<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual report pursuant to Section 13 of the
Securities Exchange Act of 1934
For the fiscal year ended March 31, 2000
Commission File No.: 0-25504
WEST TOWN BANCORP, INC.
(exact name of registrant as specified in its charter)
DELAWARE 36-3962962
(State or other jurisdiction of (I.R.S. Employer Id. No.)
incorporation or organization)
4852 West 30th Street, Cicero, Illinois 60804
(Address of principal executive offices)
Registrant's telephone number, including area code: (708) 652-2000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share
(Title of class)
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
---
As of May 26, 2000 there were issued and outstanding 207,537 shares of the
Registrant's common stock which is traded over the counter through the National
Daily Quotation System "Pink Sheet" published by the National Quotation Bureau,
Inc. The aggregate market value of the voting stock held by non-affiliates of
the Registrant based on the estimated value of the stock on May 26, 2000 was
$2,490,444 (207,537 shares at $12 per share). For purposes of this calculation
directors and officers of the Registrant are considered non-affiliates of the
Registrant.
DOCUMENTS INCORPORATED BY REFERENCE
The Annual Report to Stockholders for the year ended March 31, 2000 is
incorporated by reference into Part II of this Form 10-K.
The Proxy Statement for the 2000 Annual Meeting of Stockholders is
incorporated by reference into Part III of this Form 10-K.
<PAGE>
INDEX
<TABLE>
<CAPTION>
PART I PAGE
----
<S> <C>
Item 1. Business...................................................... 1
Additional Item. Executive Officers of the Registrant................. 27
Item 2. Properties.................................................... 27
Item 3. Legal Proceedings............................................. 27
Item 4. Submission of Matters to a Vote of Security Holders........... 27
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters....................................................... 27
Item 6. Selected Financial Data....................................... 27
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 27
Item 8. Financial Statements and Supplementary Data................... 27
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure...................................... 28
PART III
Item 10. Directors and Executive Officers of the Registrant............ 28
Item 11. Executive Compensation........................................ 28
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................... 28
Item 13. Certain Relationships and Related Transactions................ 28
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K...................................................... 29
Item 15. SIGNATURES.................................................... 30
</TABLE>
<PAGE>
PART I
Item I. Business.
-----------------
General
West Town Bancorp, Inc. (also referred to as the "Company") was
incorporated under Delaware law on May 6, 1994. On March 1, 1995, the Registrant
acquired West Town Savings Bank (the "Bank") as a part of the Bank's conversion
from a mutual to a stock state chartered savings bank. The Registrant is a
savings bank holding company and is subject to regulation by the Office of the
Illinois Commissioner of Banks and Real Estate (the "OBRE"), the Federal Deposit
Insurance Corporation (the "FDIC") and the Securities and Exchange Commission
(the "SEC"). Currently, the Registrant does not transact any material business
other than through the Bank and West Town Insurance Agency, the Bank's wholly-
owned subsidiary. The Registrant received conversion proceeds amounting to $1.9
million, of which $944,000 was utilized to acquire all of the capital stock of
the Bank. At March 31, 2000, the Company had total assets of $35.0 million and
stockholders' equity of $4.2 million (11.9% of total assets).
West Town Savings was originally organized in 1922 as an Illinois-chartered
savings and loan association. In 1992 it converted to an Illinois chartered
savings bank. The Bank is a member of the Federal Home Loan Bank (the "FHLB")
System and its deposit accounts are insured up to applicable limits by the FDIC.
The Bank's principal business has been and continues to be attracting
deposits from the general public and investing those deposits, together with
funds generated from operations, primarily in one- to four-family, owner-
occupied, fixed-rate loans, and to a lesser extent, multi-family residential
mortgage loans, commercial real estate loans, land and construction loans,
mortgage-backed securities and other short-term investments, including U.S.
Government and federal agency securities and other marketable securities. The
Bank's revenues are derived principally from interest on its mortgage loan and
mortgage-backed securities portfolios and interest and dividends on its
investment securities. The Bank's primary sources of funds are deposits,
principal and interest payments on loans and mortgage-backed securities.
Market Area
The Bank has been, and continues to be, a community-oriented savings
institution offering a variety of financial sources to meet the needs in the
community it serves. The Bank's deposit-gathering area is concentrated in the
neighborhoods surrounding its offices which are located in the Chicago suburbs
of Cicero and North Riverside, in Cook County. The Bank's lending base
primarily covers the same area. Management believes that its offices are
located in communities that can generally be characterized as stable,
residential neighborhoods of predominately one-to-four family residences, mixed
with a commercial segment of a diverse group of retail service businesses.
On January 18, 2000 the Bank commenced operations at its new branch office
located at 7820 W. 26th Street, North Riverside, Illinois. The branch office
consists of a single story brick building consisting of approximately 4,500
square feet with three drive-up windows and one drive-up ATM unit. The Bank
expended approximately $1,451,000 during the fiscal year ended March 31, 2000
for the construction, furnishing and equipping of the new branch office. As of
March 31, 2000 the North Riverside branch office attracted deposits of
$3,900,000. Management of the Bank has projected that the branch office will
experience a net loss, after taxes, estimated at $330,000 for its first two full
years of operation.
-1-
<PAGE>
Lending Activities
Loan and Mortgage-Backed Securities Portfolio Compositions. The loan
portfolio composition consists primarily of conventional fixed-rate, first-
mortgage loans secured by one-to-four family residences and, to a lesser extent,
multi-family residences. At March 31, 2000, the total loans outstanding were
$21.0 million, of which $17.7 million were one-to-four family residential
mortgage loans, or 84.2% of the loan portfolio. At that same date, multi-family
residential mortgage loans totaled $254,000, or 1.2% of the loan portfolio.
During the current period, the Bank purchased a $750,000 participating
interest in a mortgage loan secured by commercial properties located in the
Chicago area. This loan is scheduled to mature in ten years. At March 31, 2000,
non-residential mortgage loans totaled $808,381, or 3.8% of the loan portfolio.
The Bank currently is participating in a $2,000,000 construction loan for
the purpose of constructing one-to-four family dwellings in Morton Grove,
Illinois. It is anticipated that this project will be completed by September 30,
2000. The Bank is also participating in a construction loan to develop a
condominium complex located in Lombard, Illinois. The Bank's total investment in
the project approximates $400,000, and is scheduled to be repaid within one
year.
Other loans were $218,000, consisting of loans on deposit accounts and home
improvement loans, or 1.0% of total loans. At March 31, 2000, purchased mortgage
loans totaled $15.4 million, or 73.5% of the loan portfolio. All purchased
mortgage loans were originated in the Chicago metropolitan area.
The Company and its subsidiaries also invest in mortgage-backed securities.
At March 31, 2000, the amortized cost of total mortgage-backed securities
aggregated $1,575,000 or 4.5% of total assets, of which 7.2% were backed by
adjustable rate mortgage ("ARM") loans and 92.8% were backed by fixed-rate
loans. All of the mortgage-backed securities at March 31, 2000 were insured or
guaranteed by either the Government National Mortgage Bank ("GNMA"), the Federal
National Mortgage Bank ("FNMA") or the Federal Home Loan Mortgage Corporation
("FHLMC").
Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Item 1 - Description of Business that are not historical facts
are forward-looking statements subject to the safe harbor created by the Private
Securities Litigation Reform Act of 1995. The Company cautions readers of this
Annual Report on form 10-K that a number of important factors could cause the
Company's actual results in 2000 and beyond to differ materially from those
expressed in any such forward-looking statements. These factors include, without
limitation the general economic and business conditions affecting the Company's
customers; changes in interest rates; the adequacy of the Bank's allowance for
loan losses; competition from, among others, commercial banks, savings and loan
associations, mutual funds, money market funds, finance companies, credit
unions, mortgage companies, and the United States Government; limited
partnership activities; federal and state legislation, regulation and
supervision of the Bank and its subsidiaries; the risk of defaults on loans; and
contractual, statutory and regulatory restrictions on the Bank's ability to pay
dividends to the Company.
-2-
<PAGE>
The following table sets forth the composition of the loan portfolio and
mortgage-backed securities portfolio of the Company and its subsidiaries in
dollar amounts and in percentages of the respective portfolios at the dates
indicated. Mortgage-backed securities are shown at amortized cost and not fair
value.
<TABLE>
<CAPTION>
At March 31,
-------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------------- ----------------- ----------------- ----------------- -----------------
Percent Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total
-------- -------- ------ -------- ------ -------- ------ -------- ------ --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans:
One-to-four family $ 17,678 84.16% 19,249 89.37 17,141 89.20 14,525 85.45 12,183 93.72
Multi-family 254 1.21 345 1.60 440 2.29 524 3.08 620 4.77
Commercial real estate 808 3.85 67 .31 88 .46 95 .56 138 1.06
Construction 2,048 9.75 1,674 7.77 1,368 7.12 1,700 10.00 -
-------- ------ ------ ------ ------ ------ ------ ------- ------ -------
Total mortgage loans 20,788 98.97 21,335 99.05 19,037 99.07 16,844 99.09 12,941 99.55
Other loans 218 1.03 204 .95 180 .93 154 .91 58 .45
-------- ------ ------ ------ ------ ------ ------ ------- ------ -------
Total loans receivable 21,006 100.00% 21,539 100.00 19,217 100.00 16,998 100.00 12,999 100.00
-------- ====== ------ ====== ------ ====== ------ ======= ------ =======
Less:
Loans in process 1,236 1,291 626 1,348 9
Unearned discounts and
deferred loan fees 79 86 88 57 27
Allowance for loan losses 58 52 46 40 30
Allowance for
uncollected interest - - 5 - -
-------- ------ ------ ------ ------
Loans receivable, net $ 19,633 20,110 18,452 15,553 12,933
======== ====== ====== ====== ======
Mortgage-backed securities:
FHLMC $ 54 3.40% 245 25.84 664 40.46 1,140 45.54 1,490 48.19
FNMA 1,165 73.27 456 48.12 636 38.76 916 36.60 1,112 35.96
GNMA 371 23.33 246 26.04 341 20.78 447 17.86 490 15.85
-------- ------ ------ ------ ------ ------ ------ ------- ------ -------
Total mortgage-backed
securities 1,590 100.00% 947 100.00 1,641 100.00 2,503 100.00 3,092 100.00
====== ====== ====== ======= =======
Net premiums (discounts) (15) (9) (9) (9) (6)
-------- ------ ------ ------ ------
Net mortgage-backed
securities $ 1,575 938 1,632 2,494 3,086
======== ====== ====== ====== ======
</TABLE>
-3-
<PAGE>
The following tables set forth the Company and its subsidiaries' loan
originations and loan and mortgage-backed securities purchases, sales and
principal repayments for periods indicated.
<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------------------
2000 1999 1998
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Mortgage loans (gross):
At beginning of period $ 21,335 19,037 16,844
--------- -------- --------
Mortgage loans originated:
One-to-four family 115 468 202
Multi-family - - -
Commercial real estate - - -
--------- -------- --------
Total mortgage loans originated 115 468 202
--------- -------- --------
Mortgage loans purchased:
One-to-four family 1,785 7,528 5,976
Non-residential 750 - -
Construction 400 - -
--------- -------- --------
Total mortgage loans purchased 2,935 7,528 5,976
--------- -------- --------
Total mortgage loans originated and
purchased 3,050 7,996 6,178
--------- -------- --------
Participation loans sold (707) (731) (2,128)
Transfer of loans to foreclosed real estate - - -
Principal repayments (2,890) (4,967) (1,857)
--------- -------- --------
At end of period $ 20,788 21,335 19,037
========= ======== ========
Other loans (gross):
At beginning of period $ 204 180 58
Other loans originated 108 192 271
Principal repayments (94) (168) (175)
--------- -------- --------
At end of period $ 218 204 154
========= ======== ========
Mortgage-backed securities (gross):
At beginning of period $ 947 1,641 3,092
Mortgage-backed securities purchased 1,000 - -
Mortgage-backed securities sold - - -
Amortization and repayments (357) (694) (589)
--------- -------- --------
At end of period $ 1,590 947 2,503
========= ======== ========
</TABLE>
-4-
<PAGE>
Loan Maturity and Repricing. The following table shows the maturity or
period to repricing of the Company and its subsidiaries' loan and mortgage-
backed securities portfolios at March 31, 2000. Mortgage-backed securities are
shown at amortized cost, not fair value, and consist of loans with adjustable
rates and fixed rates. Information for a presentation of such adjustable rate
loans based on contractual terms to maturity is unavailable and therefore such
loans are shown as being due in the period during which the interest rates are
next subject to change. The table does not include prepayments or scheduled
principal amortization. Prepayments and scheduled principal amortization on
loans and mortgage-backed securities totaled $4.8 million, $8.1 million and $6.9
million for the years ended March 31, 2000, 1999 and 1998, respectively.
<TABLE>
<CAPTION>
At March 31, 2000
-------------------------------------------------------------------------------------------
Totals
--------------------------------
One-to- Total Mortgage-
Four Multi- Commercial Other Loans Backed
Family Family Real Estate Construction Loans Receivable Securities Total
-------- ------ ----------- ------------ ----- ---------- ---------- -----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Amounts due:
Within one year $ 2,116 3 - 2,048 26 4,193 530 4,723
-------- ----- ------- -------- ----- -------- -------- --------
After one year:
One to three years 748 136 - - 42 926 1 927
Three to five years 2,249 11 746 - 54 3,060 4 3,064
Five to ten years 5,843 104 62 - 38 6,047 55 6,102
Ten to twenty years 1,485 - - - 58 1,543 - 1,543
Over twenty years 5,237 - - - - 5,237 1,000 6,237
-------- ----- ------- -------- ----- -------- -------- --------
Total due or repricing
after one year 15,562 251 808 - 192 16,813 1,060 17,873
-------- ----- ------- -------- ----- -------- -------- --------
Total amount due or repricing $ 17,678 254 808 2,048 218 21,006 1,590 22,596
======== ===== ======= ======== =====
Less:
Loans in process (1,236) - (1,236)
Unearned discounts, premiums, and
deferred loan fees, net (79) (15) (94)
Allowance for loan losses (58) - (58)
Allowance for uncollected interest - - -
-------- -------- --------
Loans receivable and mortgage-
backed securities, net $ 19,633 1,575 21,208
======== ======== ========
</TABLE>
-5-
<PAGE>
The following table sets forth at March 31, 2000, the dollar amount of
all loans and mortgage-backed securities due or repricing after March 31, 2001,
and whether such loans have fixed interest rates or adjustable interest rates.
Due or Repricing after
March 31, 2001
----------------------------------
Fixed Adjustable Total
----- ---------- -----
(In Thousands)
Mortgage loans:
One-to-four family $ 15,562 - 15,562
Other 313 746 1,059
Other loans 192 - 192
-------- ------ --------
Total loans receivable 16,067 746 16,813
Mortgage-backed securities 1,060 - 1,060
-------- ------ --------
Total loans receivable and
mortgage-backed securities $ 17,127 746 17,873
======== ====== ========
One-to-Four Family Mortgage Lending. The Bank offers first mortgage loans
secured by one-to-four family residences, including townhouse and condominium
units, in the Bank's primary lending area. Typically, such residences are
single-or-two family homes that serve as the primary residence of the owner.
Loan originations are generally obtained from existing or past customers,
members of the local communities, local real estate agent referrals and
builder/developer referrals within the Bank's area.
The Bank offers fixed-rate loans and adjustable-rate loans on one-to-four
family residential properties. The Bank's fixed-rate mortgage loans are made for
terms of 15 to 30 years. Interest rates charged on fixed-rate loans are
competitively priced based on market conditions and the cost of funds.
Origination fees range from zero points to 2.5% depending on the interest rate
charged and other factors. Generally, the Bank's standard underwriting
guidelines conform to FHLMC guidelines with periodic exceptions granted to
customers with long-standing relationships on a case-by-case basis, which are
approved by the President.
The Bank makes one-to-four family residential mortgage loans in amounts up
to 80% of the appraised value of the secured property. Originated mortgage loans
in the Bank's portfolio generally include due-on-sale clauses which provide the
Bank with the contractual right to deem the loan immediately due and payable in
the event that the borrower transfers ownership of the property without the
Bank's consent. It is the Bank's policy to enforce due-on-sale provisions.
The Bank also purchases pools of one-to-four family mortgage loans from
area lenders. These purchased loans are subject to the Bank's underwriting
standards. Interest rates on a substantial portion of these loans adjust
annually. Purchased loans totaled $15.4 million at March 31, 2000, representing
73.5% of the loan portfolio. Adjustable rate pools totaled $2.0 million, with
fixed rate pools totaling $13.4 million at March 31, 2000.
Multi-Family Lending. In the Chicago metropolitan area, the Bank originates
fixed-rate multi-family loans with terms of 15 to 20 years. These loans are
amortized over the term of the loan. These loans are generally made in amounts
up to 75% of the appraised value of the secured property. Most of the Bank's
multi-family loans are not owner-occupied. In making such loans, the Bank bases
its underwriting decision primarily on the net operating income generated by the
real estate to support the debt service, the financial resources and income
level of the borrower, the borrower's experience in owning or managing similar
property, the marketability of the property and the Bank's lending experience
with the borrower. The Bank also receives a personal guarantee from the
borrower. An origination fee of 1% to 2% is usually charged on such loans. The
largest multi-family loan at March 31, 2000 is in the Bank's primary market area
and had an outstanding balance of $104,000. This loan is secured by a six-unit
apartment building located in the Chicago metropolitan area.
-6-
<PAGE>
Commercial Real Estate Lending. All of the Bank's commercial real estate
loans are secured by improved property such as office buildings, retail store
buildings, and other small businesses, all of which are located in the Chicago
metropolitan area. The largest commercial real estate loan at March 31, 2000,
was a $746,000 participation loan on five commercial properties. The
underwriting criteria for commercial real estate is similar to the criteria for
multi-family residential properties, except that loans on commercial real estate
are not made in excess of 70% of the appraised value.
Construction Lending. The Bank currently is participating in a $2,000,000
construction loan for the purpose of constructing single family residences in
Morton Grove, Illinois. It is anticipated that this project will be completed by
September 30, 2000. The Bank is also participating in a construction loan to
develop a condominium complex located in Lombard, Illinois. The Bank's
investment in this project approximates $400,000, and is scheduled to be repaid
within one year.
Other Lending. The Bank also offers home improvement loans, secured by
second mortgages on collateralized single-family residences. Other loans also
include loans made to depositors and are collaterized by the related deposit
accounts. Home improvement and loans against deposit accounts comprised only
1.03% of the Bank's total loans receivable at March 31, 2000.
Loan Approval Procedures. All loan applications are considered by the
Bank's President, who has the authority to approve all loans, except those in
excess of the FNMA/FHLMC loan limits, which loans may only be approved by the
Bank's Board of Directors. The Bank's Board of Directors ratifies all loans
approved by the Bank's President.
The Bank's loan originations are subject to its written underwriting
standards and loan origination procedures. The Bank is an equal opportunity
lender. Decisions on loan applications are made on the basis of detailed
applications and property valuations (consistent with the Bank's written
appraisal policy) by qualified independent appraisers. The loan applications are
designed primarily to determine the borrower's ability to repay and the more
significant items on the application are verified through use of credit reports,
financial statements, tax returns and/or confirmations.
The Bank requires evidence of marketable title and lien position (generally
consisting of a title survey and legal opinion) as well as fire and extended
coverage casualty insurance in amounts at least equal to the principal amount of
the loan or the value of improvements on the property, depending on the type of
loan. The Bank also requires flood insurance to protect the property securing
its interest when the property is located in a flood plain or otherwise deemed
prudent by management.
Mortgage-Backed Securities. The Company and its subsidiaries have
investments in mortgage-backed securities and have, at times, utilized such
investments to complement its mortgage lending activities. During the year
ended March 31, 2000, the Company and its subsidiaries purchased $1,000,000 in
mortgage-backed securities. At March 31, 2000, the amortized cost of mortgage-
backed securities totaled $1,575,000, or 4.51% of total assets, of which all
were designated as held to maturity and are carried at amortized cost. The fair
value of such securities totaled approximately $1,590,600 at March 31, 2000.
See Note 2 to the Consolidated Financial Statements in the 2000 Annual Report to
Stockholders. At March 31, 2000, the Company and its subsidiaries' entire
mortgage-backed securities portfolio was directly insured by the GNMA, the FNMA
or the FHLMC.
-7-
<PAGE>
Delinquencies and Classified Assets
Delinquent Loans. When a loan becomes between 30 and 45 days delinquent,
the Bank contacts the borrower either by telephone, in person or by mail. If a
delinquency continues and a loan is delinquent 90 days, several courses of
action are possible including directing the Bank's attorney to send a 30-day
letter advising the borrower of possible legal action or an authorization to
accommodate the special needs of the borrower in the case of hardship. A
physical inspection is ordered to evaluate the condition of the property. When a
loan is four or more months delinquent, arrangements are made to obtain title,
begin foreclosure, or both, unless a written repayment plan has been signed by
both the borrower and the Bank. The Board of Directors reviews a complete list
of all delinquent loans that are 60 days or more delinquent and is apprised of
the action taken to bring the loan current.
The remedies available to the Bank in the event of a default or delinquency
with respect to certain residential mortgage loans, and the procedures by which
such remedies may be exercised, are governed by the loan documents and Illinois
law. Under the lending documents used by the Bank, the Bank is prohibited from
accelerating the maturity of a residential mortgage loan, commencing any legal
action (including foreclosure proceedings) to the collect on such loan, or
taking possession of any loan collateral until the lender has first provided the
delinquent borrower with at least 30 days' prior written notice specifying the
nature of the delinquency and the borrowers's right to correct such delinquency.
In the event default is not cured on or before the date required in the notice,
the Bank may, at its option, require immediate payment in full of all sums
secured by the mortgage without further demand and may institute foreclosure
proceedings.
Assuming the foreclosure is uncontested, the Bank can complete the
foreclosure and obtain a deed to the collateral property within eight to ten
months of filing the complaint in Illinois. Under Illinois law, the mortgagor
has a Right of Reinstatement. Specifically, the mortgagor has the right to cure
all defaults that existed had no acceleration occurred provided that such cure
is made prior to the expiration of 90 days from the date the court obtains
jurisdiction over the mortgagor.
Loans are placed on non-accrual status when, in the judgement of
management, the probability of collection of interest is deemed to be
insufficient to warrant further accrual. When a loan is placed on non-accrual
status, previously accrued but unpaid interest is deducted from interest income.
As a matter of policy, the Bank does not accrue interest on loans past due 90
days or more. All previously accrued but unpaid interest is deducted from
interest income. Consumer loans more than 120 days delinquent are generally
written-off.
Classified Assets. Regulations of the FDIC and OBRE require that each
insured institution review and classify its assets on a regular basis. The Bank
has adopted a Classification of Assets Policy and has made the
President/Managing Officer of the Bank responsible for approving classifications
and valuation allowances and for making appropriate recommendations as to the
changes in procedures and policies to the Board for approval. In addition, in
connection with examinations of insured institutions, OBRE and FDIC examiners
have authority to identify problem assets and, if appropriate, require them to
be classified. There are three classifications for problem assets: substandard,
doubtful and loss. Substandard assets must have one or more defined weaknesses
and are characterized by the distinct possibility that the insured institution
will sustain some loss if the deficiencies are not corrected. Doubtful assets
have the weaknesses of substandard assets with the additional characteristic
that the weaknesses make collection or liquidation in full on the basis of
currently existing facts, conditions and values questionable, and there is a
high possibility of loss. An asset classified as loss is considered
uncollectible and of such little value that its continuance as an asset of the
institution is not warranted. The Bank's Classification of Assets Policy also
contains a special mention category, described as assets which do not currently
expose the Bank to a sufficient degree of risk to warrant classification but do
possess credit deficiencies or potential weaknesses deserving management's close
attention. Assets classified as substandard or doubtful require the institution
to establish general allowances for loan losses. If an asset or portion thereof
is classified loss, the insured institution must either establish specific
allowances for loan losses in the amount of 100% of the portion of the asset
classified as a loss or charge-off such amount. A portion of general loss
allowances established to cover possible losses related to assets classified
substandard or doubtful may be included in determining an institution's
regulatory capital, while specific valuation allowances for loan losses
generally do not qualify as regulatory capital.
-8-
<PAGE>
Real Estate Owned. Real estate acquired by the Bank as a result of
foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned
until it is sold. When property is acquired, it is recorded at the lower of cost
or fair value at the date of acquisition and any write-down resulting therefrom
is charged to the allowance for losses on loans. All incidental costs, such as
insurance and real estate taxes, incurred in maintaining the Bank's lien on the
collateral property are capitalized between the date the loan becomes delinquent
and the date of acquisition. After the date of acquisition, all costs incurred
in maintaining the property are expensed and costs incurred for the improvement
or development of such property are capitalized. The Bank had no foreclosed real
estate owned on its books at March 31, 2000.
Delinquent Loans. At March 31, 2000, 1999 and 1998, delinquencies in the
Bank's loan portfolio were as follows:
At March 31, 2000
----------------------------------------
60-89 Days 90 Days or More
------------------ ------------------
Number Principal Number Principal
of Balance of Balance
Loans of Loans Loans of Loans
------ ---------- ------ ---------
(In Thousands)
One-to-four family 2 $ 34 - $ -
Multi-family - - - -
Commercial real estate - - - -
Land and Construction - - - -
------ ------- ------- -----
Total loans 2 $ 34 - $ -
====== ======= ======= =====
Delinquent loans to total loans .16% - %
======= =====
At March 31, 2000
----------------------------------------
60-89 Days 90 Days or More
------------------ ------------------
Number Principal Number Principal
of Balance of Balance
Loans of Loans Loans of Loans
------ ---------- ------ --------
(In Thousands)
One-to-four family - $ - - $ -
Multi-family - - - -
Commercial real estate - - - -
Land and Construction - - - -
----- --------- ------- -----
Total loans - $ - - $ -
===== ========= ======= =====
Delinquent loans to total loans - % - %
========= =====
At March 31, 2000
----------------------------------------
60-89 Days 90 Days or More
------------------ ------------------
Number Principal Number Principal
of Balance of Balance
Loans of Loans Loans of Loans
------ ---------- ------ ---------
(In Thousands)
One-to-four family 1 $102 1 $ 96
Multi-family - - - -
Commercial real estate - - - -
Land and Construction - - - -
------ ------- ------ -------
Total loans 1 $102 1 $ 96
====== ======= ====== =======
Delinquent loans to total loans .53% .50%
======= =======
-9-
<PAGE>
Non-performing Assets. The following table sets forth information regarding
loans which are 90 days or more delinquent. The Bank continues accruing interest
on delinquent loans 90 days or more past due, but reserves 100% of the interest
due on such loans, thus effecting a non-accrual status. At March 31, 2000 there
were no other known problem assets except as described above or as included in
the table below.
At March 31,
-----------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(In Thousands)
Non-accrual delinquent mortgage loans $ - - 96 - -
Total real estate owned, net of
related allowance for losses - - - - 212
---- ---- ---- ---- ----
Total non-performing assets $ - - 96 - 212
==== ==== ==== ==== ====
Non-performing loans to total loans - % - .50 - -
Total non-performing assets to total
assets - % - .33 - .84
Allowance for Loan Losses. The determination of the allowance for loan
losses involves material estimates that are susceptible to significant change in
the near term. The allowance for loan losses is maintained at a level adequate
to provide for losses through charges to operating expense. The allowance is
based upon past loss experience and other factors which, in management's
judgement, deserve current recognition in estimating losses. Such other factors
considered by management include growth and composition of the loan portfolio,
the relationship of the allowance for losses to outstanding loans, and economic
conditions. Management believes that the allowance is adequate. While management
uses available information to recognize losses on loans, future additions to the
allowance may be necessary based on changes in economic conditions. In addition,
various regulatory agencies, as an integral part of their examination process,
periodically review the Company's allowance for losses. Such agencies may
require the Company to recognize additions to the allowance based on their
judgements about information available to them at the time of their examination.
The following table sets forth the Bank's allowance for loan losses at the
dates indicated.
At March 31,
--------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(In Thousands)
Balance at beginning of period $ 52 46 40 30 15
Provision for loan losses 6 6 6 10 15
Allowance transferred from (to)
real estate owned - - - - -
---- ---- ----- ---- -----
Balance at end of year $ 58 52 46 40 30
==== ==== ===== ==== =====
Ratio of allowance for loan losses
to net loans receivable at the
end of period .30% .26 .25 .26 .23
Ratio of allowance for loan losses
to total non-performing assets at
the end of period N/A N/A 48.05 N/A 14.15
Ratio of allowance for loan losses
to non-performing loans at the end
of the period N/A N/A 48.05 N/A N/A
-10-
<PAGE>
The following table sets forth the allocation of the Bank's allowance
for loan losses by loan category and the percent of loans in each category to
total loans receivable, net, to the end of the periods indicated. The portion of
the loan loss allowance allocated to each loan category does not represent the
total available for future losses which may occur with the loan category since
the total loan loss allowance is a valuation reserve applicable to the entire
loan portfolio.
<TABLE>
<CAPTION>
March 31,
------------------------------------------------------------------------------
2000 1999
------------------------------------ ----------------------------------
Percent Percent
of Loans of Loans
Loan in Each Loan in Each
Amount of Amounts Category Amount of Amounts Category
Loan Loss by To Total Loan Loss by To Total
Allowance Category Loans Allowance Category Loans
------------------------------------ ----------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
One-to-four family $ 18 $ 17,678 84.16% 20 19,249 89.37
Multi-family 1 254 1.21 1 345 1.60
Commercial real
estate 2 808 3.85 1 67 .31
Construction 5 2,048 9.75 5 1,674 7.77
Other 1 218 1.03 1 204 .95
Unallocated 31 -- -- 24 -- --
-- ------ ------ -- ------ ------
Total $ 58 $ 21,006 100.00% 52 21,539 100.00
== ====== ====== == ====== ======
<CAPTION>
March 31,
---------------------------------------------------------------------------------------------------------------
1998 1997 1996
---------------------------------------------------------------------------------------------------------------
Percent Percent Percent
of Loans of Loans of Loans
Loan in Each Loan in Each Loan in Each
Amount of Amounts Category Amount of Amounts Category Amount of Amounts Category
Loan Loss by To Total Loan Loss by To Total Loan Loss by To Total
Allowance Category Loans Allowance Category Loans Allowance Category Loans
---------------------------------- --------------------------------- ---------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
One-to-four family 17 17,141 89.20 14 14,525 85.45 13 12,183 93.72
Multi-family 2 440 2.29 3 524 3.08 2 620 4.77
Commercial real
estate 1 88 .46 1 95 .56 1 138 1.06
Construction 4 1,368 7.12 5 1,700 10.00 -- -- --
Other 1 180 .93 1 154 .91 1 58 .45
Unallocated 21 -- -- 16 -- -- 13 -- --
-- ------ ------ -- ------ ------ -- ------ ------
Total 46 19,217 100.00 40 16,998 100.00 30 12,999 100.00
== ====== ====== == ====== ====== == ====== ======
</TABLE>
-11-
<PAGE>
Investment Activities
The investment policy of the Company and its subsidiaries, which is
established by the Board of Directors and implemented by the Asset/Liability
Committee, is designed primarily to provide and maintain liquidity, to generate
a favorable return on investments without incurring undue interest rate and
credit risk, and to complement the Bank's lending activities. State chartered
savings institutions have the authority to invest in various types of liquid
assets, including United States Treasury obligations, securities of various
federal agencies, certain certificates of deposit of insured banks and savings
institutions, certain bankers acceptances, repurchase agreements and loans on
federal funds. Subject to various restrictions, state chartered savings
institutions may also invest a portion of their assets in commercial paper,
corporate debt securities and asset-backed securities. At March 31, 2000, the
Company and its subsidiaries had investment securities in the aggregate amount
of $435,000. The investment portfolio, except for FHLB stock, is classified as
available for sale.
The following table sets forth certain information regarding the book
value of the Company and its subsidiaries' investment securities portfolio at
the dates indicated.
At March 31,
--------------------------------
2000 1999 1998
---- ---- ----
(In Thousands)
Interest-bearing deposits:
Certificates of deposit $ 7,395 4,298 4,447
FHLB daily investment 3,372 3,485 2,321
Other 63 112 107
------ ----- -----
Total interest-bearing deposits $ 10,830 7,895 6,875
====== ===== =====
Investment securities:
U.S. Government securities
and obligations $ - - 500
FHLB-Chicago stock 186 177 177
Corporate equity investments (1) 170 170 100
Corporate debt securities (1) 79 100 -
------ ----- -----
Total investment securities $ 435 447 777
====== ===== =====
___________________
(1) For a complete description, see Note 4 to the "Notes to Consolidated
Financial Statements" in the 2000 Annual Report to Stockholders.
-12-
<PAGE>
The table below sets forth certain information regarding the carrying
value, weighted average yield and maturities of the Company and its
subsidiaries' investment securities at March 31, 2000.
<TABLE>
<CAPTION>
At March 31, 2000
------------------------------------------------------------------------------------------------
One Year or Less One to Five Years Total Investment Securities
-------------------- ----------------- -----------------------------------------------
Average
Weighted Weighted Remaining Approximate Weighted
Carrying Average Carrying Average Years to Carrying Market Average
Value Yield Value Yield Maturity Value Value Yield
--------- -------- -------- -------- --------- -------- ----------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FHLB-Chicago stock $ 186 7.00% - - - 186 186 7.00
Corporate equity investments 100 N/A - - - 170 170 N/A
Corporate debt securities - - 100 11.00 3 79 79 11.00
---- ---- --- ----- --- --- --- -----
Total $ 286 7.00% 100 11.00 3 435 435 5.52
==== ==== === ===== === === === =====
</TABLE>
-13-
<PAGE>
Sources of Funds
General. Deposits, repayments on loans and mortgage-backed securities and
stockholders' equity are the primary sources of the Bank's funds for use in
lending, investing and for other general purposes.
Deposits. The Bank offers a variety of deposit accounts having a range of
interest rates and terms. The Bank's deposits consist of passbook savings,
demand deposits, money market accounts, and certificate accounts. The flow of
deposits is influenced significantly by general economic conditions, changes in
money market and prevailing interest rates and competition. The Bank's deposits
are obtained primarily from the area in which its offices are located. The Bank
relies primarily on customer service and long-standing relationships with
customers to attract and retain these deposits. Certificate accounts in excess
of $100,000 are not actively solicited by the Bank nor does the Bank use brokers
to obtain deposits. Management constantly monitors the Bank's deposit accounts
and, based on historical experience, management believes it will retain a large
portion of such accounts upon maturity.
The following table presents the deposit activity of the Bank for the
periods indicated.
Year Ended March 31,
--------------------------------
2000 1999 1998
---- ---- ----
(In Thousands)
Deposits $ 15,562 8,712 11,431
Withdrawals (12,764) (8,522) (9,752)
-------- ------ ------
Net deposits 2,798 190 1,679
Interest credited on deposits 1,230 976 769
-------- ------ ------
Total increase in deposits $ 4,028 1,166 2,448
======== ====== ======
At March 31, 2000, the Bank had outstanding $6.5 million in deposit
accounts in amounts of $100,000 or more maturing as follows:
Maturity Period Amount
--------------- ------
(In Thousands)
Three months or less $ 3,455
Over three through six months 482
Over six through twelve months 1,701
Over twelve months 861
-----
Total $ 6,499
=====
-14-
<PAGE>
The following table sets forth the distribution of the Bank's deposit
accounts at the dates indicated and the weighted average interest rates on
deposits presented.
<TABLE>
<CAPTION>
At March 31,
------------------------------------------------------
2000 1999 1998
---------------- ---------------- ----------------
Percent Percent Percent
of Total of Total of Total
Amount Deposits Amount Deposits Amount Deposits
------ -------- ------ -------- ------ --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Passbook accounts $ 5,743 18.85% 6,122 23.16 6,317 25.00
------ ------ ----- ----- ------ -----
Demand deposit accounts 517 1.70 117 .44 55 .22
------ ------ ----- ----- ------ -----
Money market accounts 1,017 3.34 - - - -
------ ------ ----- ----- ------ -----
Certificate accounts
Ninety-one day 253 .83 199 .75 120 .47
Six to twelve months 1,842 6.05 2,274 8.61 1,763 6.98
Twelve to eighteen months 15,639 51.34 12,875 48.71 5,432 21.50
Eighteen to thirty months 1,633 5.36 978 3.70 991 3.92
Thirty to sixty months 748 2.46 837 3.17 712 2.82
Sixty months 179 .59 332 1.26 7,450 29.49
IRA and Keogh 2,792 9.17 2,601 9.84 2,420 9.58
Other 95 .31 95 .36 4 .02
------ ------ ------ ----- ------- -----
Total 23,181 76.11 20,191 76.40 18,892 74.78
------ ------ ------ ----- ------- -----
Total deposits $ 30,458 100.00% 26,430 100.00 25,264 100.00
====== ====== ====== ====== ====== ======
Weighted average rate 4.97% 4.62% 4.97%
==== ==== =====
</TABLE>
The following table presents, by various rate categories, the amount of
certificate accounts outstanding at March 31, 2000, 1999, and 1998 and the
periods to maturity of the certificate accounts outstanding at March 31, 2000.
<TABLE>
<CAPTION>
Period to Maturity
from March 31, 2000
-----------------------------
At March 31, Within One to
----------------------------
2000 1999 1998 One Year Five Years(1) Total
------- ---- ---- -------- ------------- -----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Certificate accounts:
4.99% or less $ 3,655 4,100 540 2,914 741 3,655
5.00% to 5.99% 10,261 15,090 7,928 9,833 428 10,261
6.00% to 6.99% 9,265 1,001 10,424 3,939 5,326 9,265
------ ------ ------ ------ ----- ------
Total $ 23,181 20,191 18,892 16,686 6,495 23,181
====== ====== ====== ====== ===== ======
</TABLE>
________________________
(1) The Bank does not offer certificate accounts with a period to maturity
exceeding five years.
-15-
<PAGE>
Borrowings
Deposits are the primary source of funds of the Bank's lending and
investment activities and for its general business purposes. The Bank may
obtain advances from the FHLB of Chicago to supplement its supply of lendable
funds, although the Bank has not generally utilized this funding source.
Advances from the FHLB of Chicago would typically be secured by a pledge of the
Bank's stock in the FHLB of Chicago and a portion of the Bank's first mortgage
loans and certain other assets. At March 31, 2000 and 1999, the Bank had no
advances outstanding from the FHLB of Chicago or borrowings of any kind.
In connection with the conversion, the ESOP purchased 8% of the Common
Stock issued in the Conversion (17,755 shares). Such purchase was funded by the
Company thru a 10-year loan to the ESOP in the amount of $177,550. The Bank is
making annual contributions to the ESOP to enable the ESOP to pay principal and
interest.
Subsidiary Activities
OBRE regulations permit a state-chartered savings bank to invest up to 10%
of its assets in the capital stock, paid-in surplus and unsecured obligations of
subsidiary corporations or service corporations. As of March 31, 2000, the Bank
was authorized to invest approximately $3,416,000 in the capital stock and other
securities of service corporation subsidiaries. As of that date, the Bank had
an equity investment of $4,385 in its wholly-owned service corporation, West
Town Insurance Agency, Inc. This company is a full-service licensed insurance
agency.
Competition
The Bank faces significant competition in attracting deposits. Its most
direct competition for deposits has historically come from commercial banks and
savings institutions located in its market area, many of which are substantially
larger than the Bank. The Bank also faces additional significant competition
for investors' funds from short-term money market mutual funds and issuers of
corporate and government securities. The Bank competes for deposits principally
by offering depositors a variety of deposit programs, a convenient location and
hours and other services. The Bank does not rely upon any individual group or
entity for a material portion of its deposits.
The Bank's competition for real estate loans comes principally from
mortgage banking companies, commercial banks and savings institutions. The Bank
competes for loan originations primarily through the interest rates and loan
fees it charges, and the efficiency and quality of services it provides
borrowers, real estate brokers and builders. Factors which affect competition
include the general and local economic conditions, current interest rate levels
and volatility in the mortgage markets.
Personnel
As of March 31, 2000, the Bank had 11 full-time employees and 2 part-time
employees. The employees are not represented by a collective bargaining unit,
and the Bank considers its relationship with its employees to be excellent.
Year 2000 Compliance
The Company's Year 2000 Readiness Plan proved successful in that no
problems were experienced with the data processing systems, security systems and
other systems and operations which were Year 2000 dependent. During the fiscal
year ended March 31, 2000, the Company, on a consolidated basis, expended
approximately $7,000 related to the Year 2000 readiness and contingency matters.
The Company will continue to monitor the Year 2000 issue in accordance with its
contingency plan.
-16-
<PAGE>
REGULATION OF WEST TOWN BANCORP, INC.
The Company is a savings bank holding company within the meaning of the
Home Owners' Loan Act of 1933 ("HOLA"), as amended by FIRREA. As such, the
Company is registered with the OBRE, and is subject to Illinois regulation,
examinations, supervision and reporting requirements. Furthermore, the Holding
Company is permitted to engage in activities prescribed by the Commissioner.
Per Regulation Y, the Company is also registered with the Federal Reserve
as a Bank Holding Company. The principal purposes of Regulation Y are to
regulate the acquisition of control of banks by companies and individuals, to
define and regulate the nonbanking activities in which bank holding companies
and foreign banking organizations with United States operations may engage, and
to set forth the procedures for securing approval for such transactions and
activities. The Company does not anticipate that the regulatory activities of
either the OBRE or the Federal Reserve Board will adversely affect the
activities of the Holding Company.
Affiliate Restrictions
The affiliate restrictions contained in Sections 23A and 23B of the Federal
Reserve Act apply to all federally insured savings associations and any such
"affiliate". A savings and loan holding company, its subsidiaries and any other
company under common control are considered affiliates of the subsidiary savings
association under HOLA. Generally, Sections 23A and 23B: (i) limit the extent
to which the insured institution or its subsidiaries may engage in certain
covered transactions with an affiliate to an amount equal to ten percent (10%)
of such institution's capital and surplus, and contain an aggregate limit on all
such transactions with all affiliates to an amount equal to twenty percent (20%)
of such capital and surplus, and (ii) require that all such transactions be on
terms substantially the same, or at least as favorable to the institution or
subsidiary, as those provided to a non-affiliate. The term "Covered
transaction" includes the making of loans, purchase of assets, issuance of a
guarantee and similar other types of transactions. Also, a savings institution
may not make any loan to an affiliate unless the affiliate is engaged only in
activities permissible for bank holding companies. Only the Federal Reserve
Board may grant exemptions from the restrictions of Sections 23A and 23B. The
Commissioner, however, may impose more stringent restrictions on savings
associations for reasons of safety and soundness.
Qualified Thrift Lender Test
The regulations require that any savings bank holding company that controls
a savings institution that fails the qualified thrift lender test, as explained
under "Regulation of West Town Savings Bank - Qualified Thrift Lender Test",
must, within one year after the date on which the institution ceases to be a
qualified thrift lender, register as and be deemed a bank holding company
subject to all applicable laws and regulations.
-17-
<PAGE>
REGULATION OF WEST TOWN SAVINGS BANK
As a state-chartered and federally insured savings bank, West Town Savings
Bank is subject to extensive regulation. Lending activities and other
investments must comply with various statutory and regulatory capital
requirements. The Bank is regularly examined by its federal and state
regulators and files periodic reports concerning the Bank's activities and
financial condition. The Bank's relationship with its depositors and borrowers
also is regulated to a great extent by both federal and state laws, especially
in such matters as the ownership of savings accounts and the form and content of
the Bank's mortgage documents.
The Effects of FDICIA
In December, 1991, the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA") was enacted into law. FDICIA provides for, among other
things, the recapitalization of the Bank Insurance Fund; enhanced federal
supervision of depository institutions, including greater authority for the
appointment of a conservator or receiver for undercapitalized institutions; the
adoption of safety and soundness standards by the federal banking regulators, on
matters such as loan underwriting and documentation, interest rate risk exposure
and compensation and other employee benefits; the establishment of risk-based
deposit insurance premiums; liberalization of the qualified thrift lender test;
greater restrictions of the qualified thrift lender test; greater restrictions
on transactions with affiliates; and mandated consumer protection disclosures
with respect to deposit accounts. See "-Insurance of Accounts and Regulation by
the FDIC," "-Regulatory Capital Requirements" and "-Qualified Thrift Lender
Test".
Insurance of Accounts and Regulation by the FDIC
The Bank is a member of the Savings Association Insurance Fund ("SAIF")
which is administered by the FDIC. Savings deposits are insured up to $100,000
per insured member (as defined by law and regulation) by the FDIC and such
insurance is backed by the full faith and credit of the United States
Government. As insurer, the FDIC imposes deposit insurance premiums and is
authorized to conduct examination of and to require reporting by the FDIC-
insured institutions. It also may prohibit any FDIC-insured institution from
engaging in any activity the FDIC determines by regulation or order to pose a
serious risk to the FDIC. The FDIC also has the authority to initiate
enforcement actions against savings associations, after giving the OBRE an
opportunity to take such action, and may terminate the deposit insurance if it
determines that the institution has engaged or is engaging in unsafe or unsound
practices, or is in an unsafe or unsound condition.
Since the Bank is a state-chartered savings bank, the FDIC is its primary
federal regulator.
-18-
<PAGE>
Office of Banks and Real Estate
The OBRE is the Bank's primary state regulator. As regulator, the OBRE has
extensive authority over the operations of the Bank and other state-chartered
savings banks. As part of this authority, the Bank is required to file periodic
reports with the OBRE and is subject to periodic examination by the OBRE.
The OBRE established regulations affecting the operations of the Bank,
including regulations that affect the Bank's lending and investment activities.
The OBRE also has extensive enforcement authority, including the issuance of
cease-and-desist and removal orders and the initiation of injunctive actions.
The OBRE assesses quarterly fees based upon asset size and charges its
regulated institutions for periodic examinations.
Federal Home Loan Bank System
The FHLB System, consisting of twelve FHLBs, is under the jurisdiction of
the Federal Housing Finance Board ("FHFB"). The designated duties of the FHFB
are to: supervise the FHLBs; ensure that the FHLBs carry out their housing
finance missions; ensure that the FHLBs remain adequately capitalized and able
to raise funds in the capital markets; and ensure that the FHLBs operate in a
safe and sound manner.
While the Bank is no longer required to be a member since its conversion to
a state-chartered savings bank in 1995, the Bank has chosen to remain a member.
Among other benefits, the FHLB provides a central credit facility primarily for
member institutions. It is funded primarily from proceeds derived from the sale
of consolidated obligations of the FHLB System. It makes advances to members in
accordance with policies and procedures established by the FHFB and the Board of
Directors of the FHLB of Chicago. At March 31, 2000, the Bank had no advances
from the FHLB of Chicago. See "Sources of Funds - Borrowings".
Qualified Thrift Lender Test
Under FIRREA and state savings bank regulations, a state-chartered savings
bank must maintain at least 60% of its total tangible assets in "qualified
thrift investments" on an average basis in three out of every four quarters and
two out of every three years. Under the QTL statutory and regulatory
provisions, all forms of home mortgages, home improvement loans, home equity
loans and loans on the security of other residential real estate and mobile
homes, as well as shares of FHLB stock, investments or deposits in other insured
institutions, securities issued by the FNMA, FHLMC, GNMA and other mortgage-
related securities, are considered qualified thrift investments. Investments in
non-subsidiary corporations or partnerships whose activities include servicing
mortgages or real estate development are also considered qualified thrift
investments in proportion to the amount of primary revenue such entities derive
from housing-related activities. Also included in qualified thrift investments
are mortgage servicing rights, whether such rights are purchased by the insured
institution or created when the institution sells loans and retains the right to
service such loans.
A savings bank that fails to become or maintain a qualified thrift lender
shall either become a commercial bank (other than a savings bank) or be subject
to restrictions specified in FIRREA. A savings bank that converts to a
commercial bank must pay applicable exit and entrance fees involved in
converting from the SAIF fund to the BIF fund of the FDIC. A savings bank that
fails to meet the QTL test and does not convert to a commercial bank will be:
(1) prohibited from making any new investment or engaging in activities that
would not be permissible for national banks; (2) prohibited from establishing
any new branch office where a national bank located in the savings institutions
home state would not be able to establish a branch office; (3) ineligible to
obtain new advances from any FHLBs; and (4) subject to limitations on the
payment of dividends comparable to the statutory and regulatory dividend
restrictions applicable to a national bank. Also, beginning three years after
the date on which the savings bank ceases to be a qualified thrift lender, the
savings bank would be prohibited from retaining any investment or engaging in
any activity not permissible for a national bank and would be required to repay
any outstanding advances to any FHLB. A savings bank may requalify as a
qualified thrift lender if it thereafter complies with the QTL test.
As of March 31, 2000, the Bank was in compliance with the QTL test with a
QTL ratio of 64.55%.
-19-
<PAGE>
Capital Requirements
Under OBRE regulations, a savings bank must satisfy two minimum capital
requirements: core capital and risk-based capital. Savings banks must meet
both of the standards in order to comply with the capital requirements.
The minimum core capital requirement is three percent of adjusted total
assets (the "leverage limit" requirement). Core capital is defined to include
common stockholders' equity, non-cumulative perpetual preferred stock and any
related surplus, and minority interests in equity accounts of consolidated
subsidiaries, less (i) any unidentifiable intangible assets (other than
purchased mortgage servicing rights); (ii) the amount by which purchased
mortgage servicing rights exceed the lower of 90% of determinable fair market
value, 90% of original costs, or current amortized book value; and (iii) equity
and debt investments in subsidiaries that are not "includable subsidiaries",
which is defined as subsidiaries engaged solely in activities not impermissible
for a national bank, engaged in activities impermissible for a national bank but
only as an agent for its customers, or engaged solely in mortgage-banking
activities.
In calculating adjusted total assets, adjustments are made to total assets
to give effect to the exclusion of certain assets from capital and to
appropriately account for the investment in and assets of both includable and
nonincludable subsidiaries.
The FDIC is required to evaluate capital before approving various
applications by depository institutions. The FDIC also must evaluate capital as
an essential component in determining the safety and soundness of state
nonmember banks it insures and supervises and in determining whether depository
institutions are in any unsafe or unsound condition. Generally, all FDIC
insured banks must maintain "core" or "Tier I" capital of at least 3.0% of total
assets. The rule further provides that a bank operating at or near the 3.0%
capital level is expected to have well diversified risks, including no undue
interest rate risk exposure, excellent control systems, good earnings, high
asset quality, high liquidity and well managed on - and off - balance sheet
activities, and in general, be considered a strong banking organization with
composite 1 rating under the CAMEL rating system for banks. For all but the
most highly rated banks meeting the above conditions, the minimum core capital
ratio will be increased to not less than 4.0% of total assets. Under the
regulations of the OBRE, savings banks are required to maintain a core capital
ratio of at least 3.0%.
Savings banks must also maintain capital equal to at least 8.0% of risk-
weighted assets. Total capital consists of the sum of core and supplementary
capital, provided that supplementary capital cannot exceed core capital, as
previously defined.
Supplementary capital includes (i) permanent capital instruments such as
cumulative perpetual preferred stock, perpetual subordinated debt, and mandatory
convertible subordinated debt, (ii) maturing capital instruments such as
subordinated debt, intermediate-term preferred stock and mandatory redeemable
preferred stock, subject to an amortization schedule, and (iii) general
valuation loan and lease allowances. Supplementary capital may not exceed the
Bank's core capital for purposes of calculating the Bank's compliance with
regulatory capital requirements.
The risk-based capital regulation assigns each balance sheet asset held by
a savings institution to one of four risk categories based on the amount of
credit risk associated with that particular class of assets. Assets not
included for purposes of calculating capital are not included in calculating
risk-weighted assets. The categories range from 0% for cash and U.S. Government
securities that are backed by the full faith and credit of the U.S. Government
up to 100%. Qualifying residential mortgage loans (including multi-family
mortgage loans) are assigned a 50% risk weight.
The book value of assets in each category is multiplied by the weighing
factor (from 0% to 100%) assigned to that category. These products are then
totaled to arrive to total risk-weighted assets. Off-balance sheet items are
included in risk-weighted assets by converting them to an approximate balance
sheet "credit equivalent amount" base on a conversion schedule. These credit
equivalents are then assigned to risk categories in the same manner as balance
sheet assets and are included in risk-weighted assets.
-20-
<PAGE>
The FDIC has been considering adopting a proposed rule for adding an
interest rate risk component to the regulatory capital rule. The proposal would
require, if adopted, that an institution hold capital against interest rate risk
exposure in an amount equal to 50% of the market value of portfolio equity
(i.e., aggregate net market value of assets, liabilities, and off-balance sheet
items) that would result from a immediate 200 basis point increase or decrease
in interest rates. If adopted, this component of the risk-based capital
requirement would require that an institution maintain additional capital
related to the amount of risk attendant to its interest rate position.
At March 31, 2000 and 1999, the Bank met all of its capital requirements.
See Note 13 to the Consolidated Financial Statements in the 2000 Annual Report
to Stockholders.
Dividend Limitations
OBRE regulations require the Bank to give the OBRE thirty days advance
notice of any proposed declaration of dividends to the Holding Company, and the
OBRE has the authority under its supervisory powers to prohibit the payment of
dividends to the Holding Company. In addition, a Bank may not declare or pay a
cash dividend on its capital stock if the effect thereof would be to reduce the
regulatory capital of the Bank below the amount required for the liquidation
account established pursuant to the Bank's Plan of Conversion. The OBRE imposes
uniform limitations on the ability of savings banks to engage in various
distributions of capital such as dividends, stock repurchases and cash-out
mergers. The regulations utilize a three-tiered approach which permits various
level of distributions based primarily upon the savings bank's capital level.
In the first tier, a savings bank that has capital in excess of the capital
requirements and that has not been notified by the OBRE that it is in need of
more than normal supervision, may make (without application) capital
distributions during a calendar year up to 100% of its net income to date during
the calendar year, plus one-half its surplus capital ratio at the beginning of
the calendar year. Capital distributions in excess of such amount require
advance approval from the OBRE.
In the second tier, a savings bank that meets or exceeds its minimum
capital requirement (both before and after the proposed capital distribution),
but which has been notified by the OBRE that it shall be treated as a tier 2
bank because it is in need of more than normal supervision, may make (without
application) capital distributions ranging between 25% and 75% of its net income
during the previous four quarters.
In the third tier, a savings bank with either capital below its minimum
capital requirements (either before and after the proposed capital
distribution), or a savings bank that meets or exceeds its capital requirement
but which has been notified by the OBRE that it shall be treated as a tier 3
bank because it is in need of more than normal supervision, may not make any
capital distributions without prior approval from the OBRE.
The Bank has met the criteria to be in the first tier, and consequently,
would be able to distribute up to 100% of its net income during any calendar
year, plus 50% of its surplus capital ratio at the beginning of the calendar
year less any distributions previously paid during the year.
Investment Rules, Loans to One Borrower, and Aggregate Loan Limits
Under OBRE regulations, the permissible amount of loans-to-one borrower for
state-chartered savings banks is 20% of its unimpaired capital and surplus (25%
if the security for such a loan has a "readily ascertainable" value or 30% for
certain residential development loans) or $500,000. At March 31, 2000, the
lending limitations, in essence, imposed a $659,000 limit on the Bank's loans-
to-one borrower.
Savings banks and their subsidiaries may not acquire or retain investments
in corporate debt securities that, at the time of acquisition, were not rated in
one of the four highest rating categories by at least one nationally recognized
rating organization. At March 31, 2000, the Bank did not have any corporate
debt securities below investment grade.
-21-
<PAGE>
Restrictions on Loans to Insiders
FIRREA applies Section 22(h) of the Federal Reserve Act to non-member
savings banks and authorizes the FDIC to impose additional loan-to-insider
restrictions upon savings banks on a case-by-case basis. In general, Section
22(h) prohibits a bank from making loans or extending credit: (i) to any of its
executive officers or any person who directly or indirectly controls more than
10% of any class of voting securities of the bank where the loan amount or
extension of credit, when aggregated with other loans to that person and all
related interests of that person, would exceed 15% of a bank's unimpaired
capital and surplus for loans that are not fully secured by "readily marketable
collateral" and an additional 10% of such capital and surplus for loans fully
secured by such collateral; and (ii) to any of its executive officers, directors
or principal shareholders in an amount exceeding the higher of $25,000 or 5% of
the Bank's unimpaired capital and surplus, unless the loan or extension of
credit is preapproved by a majority of the entire board of directors with the
interested party abstaining from participating directly or indirectly in the
voting.
Section 22(h) also requires that all such insider loans or extensions of
credit be made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons and do not involve more than the normal risk of repayment or
present other unfavorable features. Additionally, with certain exceptions,
Section 22(h) prohibits a member bank from paying an overdraft on an account at
such bank of an executive officer or director. At March 31, 2000, the Bank was
in compliance with restrictions on loans to insiders.
Regulations issued by the FHLB Board prior to the enactment of FIRREA, in
relevant part, restricted a savings bank's loans to "affiliated persons" to ones
made in the "ordinary course of business" involving not more that the "normal
risks of collectibility" and not exceeding the loan amount that would be
available to members of the general public of similar credit status. According
to former FHLB Board regulations, loans secured by the principal residence of an
affiliated person, home improvement loans for affiliated persons and education,
consumer and credit card loans for affiliated persons must have been pre-
approved by at least a majority of the board of directors of the Bank. The Bank
was authorized, generally, to make such loans (and those secured by the
affiliated person's savings accounts at the Bank) with an interest rate not
below its current cost of funds.
Activities of Savings Bank and Their Subsidiaries
FDIC and OBRE regulations provide that, when a savings bank establishes or
acquires a subsidiary or elects to conduct any new activity through a subsidiary
that the bank controls, the savings bank shall notify the FDIC and OBRE thirty
days in advance and provide the information each agency may, by regulation,
require. Savings banks also must conduct the activities of subsidiaries in
accordance with existing regulations and orders.
The FDIC or the OBRE may determine that the continuation by a savings bank
of its ownership control, or its relationship to, the subsidiary constitutes a
serious risk to the safety, soundness, or stability of the bank or is
inconsistent with sound banking practices or with the purposes of the FDIC Act.
Based upon that determination, the FDIC or the OBRE has the authority to order
the savings bank to divest itself of control of the subsidiary. The FDIC also
may determine by regulation or order that any specific activity poses a serious
threat to the SAIF. If so, it may require that no SAIF member engage in that
activity directly. At March 31, 2000, the Bank had West Town Insurance Agency
as a wholly-owned subsidiary.
Brokered Deposits
FIRREA states that no insured depository institution that fails to meet the
applicable minimum capital requirement may accept funds obtained directly or
indirectly by or through a deposit broker for deposit into one or more deposit
accounts. The FDIC is authorized to waive this prohibition on a case-by-case
basis, but only upon finding that such use of brokered deposits does not
constitute an unsafe or unsound practice. At March 31, 2000, the Bank had no
brokered deposits.
-22-
<PAGE>
Investment Portfolio Policy
Under OBRE regulations, savings banks are required to adopt and maintain an
investment policy which demonstrates the exercise of prudence in making
investment decisions. Per regulations and generally accepted accounting
principles, a financial institution is required to classify its securities into
one of three categories: securities purchased or held to maturity, securities
available for sale, and securities held for trading. Securities held in the
investment portfolio may be carried at amortized cost if the bank has documented
the intent and ability to hold the securities until maturity. Those being held
for sale or trading are to be carried at fair value. All of the Bank's
mortgage-backed securities are classified as held to maturity, since the Bank
had both the intent and ability to hold these mortgage-backed securities to
maturity, in accordance with Statement of Financial Accounting Standards 115.
The Bank's investments in corporate equity and debt securities are classified as
available for sale, and are recorded at their current fair values. See "Notes to
Consolidated Financial Statements #1 - Accounting Policies - Investment
Securities" in the Annual Report.
Transactions with Affiliates
Pursuant to FIRREA, all financial institutions must comply with Section 23A
and 23B of the Federal Reserve Act relative to transactions with affiliates in
the same manner and to the same extent as if all were Federal Reserve member
banks. Generally, Sections 23A and 23B: (i) limit the extent to which the
insured institution or its subsidiaries may engage in certain covered
transactions with an affiliate to an amount equal to 10% of such institution's
capital and surplus and place an aggregate limit on all such transactions with
affiliates to an amount equal to 20%of such capital and surplus, and (ii)
require that all such transactions be on terms substantially the same, or at
least as favorable to the institution or subsidiary, as those provided to a non-
affiliate. The term "covered transaction" includes the making of loan,
purchases of assets, issuance of a guaranty and similar other types of
transactions.
-23-
<PAGE>
FEDERAL AND STATE TAXATION
Federal Taxation
General. The Company and the Bank report their income on a fiscal year
basis using the accrual method of accounting and are subject to federal income
taxation in the same manner as other corporations with some exceptions,
including particularly the Bank's addition to its reserve for bad debts
discussed below. The following discussion of tax matters is intended only as a
summary and does not purport to be a comprehensive description of the tax rules
applicable to the Bank or the Company. For its taxable year ending March 31,
2000, the Company was subject to a federal income tax rate of 15%.
Bad Debt Reserves. For fiscal years beginning prior to December 31, 1995,
savings institutions which qualified under certain definitional tests and other
conditions of the Internal Revenue Code of 1986 (the "Code") were permitted to
use certain favorable provisions to calculate their deductions from taxable
income for annual additions to their bad debt reserve. A reserve could be
established for bad debts on qualifying real property loans (generally secured
by interests in real property improved or to be improved) under (i) Percentage
of Taxable Income Method (the "PTI Method") or (ii) the Experience Method. The
reserve for nonqualifying loans was computed using the Experience Method.
The Small Business Job Protection Act of 1996 (the "1996 Act"), which was
enacted on August 20, 1996, made significant changes to provisions of the Code
relating to a savings institution's use of bad debt reserves for federal income
tax purposes and requires such institutions to recapture (i.e., take into
income) certain portions of their accumulated bad debt reserves. The 1996 Act
repeals the reserve method of accounting for bad debts effective for tax years
beginning after 1995. Savings institutions that would be treated as small banks
are allowed to utilize the Experience Method applicable to such institutions,
while savings institutions that are treated as large banks (those generally
exceeding $500 million in assets) are required to use only the specific charge-
off method. Thus, the PTI Method of accounting for bad debts is no longer
available for any financial institution.
A savings institution required to change its method of computing reserves
for bad debts will treat such change as a change in method of accounting
initiated by the taxpayer, and having been made with the consent of the IRS.
Any Section 481(a) adjustment required to be taken into income with respect to
such change generally will be taken into income ratably over a six-taxable year
period, beginning with the first taxable year beginning after 1995, subject to
the residential loan requirement.
Under the 1996 Act, for its current and future taxable years, the Bank is
not permitted to make additions to its tax bad debt reserves. In addition, the
Bank is required to recapture (i.e., take into income) over a six year period
the excess of the balance of its tax bad debt reserves as of March 31, 1996
other than its supplemental reserve for losses on loans, over the balance of
such reserves as of March 31, 1988. As a result of such recapture, the Bank
will incur an additional income tax liability of approximately $46,000 over the
recapture period.
-24-
<PAGE>
Distributions. Under the 1996 Act, if the Bank makes "non-dividend
distributions" to the Company, such distributions will be considered to have
been made from the Bank's unrecaptured tax bad debt reserves (including the
balance of its reserves as of March 31, 1988) to the extent thereof, and then
from the Bank's supplemental reserve for losses on loans, to the extent thereof,
and an amount based on the amount distributed (but not in excess of the amount
of such reserves) will be included in the Bank's income. Non-dividend
distributions include distributions in excess of the Bank's current and
accumulated earnings and profits, as calculated for federal income tax purposes,
distributions in redemption of stock, and distributions in partial or complete
liquidation. Dividends paid out of the Bank's current or accumulated earnings
and profits will not be so included in the Bank's income.
The amount of additional taxable income triggered by a non-dividend is an
amount that, when reduced by the tax attributable to the income, is equal to the
amount of the distribution. Thus, if the Bank makes a non-dividend distribution
to the Company, approximately one and one-half times the amount of such
distribution (but not in excess of the amount of such reserves) would be
includable in income for federal income tax purposes, assuming a 34% federal
corporate income tax rate. The Bank does not intend to pay dividends that would
result in a recapture of any portion of its bad debt reserves.
Corporate Alternative Minimum Tax. The Internal Revenue Code (the "Code")
imposes a tax on alternative minimum taxable income ("AMTI") at a rate of 20%.
Only 90% of AMTI can be offset by net operating loss carryovers. AMTI is
increased by an amount equal to 75% of the amount by which a corporation's
adjusted current earnings exceeds its AMTI (determined without regard to this
adjustment and prior to reduction for net operating losses). The Company and its
subsidiaries were not subject to this tax for the year ended March 31, 2000.
Dividends Received Deduction and Other Matters. The Company may exclude
from its income 100% of dividends received from the Bank as a member of the same
affiliated group of corporations. The corporate dividends received deduction is
generally 70% in the case of dividends received from unaffiliated corporations
with which the Company and the Bank will not file a consolidated tax return,
except that if the Company or the Bank own more than 20% of the stock of a
corporation distributing a dividend 80% of any dividends received may be
deducted.
Illinois Taxation. The Company and the Bank file Illinois income tax
returns. For Illinois income tax purposes, corporations are presently taxed at
a rate equal to 7.2% of taxable income. For this purpose, "taxable income"
generally means federal taxable income, subject to certain adjustments
(including the addition of interest income on state and municipal obligations
and the exclusion of interest income on United States Treasury obligations).
The exclusion of income on United States Treasury obligations has the effect of
reducing significantly the Illinois taxable income of savings institutions.
-25-
<PAGE>
Impact of New Accounting Standards
The following does not constitute a comprehensive summary of all material
changes or developments affecting the manner in which the Company keeps its
books and records and performs its financial accounting responsibilities. It is
intended only as a summary of sonic of the recent pronouncements made by the
Financial Accounting Standards Board ("FASB") which are of particular interest
to financial institutions.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities", ("SFAS
No. 133") which is effective for fiscal years beginning after June 15, 1999.
The statement requires all derivatives to be recorded on the balance sheet at
fair value. It also establishes "special accounting" for hedges of changes in
the fair value of assets, liabilities, or firm commitments (fair value hedges),
hedges of the variable cash flows of forecasted transactions (cash flow hedges),
and hedges of foreign currency exposures of net investments in foreign
operations. To the extent the hedge is considered highly effective, both the
change in the fair value of the derivative and the change in the fair value of
the hedged item are recognized (offset) in earnings in the same period. Changes
in fair value of derivatives that do not meet the criteria of one of these three
hedge categories are included in income.
In September 1999, the FASB issued Statement of Financial Accounting
Standards No. 137 ("SFAS No. 137"), entitled "Accounting for Derivative
Instruments in Hedging Activities--Deferral of the Effective Date of FASB
Statement No. 133". SFAS No. 137 defers the effective date of SFAS No. 133 from
years beginning after June 15, 1999 to all fiscal quarters of all fiscal years
beginning after June 15, 2000. Management does not believe that adoption of
SFAS No. 133 will have a material impact on the Company's consolidated financial
condition or results of operations.
-26-
<PAGE>
Additional Item. Executive Officers of the Registrant.
-------------------------------------------------------
The following table sets forth certain information regarding the executive
officers of the Company and the Bank who are not also directors.
Age at Position with the Company and Bank
Name 03/31/00 and Past Five Years Experience
---- -------- ----------------------------------
Jeffrey P. Kosobucki 34 Chief Financial Officer of the
Company. Vice President and Chief
Financial Officer of the Bank.
Item 2. Properties.
--------------------
The Company is located and conducts its business at the Bank's main office
located in Cicero, located at 4852 West 30th Street, Cicero, Illinois. The Bank
also maintains a branch office located 7820 W. 26th Street, North Riverside,
Illinois. See Note 6 to the Notes to Consolidated Financial Statements for the
net book value of the Bank's premises and equipment.
Item 3. Legal Proceedings.
---------------------------
Neither the Company nor its subsidiaries are involved in any pending legal
proceedings, other than routine legal matters occurring in the ordinary course
of business, which in the aggregate involve amounts which are believed by
management to be immaterial to the consolidated financial condition or results
of operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
-------------------------------------------------------------
None.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
-------------------------------------------------------------------------------
Information relating to the market for the Registrant's common equity and
related stockholder matters appears in the Registrant's 2000 Annual Report to
Stockholders on Page 27 and is incorporated herein by reference. On May 26,
2000, the Company had 84 registered shareholders.
Item 6. Selected Financial Data.
---------------------------------
The above-captioned information appears under "Selected Consolidated
Financial and Other Data of the Company" in the Registrant's 2000 Annual Report
to Stockholders on Pages 9 through 11 and is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
--------------------------------------------------------------------------------
of Operations.
--------------
The above-captioned information appears under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Registrant's
2000 Annual Report to Stockholders on Pages 12 through 27 and is incorporated
herein by reference.
Item 8. Financial Statements and Supplementary Data.
-----------------------------------------------------
The Consolidated Financial Statements of West Town Bancorp, Inc. and its
subsidiaries, together with the report thereon by Cobitz, VandenBerg & Fennessy
appear in the Registrant's 2000 Annual Report to Stockholders on Pages F-1
through F-24 and are incorporated herein by reference.
-27-
<PAGE>
Item 9. Change in and Disagreements with Accountants on Accounting and
-----------------------------------------------------------------------
Financial Disclosure.
---------------------
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
-------------------------------------------------------------
The information relating to Directors and Executive Officers of the
Registrant is incorporated herein by reference to the Registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held on July 12, 2000, on
Pages 3 through 6. Information concerning Executive Officers who are not
directors is contained in Part I of this report pursuant to paragraph (b) of
Item 401 of Regulation S-K in reliance on Instruction G.
Item 11. Executive Compensation.
---------------------------------
The information relating to director and executive compensation is
incorporated herein by reference to the Registrant's Proxy Statement for the
Annual Meeting of Stockholders to be held on July 12, 2000, on Pages 6 through
9.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
-------------------------------------------------------------------------
The information relating to security ownership of certain beneficial owners
and management is incorporated herein by reference to the Registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held on July 12, 2000, on
Pages 2 through 4.
Item 13. Certain Relationships and Related Transactions.
---------------------------------------------------------
The information relating to certain relationships and related transactions
is incorporated herein by reference to the Registrant's Proxy Statement for the
Annual Meeting of Stockholders to be held on July 12, 2000, on Page 13.
-28-
<PAGE>
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
--------------------------------------------------------------------------
1. Independent Auditors' Report*
2. All Financial Statements*
(a) Consolidated Statements of Condition as of March 31, 2000 and 1999.
(b) Consolidated Statements of Income for the Years Ended March 31, 2000,
1999 and 1998.
(c) Consolidated Statements of Stockholders' Equity for Years Ended March
31, 2000, 1999 and 1998.
(d) Consolidated Statements of Cash Flows for the Years Ended March 31,
2000, 1999 and 1998.
(e) Notes to Consolidated Financial Statements
All schedules have been omitted as the required information is either
inapplicable or included in the Notes to Consolidated Financial Statements.
3. Exhibits
(3)(a) Certificate of Incorporation of West Town Bancorp, Inc.**
(3)(b) Bylaws of West Town Bancorp, Inc.**
13 2000 Annual Report to Stockholders
22 Subsidiaries of the Registrant
24 Consent of Independent Auditors
* Incorporated by reference to the Annual Report to Stockholders for
the fiscal year ended March 31, 2000, attached as an exhibit hereto.
** Incorporated by reference to the Registration Statement on Form S-1,
and amendments thereto, filed with the Securities and Exchange
Commission.
-29-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 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 TOWN BANCORP, INC.
By: /s/ Dennis B. Kosobucki
-------------------------------------
Dennis B. Kosobucki
DATED: June 7, 2000 Chairman of the Board,
President and Chief Executive Officer
(Duly Authorized Representative)
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the dates indicated.
Name Title Date
---- ----- ----
/s/ Dennis B. Kosobucki Chairman of the Board June 7, 2000
--------------------------
Dennis B. Kosobucki President, Chief Executive Officer
(Principal Executive Officer)
/s/ Jeffrey P. Kosobucki Vice President and Chief June 7, 2000
--------------------------
Jeffrey P. Kosobucki Financial Officer
(Principal Financial Officer
and Principal Accounting Officer)
/s/ Edward J. Hradecky Director June 7, 2000
--------------------------
Edward J. Hradecky
/s/ John A. Storcel Director June 7, 2000
--------------------------
John A. Storcel
/s/ James Kucharczyk Director June 7, 2000
--------------------------
James Kucharczyk
/s/ James J. Kemp, Jr. Director June 7, 2000
--------------------------
James J. Kemp, Jr.
-30-
<PAGE>
Cobitz, Vandenberg & Fennessy
CERTIFIED PUBLIC ACCOUNTANTS
9944 SOUTH ROBERTS ROAD - SUITE 202
PALOS HILLS, ILLINOIS 60465
(708) 430-4106 - Fax (708) 430-4499
INDEPENDENT AUDITORS' REPORT
The Board of Directors
West Town Bancorp, Inc.
Cicero, Illinois
We have audited the consolidated statements of financial condition of West
Town Bancorp, Inc. and subsidiaries as of March 31, 2000 and 1999 and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for each of the three years in the period ended March 31, 2000.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of West Town
Bancorp, Inc. and subsidiaries at March 31, 2000 and 1999, and the results of
their operations and their cash flows for each of the three years in the period
ending March 31, 2000, in conformity with generally accepted accounting
principles.
/s/ Cobitz, Vandenberg & Fennessy
May 2, 2000
Palos Hills, Illinois
-31-
