		Net realized loss (gain) on sales of securities available for sale				7			(89	)
		Net gain on sales of loans held for sale				(13	)		(298	)
		Proceeds from sales of loans held for sale				351			23,722
		Origination of loans held for sale				(338	)		(20,100	)
		Gain on sales of premises and equipment				(28	)		(10	)
		Net gain on sales of other real estate				(51	)		(14	)
		Increase in accrued interest and other assets				(1,577	)		(946	)
		Increase (decrease) in accrued interest and other liabilities				1,422			(258	)
			Net cash provided by operating activities			12,281			16,566
Cash flows from investing activities
	Securities available for sale
		Proceeds from sales				—			21,534
		Proceeds from maturities				29,540			52,998
		Purchases				(19,246	)		(69,491	)
	Securities held to maturity
		Proceeds from maturities				1,619			62,104
		Purchases				(201	)		(69,573	)
	Net increase in loans					(99,761	)		(43,149	)
	Purchases of premises and equipment					(3,666	)		(2,664	)
	Proceeds from sales of premises and equipment					32			52
	Proceeds from sales of other real estate					1,599			414
			Net cash used in investing activities			(90,084	)		(47,775	)
Cash flows from financing activities
	Net decrease in deposits					(30,663	)		(20,087	)
	Cash dividends paid					(10,380	)		(9,947	)
		Net cash used in financing activities				(41,043	)		(30,034	)
Net decrease in cash and cash equivalents						(118,846	)		(61,243	)
Beginning cash and cash equivalents						167,082			106,863
Ending cash and cash equivalents					$	48,236		$	45,620
Supplemental disclosures of cash flow information
	Cash paid for
		Interest on deposits and other borrowings			$	21,121		$	19,668
		Income taxes				3,365			4,119
	Transfers from loans to other real estate					101			168

See accompanying notes to condensed consolidated financial statements.

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WEST SUBURBAN BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS AND THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(Dollars in thousands)
(UNAUDITED)

				Six Months Ended June 30,						Three Months Ended June 30,
				2000			1999			2000			1999
Net income				$	10,060		$	11,569		$	5,046		$	4,650
Other comprehensive income:
	Unrealized holding losses on available for sale securities				(559	)		(2,430	)		(26	)		(1,964	)
	Less reclassification adjustments for gains and losses later recognized in income				7			(89	)		—			(23	)
	Tax effect				216			1,003			12			791
		Other comprehensive (loss) income			(336	)		(1,516	)		(14	)		(1,196	)
Total comprehensive income				$	9,724		$	10,053		$	5,032		$	3,454

See accompanying notes to condensed consolidated financial statements.

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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 condensed 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 2000 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 cost and available for sale securities are carried at fair value with net unrealized gains and losses (net of tax) reported in accumulated other comprehensive income (loss) 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 specific securities sold. The Company does not engage in trading activities, futures, forward commitments, interest rate swaps or option contracts.

    During the first six months of 2000, the Company's unrealized loss on securities available for sale, net of taxes, increased $.3 million to a $2.5 million loss at June 30, 2000 from a $2.2 million loss at December 31, 1999, net of taxes.

NOTE 3—FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK—(dollars in thousands)

    The Company had $15.0 million and $6.3 million of commitments to originate residential mortgage loans as of June 30, 2000 and December 31, 1999, respectively.

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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 provides a comprehensive and consistent standard for the recognition and measurement of derivatives and hedging activities. This standard requires all derivatives be recorded on the balance sheet at fair value and establishes accounting guidelines for hedges of changes in the fair value of assets, liabilities, or firm commitments (referred to as fair value hedges); hedges of the variable cash flows of forecasted transactions (cash flow hedges); and hedges of foreign currency exposures of net investment in foreign operations. SFAS 133 is effective for the year 2001. The Company has not yet determined if the adoption of SFAS 133 will have an impact on the Company's financial condition or results of operations.

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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, 2000 decreased $29.9 million (2.1%) to $1,378.2 million from $1,408.1 million at December 31, 1999. Total cash and cash equivalents decreased $118.9 million to $48.2 million at June 30, 2000 from $167.1 million at December 31, 1999. Reductions in short-term commercial paper and federal funds sold were the largest components of this decrease. This decrease resulted from uses of cash equivalents to fund growth in the loan portfolio. Aggregate holdings in securities declined $12.0 million to $325.8 million at June 30, 2000 from $337.8 million at December 31, 1999. This decrease was also primarily due to the use of proceeds from maturing securities to fund growth in the loan portfolio. The Company's objectives in managing the securities portfolio include maximizing yield over an entire interest rate cycle while providing liquidity.

    Total loans increased $99.6 million (11.6%) to $956.1 million at June 30, 2000 from $856.5 million at December 31, 1999. This increase was primarily due to growth in the commercial loan portfolio of $63.7 million. The growth in the commercial loan portfolio was the result of opportunities that were created when certain of the companies competitors were acquired by larger organizations as well as the success of the Company's customer and non-customer calling program. The Company believes the new commercial loans were underwritten in a manner consistent with the Company's past loan underwriting standards and do not represent increased credit risk to the company. The Company attempts to remain competitive by offering attractive rates and loan products and, from time to time, by introducing new products and entering into new business lines. The Company believes these efforts will lead to long-term capital enhancements translating into shareholder value. The Company presently intends to continue maintaining its current credit evaluation standards when making its credit decisions and in evaluating new products and business lines.

    Allowance for Loan Losses and Asset Quality.  The Company's provision for loan losses is based on management's quarterly evaluations of the adequacy of the allowance for loan losses. In these evaluations, management considers numerous factors including, but not limited to, historical loan loss experience, the nature and volume of the loan portfolio, adverse situations that may affect borrowers' ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision based on currently available information and as more information becomes available or as future events occur.

    The provision for loan losses decreased $.2 million (27.8%) to $.8 million for the six months ended June 30, 2000 from $1.0 million for the six months ended June 30, 1999. The Company's provision for loan losses was reflective of management's evaluation of the loan portfolio within the context of the factors outlined above. The decrease was primarily the result of declining levels of nonperforming loans. Year to date net loan charge-offs were $.1 million for the six months ended June 30, 2000 and 1999.

    The allowance for loan losses increased $.7 million for the six-month period ended June 30, 2000. 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 decreased at June 30, 2000 to 1.20% compared to 1.26% at December 31, 1999.

    Nonperforming loans decreased $1.4 million (30.0%) to $3.3 million at June 30, 2000 from $4.7 million at December 31, 1999. The allowance for loan losses was 346.19% and 227.56% of nonperforming loans at June 30, 2000 and December 31, 1999, respectively.

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    The following table presents an analysis of the Company's nonperforming loans and other real estate as of the dates indicated (dollars in thousands):

    The following table presents an analysis of the Company's provision for loan losses for the periods stated (dollars in thousands):

    Liability Distribution.  Total liabilities decreased $33.3 million (2.6%) to $1,239.1 million at June 30, 2000 from $1,272.4 million at December 31, 1999. The decrease in total liabilities was primarily due to decreases in time deposits over $100,000. This decrease was primarily the result of one $83.0 million short-term time deposit that the Company received during December 1999 which was withdrawn in January 2000. This decrease was partially offset by an increase in time deposits of less than $100,000 of $23.4 million due to increased promotional efforts. In order to retain current and attract new deposits, the Company plans to open new branches in Downers Grove, South Elgin and Oswego in the near future. The Company promotes its deposit products when feasible while preserving the Company's net interest margin.

    Balances in the Company's major categories of deposits are summarized in the following table (dollars in thousands):

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    Management believes the continued growth in money market checking deposits is a result of customers taking advantage of this product which pays a higher interest rate than the Company's traditional savings accounts.

CAPITAL RESOURCES

    Total shareholders' equity increased $3.5 million (2.5%) to $139.1 million at June 30, 2000 from $135.6 million at December 31, 1999. This increase was a result of net income of $10.1 million for the first six months of 2000 reduced by dividends declared of $6.3 million and an increase in accumulated other comprehensive loss of $.3 million resulting from a decline in the market value of securities available for sale.

    The Company's capital ratios as well as those of the Bank as of June 30, 2000 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, a minimum Tier 1 risk-based capital ratio of 4% and a minimum leverage ratio (3% for the most highly rated banks and bank holding companies 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 the regulatory capital ratios of the Company and the Bank at June 30, 2000:

    The Federal Deposit Insurance Corporation Improvement Act of 1991 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, 2000 and December 31, 1999, the Bank qualified as a "well-capitalized" institution.

LIQUIDITY

    Effective liquidity management ensures there is sufficient cash flow to satisfy demand for deposit withdrawals along with attractive loan and 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. Additionally, the Company maintains lines of credit to purchase federal funds in the amount of $75 million from other financial institutions as

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well as an additional line of credit of approximately $80 million at the Federal Home Loan Bank of Chicago.

    The Company manages its liquidity position through continuous monitoring of profitability trends, asset quality, interest sensitivity and maturity schedules of earning assets and 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 loss. These assets include federal funds sold, commercial paper and securities available for sale. As of June 30, 2000 and December 31, 1999, these liquid assets represented 14.6% and 23.5% of total assets, respectively. A more detailed discussion concerning these assets is presented in the Asset Distribution section of this report.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999

    Net Income.  The Company's net income for the six months ended June 30, 2000 and 1999 was $10.1 million and $11.6 million, respectively. This represents a decrease of $1.5 million (13.0%) for the 2000 period when compared to the same period in 1999. This was primarily due to a decrease in the amount of $3.9 million in total noninterest income in 2000 when compared to the same period in 1999. 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 it made in the late 1980's.

    Net interest income, on a tax equivalent basis, increased $1.5 million during the first six months of 2000 compared to the same period in 1999. Income tax expense decreased $1.3 million during this period due to lower pre-tax income. The provision for loan losses decreased $.2 million. Partially offsetting the increase in net interest income and decreases to income tax expense and provision for loan losses was an increase in total noninterest expense of $.7 million.

    Interest Income.  Total interest income, on a tax equivalent basis, increased $4.6 million for the six months ended June 30, 2000 compared to the same period in 1999. This increase was primarily due to increased average balances on all major components of the loan portfolio along with increased yields on the commercial and home equity portfolios. The Company's net interest margin increased to 4.47% for the six months ended June 30, 2000 compared to 4.40% at June 30, 1999. The yield on average interest-earning assets increased 48 basis points to 7.91% at June 30, 2000 compared to 7.43% at June 30, 1999. Total interest income on the Company's securities portfolio declined primarily due to decreased average balances of corporate securities and government agencies and corporations.

    Interest Expense.  Total interest expense increased $3.0 million for the six months ended June 30, 2000 compared to the same period during 1999. The yield on average interest-bearing liabilities increased 47 basis points to 4.00% at June 30, 2000 compared to 3.53% at June 30, 1999.

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    The following table reflects the impact of changes in volume and interest rates on interest-earning assets and interest-bearing liabilities on a tax equivalent basis for the six-month period ended June 30, 2000, as compared to the same period in 1999 (dollars in thousands):

    The following table presents an analysis of the Company's year to date average interest-earning assets, interest-bearing liabilities, and noninterest-bearing deposits, as of the date indicated (dollars in thousands):

    Provision for Loan Losses.  The Company's provision for loan losses decreased $.2 million (27.8%) for the six months ended June 30, 2000 compared to the same period in 1999. See the section entitled "Allowance for Loan Losses and Asset Quality" for further details.

    Noninterest Income.  Total noninterest income decreased $3.9 million (48.6%) for the six months ended June 30, 2000 compared to the same period in 1999. This was primarily due to the Company recording non-recurring other income of $3.6 million in the first quarter of 1999 representing the settlement of a lawsuit brought by the Company in connection with an investment that it made in the late 1980's. The Company also experienced decreases in gains on sale of loans held for sale of $.3 million.

    Noninterest Expense.  Total noninterest expense increased $.7 million (4.6%) for the six months ended June 30, 2000 compared to the same period in 1999. This increase was primarily the result of salary and employees benefits increasing $.5 million principally due to the opening of the Romeoville and Charlestowne facilities. Additionally, the Company experienced an increase of $.1 and $.2 million in occupancy and furniture and equipment expense, respectively. This was primarily due to increased expenses associated with the opening of the new facilities. The Company's efficiency ratio, a measure of the amount of expense needed to generate each dollar of revenue, was approximately 53% at June 30, 2000 and 1999. The efficiency ratio for 1999 excludes the litigation settlement reported on the condensed consolidated statements of income for the six months ended 2000 and 1999.

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    Income Taxes.  Income tax expense decreased $1.3 million (23.4%) for the six months ended June 30, 2000 compared to the same period in 1999. The decrease was principally due to lower pre-tax income. The effective tax rates for the six months ended June 30, 2000 and 1999 were 29.0% and 31.7%, respectively.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999

    Net Income.  The Company's net income for the three months ended June 30, 2000 and 1999 was approximately $5.0 million and $4.7 million, respectively. This represents an increase of $.3 million (8.5%) for the 2000 period when compared to the same period in 1999. Net interest income increased $1.1 million during this period. This increase was partially offset by a decrease in total noninterest income of $.2 million and an increase in total noninterest expense of $.5 million. Additionally, income tax expense increased $.1 million during this period.

    Interest Income.  Total interest income, on a tax equivalent basis, increased $3.1 million for the three months ended June 30, 2000 compared to the same period in 1999. This increase was primarily due to increased average balances and yields on the commercial, real estate and home equity loan portfolios. The Company's net interest margin, on a tax equivalent basis, increased to 4.50% for the three months ended June 30, 2000 compared to 4.37% at June 30, 1999. The yield on average interest-earning assets increased 64 basis points to 8.00% at June 30, 2000 compared to 7.36% at June 30, 1999. Total interest income on the Company's securities portfolio declined primarily due to lower average balances of corporate securities.

    Interest Expense.  Total interest expense increased $2.1 million for the three months ended June 30, 2000 compared to the same period during 1999. The yield on average interest-bearing liabilities increased 61 basis points to 4.11% at June 30, 2000 compared to 3.50% at June 30, 1999.

    The following table reflects the impact of changes in volume and interest rates on interest-earning assets and interest-bearing liabilities on a tax equivalent basis for the three-month period ended June 30, 2000, as compared to the same period in 1999 (dollars in thousands):

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    The following table presents an analysis of the Company's quarterly average interest-earning assets, interest-bearing liabilities, and non-interest-bearing deposits, as of the date indicated (dollars in thousands):

    Provision for Loan Losses.  The Company's provision for loan losses decreased $.1 million (23.6%) for the three months ended June 30, 2000 compared to the same period in 1999. See the section entitled "Allowance for Loan Losses and Asset Quality" for further details.

    Noninterest Income.  Total noninterest income decreased $.2 million (8.7%) for the three months ended June 30, 2000 compared to the same period in 1999. This was primarily due to declines in net gains on sales of loans held for sale of $.1 million and decreases in other noninterest income of $.1 million.

    Noninterest Expense.  Total noninterest expense increased $.5 million (5.9%) for the three months ended June 30, 2000 compared to the same period in 1999. Salary and employee benefits increased $.2 million. Occupancy and furniture and equipment expense each increased $.1 million. These increases were primarily due to the opening of the Charlestowne and Romeoville facilities.

    Income Taxes.  Income tax expense increased $.1 million (6.0%) for the three months ended June 30, 2000 compared to the same period in 1999. This increase was primarily the result of higher taxable income. The effective tax rates for the three months ended June 30, 2000 and 1999 were 30.5% and 31.0%, respectively.

OTHER CONSIDERATIONS

    General.  Earnings of bank holding companies and their subsidiaries are affected by general economic conditions and 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.  The Gramm-Leach-Bliley Act (the "Act"), which was enacted in November, 1999, allows eligible bank holding companies to engage in a wider range of nonbanking activities, including greater authority to engage in securities and insurance activities. Under the Act, an eligible bank holding company that elects to become a financial holding company may engage in any activity that the Board of Governors of the Federal Reserve System (the "Federal Reserve"), in consultation with the Secretary of the Treasury, determines by regulation or order is financial in nature, incidental to any such financial activity, or complementary to any such financial activity and does not pose a substantial risk to the safety or soundness of depository institutions or the financial system generally. National banks are also authorized by the Act to engage, through "financial subsidiaries," in certain activity that is permissible for financial holding companies (as described above) and certain activity that the Secretary of the Treasury, in consultation with the Federal Reserve, determines is financial in nature or incidental to any such financial activity.

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    Various bank regulatory agencies have begun issuing regulations as mandated by the Act. During June, 2000, all of the federal bank regulatory agencies jointly issued regulations implementing the privacy provisions of the Act. In addition, the Federal Reserve issued interim regulations establishing procedures for bank holding companies to elect to become financial holding companies and listing the financial activities permissible for financial holding companies, as well as describing the extent to which financial holding companies may engage in securities and merchant banking activities. The Federal Deposit Insurance Corporation issued an interim regulation regarding the parameters under which state nonmember banks may conduct activities through subsidiaries that national banks may conduct only in financial subsidiaries. At this time, it is not possible to predict the impact the Act and its implementing regulations may have on the Company or the Bank. As of the date of this filing, the Company has not applied for or received approval to operate as a financial holding company. In addition, the Bank has not applied for or received approval to establish any financial subsidiaries.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    The Company attempts to maintain a conservative posture with regard to interest rate risk by actively managing its asset/liability gap position and 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, although the net interest margin does vary somewhat due to management's response to increasing competition from other financial institutions.

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    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, 2000 (dollars in thousands):

				Three Months or Less			Over Three Months to Twelve Months			Over One Year to Five Years			Over Five Years			Total
Rate sensitive assets
	Federal funds sold			$	7,918		$	—		$	—		$	—		$	7,918
	Securities				14,424			86,222			187,733			37,408			325,787
	Loans				315,753			179,732			356,727			103,863			956,075
		Total		$	338,095		$	265,954		$	544,460		$	141,271		$	1,289,780
Rate sensitive liabilities
	NOW			$	219,229		$	—		$	—		$	—		$	219,229
	Money market checking				138,823			—			—			—			138,823
	Savings				284,510			—			—			—			284,510
	Time deposits
		Less than $100,000			55,166			171,709			115,455			—			342,330
		$100,000 and over			43,502			37,796			26,846			—			108,144
		Total		$	741,230		$	209,505		$	142,301		$	—		$	1,093,036
Interest sensitivity gap				$	(403,135	)	$	56,449		$	402,159		$	141,271		$	196,744
Cumulative interest sensitivity gap					(403,135	)		(346,686	)		55,473			196,744
Cumulative net interest-earning assets to cumulative net interest-bearing liabilities					45.6	%		63.5	%		105.1	%		118.0	%
Cumulative interest sensitivity gap to total assets					(29.3	)%		(25.2	)%		4.0	%		14.3	%

    Included in "Three Months or Less" rate sensitive liabilities are $284.5 million of savings deposits, $219.2 million of NOW deposits and $138.8 million of money market checking deposits that management considers more core deposit in nature than time deposits. There are no securities callable for the remainder of 2000 based upon their contractual terms included in the above table.

    While the shorter term negative GAP position represents a potential adverse impact on the Company's net interest income position in periods of rising interest rates, the same position generally results in a favorable impact when interest rates remain constant or decline.

    The target GAP position, as defined by the Company's Asset and Liability Policy, is to maintain a ratio (as adjusted) of cumulative net interest-earning assets to cumulative net interest-bearing liabilities of at least 60.0% and not more than 120.0% for the twelve-month time frame.

    The previous table does not necessarily indicate the future impact of general interest rate movements on the Company's net interest income because the repricing of certain assets and liabilities is discretionary and is subject to competitive and other pressures. As a result, assets and liabilities indicated as repricing within the same period may in fact reprice at different times and at different rate levels. Assets and liabilities are reported in the earliest time frame in which maturity or repricing may occur. The consolidated interest rate sensitivity position of the Company within the one year window at June 30, 2000 reflects cumulative net interest-earning assets compared to cumulative net interest-bearing liabilities of 63.5% and cumulative net interest-earning assets that reprice or mature within one year compared to similarly sensitive liabilities of negative 25.2% of total assets. The percentage indicated for the cumulative net interest-earning assets as a percentage of cumulative net interest-bearing liabilities is within the Company's target range of acceptable gap values for the twelve-month time frame.

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    In addition to the previous gap analysis, 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 100 to 200 basis point increase or decrease in market interest rates. This analysis is subject to certain assumptions made by the Company including 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 securities 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, 2000 and December 31, 1999 (dollars in thousands):

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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 10, 2000.

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:

C.

Ratification of Crowe, Chizek and Company LLP as the Company's independent auditors.

ITEM 5.  OTHER INFORMATION

    None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

A.

Exhibits

27

Financial Data Schedule

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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, 2000
	/s/ Kevin J. Acker KEVIN J. ACKER CHAIRMAN OF THE BOARD
	/s/ Duane G. Debs DUANE G. DEBS PRESIDENT AND CHIEF FINANCIAL OFFICER

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INDEX OF EXHIBITS

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QuickLinks

PART I
WEST SUBURBAN BANCORP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (UNAUDITED)
WEST SUBURBAN BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (Dollars in thousands, except per share data) (UNAUDITED)
WEST SUBURBAN BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999 (Dollars in thousands, except per share data) (UNAUDITED)
WEST SUBURBAN BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (Dollars in thousands) (UNAUDITED)
WEST SUBURBAN BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (Dollars in thousands) (UNAUDITED)
WEST SUBURBAN BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE SIX MONTHS AND THREE MONTHS ENDED JUNE 30, 2000 AND 1999 (Dollars in thousands) (UNAUDITED)
WEST SUBURBAN BANCORP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
PART II
ITEM 1. LEGAL PROCEEDINGS
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
INDEX OF EXHIBITS