PROFILE
West Suburban Bancorp, Inc. (the "Parent"), a bank and thrift holding company,
is the parent company of the following (the "Subsidiaries", and together with
the Parent, the "Company" or "West Suburban"): West Suburban Bank, Lombard,
Illinois; West Suburban Bank of Downers Grove/Lombard, Downers Grove, Illinois;
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇; West Suburban Bank of ▇▇▇▇▇
Stream/Stratford Square, Bloomingdale, Illinois; and West Suburban Bank of
Aurora, F.S.B., Aurora, Illinois ("WSB Aurora"). The Company had total
consolidated assets at December 31, 1996 of approximately $1.24 billion.
WEST SUBURBAN BANCORP, INC.
FINANCIAL HIGHLIGHTS
Years Ended December 31,
(Dollars in thousands, except per share data)
-----------------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
Net income $15,942 $13,525 $13,026 $11,824 $11,996
Per share data
Net income fully diluted 36.86 31.27 30.12 27.72 28.74
Book value 273.62 254.73 226.53 221.56 209.31
Net loans 784,242 760,687 709,205 694,301 652,007
Total assets 1,235,604 1,154,349 1,041,495 999,878 1,000,200
Deposits 1,099,397 1,029,789 923,257 883,464 877,923
Shareholders' equity 118,338 110,168 97,971 95,822 84,444
TABLE OF CONTENTS
Profile........................................1 Distribution of Assets and Net Interest
Letter to Our Shareholders, Income and Average Rates
Customers and Friends........................2 and Yields on a Tax Equivalent Basis..........24
Corporate Information..........................3 Management's Discussion
Business Review................................3 and Analysis of Financial
Selected Quarterly Financial Data..............3 Condition and Results of Operations...........26
Review of Operations...........................4 Boards of Directors............................35
Independent Auditors' Report...................5 Officers.......................................36
Consolidated Financial Statements..............6 Addresses of Locations.........................38
Notes to Consolidated Financial Statements....11 Map of Locations...............................39
Selected Financial Data.......................23 Shareholder Information........................40
THIS REPORT, INCLUDING THE CHAIRMAN'S LETTER, CONTAINS CERTAIN
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. THE COMPANY INTENDS SUCH FORWARD-LOOKING
STATEMENTS TO BE COVERED BY THE SAFE HARBOR PROVISIONS FOR FORWARD-LOOKING
STATEMENTS CONTAINED IN THE PRIVATE SECURITIES REFORM ACT OF 1995, AND IS
INCLUDING THIS STATEMENT FOR PURPOSES OF INDICATING SUCH INTENT.
FORWARD-LOOKING STATEMENTS WHICH ARE BASED ON CERTAIN ASSUMPTIONS AND
DESCRIBE FUTURE PLANS, STRATEGIES AND EXPECTATIONS OF THE COMPANY, ARE
GENERALLY IDENTIFIABLE BY USE OF THE WORDS "BELIEVE", "EXPECT", "INTEND",
"ANTICIPATE", "ESTIMATE", "PROJECT" OR SIMILAR EXPRESSIONS. THE COMPANY'S
ABILITY TO PREDICT RESULTS OR THE ACTUAL EFFECT OF FUTURE PLANS OR STRATEGIES
IS INHERENTLY UNCERTAIN. FACTORS WHICH COULD HAVE A MATERIAL ADVERSE AFFECT ON
THE OPERATIONS AND FUTURE PROSPECTS OF THE PARENT AND THE SUBSIDIARIES
INCLUDE, BUT ARE NOT LIMITED TO, CHANGES IN INTEREST RATES, GENERAL ECONOMIC
CONDITIONS, LEGISLATIVE/REGULATORY CHANGES, MONETARY AND FISCAL POLICIES OF
THE U.S. GOVERNMENT, INCLUDING POLICIES OF THE U.S. TREASURY AND THE FEDERAL
RESERVE BOARD, THE QUALITY OR COMPOSITION OF THE LOAN OR INVESTMENT
PORTFOLIOS, DEMAND FOR LOAN PRODUCTS, DEPOSIT FLOWS, COMPETITION, DEMAND FOR
FINANCIAL SERVICES IN THE COMPANY'S MARKET AREA AND ACCOUNTING PRINCIPLES,
POLICIES AND GUIDELINES. THESE RISKS AND UNCERTAINTIES SHOULD BE CONSIDERED
IN EVALUATING FORWARD-LOOKING STATEMENTS AND UNDUE RELIANCE SHOULD NOT BE
PLACED ON SUCH STATEMENTS. FURTHER INFORMATION CONCERNING THE COMPANY AND ITS
BUSINESS, INCLUDING ADDITIONAL FACTORS THAT COULD MATERIALLY AFFECT THE
COMPANY'S FINANCIAL RESULTS, IS INCLUDED IN THE COMPANY'S FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION.
1
TO OUR SHAREHOLDERS, CUSTOMERS AND FRIENDS:
West Suburban looks forward to 1997 with great enthusiasm and pride as we
celebrate our 35th anniversary. We hope that our shareholders, customers, and
friends join in our excitement. As consolidation in the banking industry
continues and community banks throughout our market area continue to be
absorbed by larger institutions, West Suburban remains committed to
maintaining its independence and to providing its customers with superior
service, innovative products and local decision making.
While we are committed to maintaining many aspects of our organization and
operations, as the banking industry changes, West Suburban continues to adapt
in order to remain competitive. In this regard, we plan to consolidate our
four banks and our thrift into one bank that will operate under the name "West
Suburban Bank". This consolidation will create efficiencies which will allow
us to continue to compete successfully with other financial institutions and
will reduce certain regulatory burdens.
In 1996, our assets grew by $81.3 million (7.0%) from $1,154.3 million at
year end 1995 to $1,235.6 million. Our net income increased by $2.4 million
(17.9%) from $13.5 million for the year ended December 31, 1995 to $15.9
million in 1996. Our assets and net income both represent record levels. West
Suburban increased its return on average assets in 1996 to 1.38% from 1.27%
for the year ending December 31, 1995. During 1996, our per share book value
increased by $18.89 (7.4%) to $273.62 from $254.73 at year end 1995 and the
dividends paid to our shareholders increased to $15.75 from $14.75 in 1995.
Additionally, in June of 1996, we opened our first banking facility in
Naperville. We welcome Naperville into the communities that we serve.
We are proud of our many accomplishments during our first 35 years. We look
forward to the challenges of offering innovative products and increased
locations in the upcoming years as we hope to be your bank now and in the
future.
While we are excited about the future, we would like to announce, with
regret, the resignation of ▇▇▇▇ ▇. ▇▇▇▇▇, President and Chief Executive
Officer. ▇▇▇▇ joined West Suburban in 1980. His efforts and leadership
contributed in a significant manner to the growth and profitability of West
Suburban. We thank ▇▇▇▇ for his significant contributions and wish him well
in his future endeavors.
As always, we appreciate your continued support and welcome your comments,
criticisms and suggestions. We could not have achieved our accomplishments of
the past 35 years without the support of our shareholders, customers,
communities, friends and employees. Thank you everyone.
Sincerely,
▇▇▇▇▇ ▇. ▇▇▇▇▇
Chairman of the Board
2
CORPORATE INFORMATION
The Company is a multi-bank and thrift holding company for four banks
headquartered in DuPage County, Illinois and WSB Aurora, a federally charted
thrift headquartered in Aurora, Illinois.
The Company has two classes of common stock issued and outstanding and, in
accordance with the terms of its articles of incorporation and bylaws, the
Company treats both classes equally for all purposes including book value and
dividend purposes. The shares of the Company's common stock are not traded on
any stock exchange or on the over-the-counter market. The Company's per share
book value as of the end of the indicated periods and dividends declared for
the last two years are set forth in the following table:
YEAR QUARTER BOOK VALUE DIVIDENDS DECLARED
1996 4TH $273.62 $4.00
3RD 266.00 4.00
2ND 265.31 4.00
1ST 258.36 4.00
1995 4th $254.73 $3.75
3rd 246.47 3.75
2nd 242.69 3.75
1st 237.68 3.75
BUSINESS REVIEW
The Subsidiaries ranged in size from total assets at December 31, 1996 of
$148 million to $487 million. As of December 31, 1996, the Subsidiaries
operated 32 facilities throughout DuPage, ▇▇▇▇, ▇▇▇▇▇▇▇ and Will Counties,
with their business activities focusing primarily on the retail and
commercial banking markets. The Company had a total of 533 full-time
equivalent employees at December 31, 1996.
SELECTED QUARTERLY FINANCIAL DATA
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
(Dollars in thousands, except per share data)
1996
INTEREST INCOME $22,021 $21,378 $21,782 $23,377
NET INTEREST INCOME 12,774 12,480 12,193 12,752
PROVISION FOR LOAN LOSSES 458 338 388 321
OTHER OPERATING INCOME 2,276 3,187 2,155 2,278
OTHER OPERATING EXPENSE 7,674 6,982 11,616 7,878
NET INCOME 4,583 5,274 1,640 4,445
NET INCOME PER SHARE 10.60 12.19 3.79 10.28
1995
Interest income $19,192 $21,020 $21,376 $21,840
Net interest income 10,969 11,466 11,598 11,981
Provision for loan losses 463 462 463 462
Other operating income 1,789 1,983 1,811 2,241
Other operating expense 7,322 7,180 8,122 7,568
Net income 2,967 3,428 3,238 3,892
Net income per share 6.86 7.92 7.49 9.00
3
REVIEW OF OPERATIONS
In 1996, West Suburban was presented with a number of opportunities and
challenges. We believe that our abundance of innovative products and quality
services, as well as our commitment to profitable growth have allowed us to
meet these challenges successfully. We continued to expand into new markets
by opening our first facility in Naperville at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ in June.
Over the past year, West Suburban continued to develop new and innovative
products that serve the varied needs of our customers. In March, we
introduced our Master Equity Line. This new home equity product features a
traditional line of credit that allows customers to "carve out" fully
amortizing installment loans with competitive interest rates. By combining
the best features of a line of credit (check writing capability and interest
only payments) with the advantages of a fully amortizing loan (regular
principal reduction and fixed rates), our Master Equity Line appeals to a
broad range of customers.
On the deposit side, we maintained our emphasis on providing customers
flexible deposit products that would allow our customers to maximize yields.
We continued to promote our 5-Year Look-In Certificate of Deposit, a product
that guarantees a high 5-year rate while allowing customers an annual "look-in"
on the certificate of deposit's anniversary when they may withdraw any or all
of their deposit without penalty. In February, we introduced our 4-Year
Maximum Yield Certificate of Deposit to give our customers another
high-yielding option for their savings. This certificate of deposit has an
initial annual percentage yield that matches our 5-Year Look-In Certificate
of Deposit - the highest standard yield that we offer. We believe it is
important to offer products like the 5-Year Look-In Certificate of Deposit
and the 4-Year Maximum Yield Certificate of Deposit to provide customers with
a competitive alternative to nonbank investments.
In addition to these new certificates of deposit, we also offered a number of
short-to-medium term promotional certificates of deposit, including a 7%
7-Month Certificate of Deposit that coincided with our Naperville grand
opening, as well as a 6.5% 15-Month Certificate of Deposit offered during
September. Aggressively priced certificates of deposit like these have
allowed us to attract funds and new customers even as money has been moving
out of banks and into mutual funds at a record pace. We remain committed to
retaining these funds and expanding our relationships with our existing
customers.
These product introductions, along with existing products and services,
reflect our dedication to meeting the needs of our customers. At West
Suburban, we believe our responsibility extends beyond our customer base and
into the communities we serve. As in the past, we have expressed this at the
institutional and individual levels.
West Suburban welcomes the challenges and opportunities that 1997 presents.
We continue to streamline operations to create greater efficiencies and we
will aggressively pursue new customers and new relationships with our
existing customers. We anticipate that our innovative financial thinking and
our dedication to serving our customers and shareholders will lead to
continued success in the years ahead.
4
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
West Suburban Bancorp, Inc.
We have audited the accompanying consolidated balance sheets of West Suburban
Bancorp, Inc. and subsidiaries (the "Company") as of December 31, 1996 and
1995, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. 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 financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the accompanying consolidated financial statements present
fairly, in all material respects, the financial position of West Suburban
Bancorp, Inc. and subsidiaries at December 31, 1996 and 1995 and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1996 in conformity with generally accepted
accounting principles.
DELIOTTE & TOUCHE LLP
January 30, 1997
5
WEST SUBURBAN BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(Dollars in thousands)
ASSETS
1996 1995
----------- -----------
Cash and due from banks $38,520 $50,094
Interest-bearing deposits in financial institutions 240 141
Federal funds sold 29,890 38,110
----------- -----------
Total cash and cash equivalents 68,650 88,345
Investment securities:
Available for sale (amortized cost of $159,614 in
1996; $134,139 in 1995) 158,578 134,519
Held to maturity (fair value of $170,202 in
1996; $116,199 in 1995) 170,191 116,037
Loans, less allowance for loan losses of $9,603 in
1996; $8,900 in 1995 784,242 760,687
Premises and equipment, net 30,130 29,206
Other real estate 2,757 8,317
Accrued interest and other assets 21,056 17,238
----------- -----------
TOTAL ASSETS $1,235,604 $1,154,349
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $102,583 $104,821
Interest-bearing 996,814 924,968
----------- -----------
Total Deposits 1,099,397 1,029,789
FHLB advances 1,350
Accrued interest and other liabilities 16,519 14,392
----------- -----------
TOTAL LIABILITIES 1,117,266 1,044,181
----------- -----------
Shareholders' equity:
Common stock, Class A, no par value; 1,000,000
shares authorized; 347,015 shares issued
and outstanding 2,774 2,774
Common stock, Class B, no par value; 1,000,000
shares authorized; 85,480 shares issued
and outstanding 683 683
Surplus 38,066 38,066
Retained earnings 77,439 68,416
Unrealized (loss) gain on securities available
for sale, net of taxes (benefit) of ($412) in
1996; $151 in 1995 (624) 229
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 118,338 110,168
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,235,604 $1,154,349
----------- -----------
----------- -----------
The accompanying notes are an integral part of the consolidated financial
statements.
6
WEST SUBURBAN BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Dollars in thousands, except per share data)
1996 1995 1994
---------- --------- ---------
INTEREST INCOME
Loans, including fees $70,759 $67,381 $53,570
---------- --------- ---------
Investment securities:
Taxable 13,859 12,801 13,572
Nontaxable 2,084 1,290 1,194
---------- --------- ---------
Total investment securities 15,943 14,091 14,766
Deposits in financial institutions 16 7 33
Federal funds sold 1,840 1,949 743
---------- --------- ---------
Total interest income 88,558 83,428 69,112
---------- --------- ---------
INTEREST EXPENSE
Deposits 37,787 36,988 27,093
Other 572 426 338
---------- --------- ---------
Total interest expense 38,359 37,414 27,431
---------- --------- ---------
Net interest income 50,199 46,014 41,681
PROVISION FOR LOAN LOSSES 1,505 1,850 2,216
---------- --------- ---------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 48,694 44,164 39,465
---------- --------- ---------
OTHER OPERATING INCOME
Service fees 3,746 3,529 3,496
Trust fees 157 243 280
Gain on sales of loans 151 110 213
Loan servicing 899 941 876
Net realized gain on sales of investment
securities available for sale 449 41 1,524
Other 4,494 2,960 3,296
---------- --------- ---------
Total other operating income 9,896 7,824 9,685
---------- --------- ---------
OTHER OPERATING EXPENSE
Salaries and employee benefits 14,954 13,228 12,860
Occupancy 2,743 2,604 2,127
Furniture and equipment 2,655 2,413 2,186
FDIC insurance premiums 1,113 1,213 1,997
Professional fees 1,062 1,106 1,180
Data processing 827 967 916
Other real estate 5,042 3,516 824
Other 5,754 5,145 5,083
---------- --------- ---------
Total other operating expense 34,150 30,192 27,173
---------- --------- ---------
INCOME BEFORE INCOME TAXES 24,440 21,796 21,977
Income taxes 8,498 8,271 8,951
---------- --------- ---------
NET INCOME $15,942 $13,525 $13,026
---------- --------- ---------
---------- --------- ---------
EARNINGS PER PRIMARY AND FULLY DILUTED SHARE $36.86 $31.27 $30.12
---------- --------- ---------
---------- --------- ---------
The accompanying notes are an integral part of the consolidated financial
statements.
7
WEST SUBURBAN BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Dollars in thousands)
Unrealized
Gain (Loss)
on Securities Total
Class A Class B Available For Share-
Common Common Retained Sale, Net of holders'
Stock Stock Surplus Earnings Taxes Equity
--------- ---------- --------- ---------- ------------- ---------
BALANCE, JANUARY 1, 1994 $2,774 $683 $38,066 $54,299 $95,822
Net unrealized gain on
securities available for
sale, net of taxes, at
January 1, 1994 $1,574 1,574
Net income 13,026 13,026
Cash dividends declared (5,947) (5,947)
Change in net
unrealized gain (loss)
on securities available
for sale, net of taxes (6,504) (6,504)
--------- ---------- --------- ---------- ------------- ---------
BALANCE, DECEMBER 31,
1994 2,774 683 38,066 61,378 (4,930) 97,971
Net income 13,525 13,525
Cash dividends declared (6,487) (6,487)
Change in net
unrealized gain (loss)
on securities available
for sale, net of taxes 5,159 5,159
--------- ---------- --------- ---------- ------------- ---------
BALANCE, DECEMBER 31,
1995 2,774 683 38,066 68,416 229 110,168
Net income 15,942 15,942
Cash dividends declared (6,919) (6,919)
Change in net
unrealized gain (loss)
on securities available
for sale, net of taxes (853) (853)
--------- ---------- --------- ---------- ------------- ---------
BALANCE, DECEMBER 31,
1996 $2,774 $683 $38,066 $77,439 ($624) $118,338
--------- ---------- --------- ---------- ------------- ---------
--------- ---------- --------- ---------- ------------- ---------
The accompanying notes are an integral part of the consolidated financial
statements.
8
WEST SUBURBAN BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Dollars in thousands)
1996 1995 1994
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $15,942 $13,525 $13,026
-------- -------- --------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,974 2,720 2,426
Provision for loan losses 1,505 1,850 2,216
Provision for deferred income tax benefit (2,185) (593) (18)
Net premium amortization and discount
accretion of investment securities 487 463 1,523
Net realized gain on sales of
securities available for sale (449) (41) (1,524)
Gain on sale of loans held for sale (151) (110) (213)
Proceeds from sale of loans held for sale 727 1,964 8,599
Origination of loans held for sale (1,043) (3,038) (12,693)
Provision for loss on other real estate 5,460 1,543
Loss (gain) on sale of premises and
equipment 90 (31) 266
Gain on sale of other real estate (55) (12) (481)
(Increase) decrease in accrued interest
and other assets (1,165) 2,835 1,715
Increase (decrease) in accrued interest
and other liabilities 2,114 3,606 (1,960)
-------- -------- --------
Total adjustments 8,309 11,156 (144)
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 24,251 24,681 12,882
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment securities available for sale:
Proceeds from sales 30,160 9,087 70,135
Proceeds from maturities 16,721 3,162 68,117
Purchases (72,537) (24,676) (72,249)
Investment securities held to maturity:
Proceeds from maturities 48,343 55,632 2,380
Purchases (102,353) (63,016) (91,166)
Net increase in loans (26,697) (53,869) (21,773)
Purchases of premises and equipment (4,017) (5,273) (3,966)
Proceeds from sale of premises and
equipment 29 32 23
Proceeds from sale of other real estate 2,259 2,330 8,937
--------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES ($108,092) ($76,591) ($39,562)
-------- -------- --------
The accompanying notes are an integral part of the consolidated financial
statements.
9
WEST SUBURBAN BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(CONTINUED)
(Dollars in thousands)
1996 1995 1994
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in total deposits $ 69,608 $ 106,531 $ 39,793
Increase (decrease) in FHLB advances 1,350 (9,940) 1,720
Repayment of REMIC (3,541)
Cash dividends paid (6,812) (6,379) (5,745)
-------- -------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 64,146 90,212 32,227
-------- -------- --------
Net (decrease) increase in cash and cash
equivalents (19,695) 38,302 5,547
Cash and cash equivalents at beginning
of year 88,345 50,043 44,496
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 68,650 $ 88,345 $ 50,043
-------- -------- --------
-------- -------- --------
Supplemental cash flow information:
Cash paid during the year for:
Interest on deposits and other borrowings $37,694 $35,707 $27,417
Income taxes 10,244 7,673 6,090
Transfers from loans to other real estate 2,104 1,721 8,960
Transfer of investment securities from
held to maturity to available for sale 32,288
The accompanying notes are an integral part of the consolidated financial
statements.
10
WEST SUBURBAN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of West Suburban
Bancorp, Inc. (the "Parent") and its subsidiaries (collectively, the
"Subsidiaries" and together with the Parent, the "Company"): West Suburban Bank;
West Suburban Bank of Downers Grove/Lombard; West Suburban Bank of Darien;
West Suburban Bank of ▇▇▇▇▇ Stream/Stratford Square; and West Suburban Bank
of Aurora, F.S.B. ("WSB Aurora"). Significant intercompany accounts and
transactions have been eliminated.
BASIS OF ACCOUNTING
The accompanying consolidated financial statements are prepared in accordance
with generally accepted accounting principles and conform to general practices
within the banking industry. A summary of accounting policies follows.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
primarily the allowance for loan losses, and disclosure of contingent assets
and liabilities at the date of the consolidated financial statements and the
reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
INVESTMENT SECURITIES
Debt and marketable equity securities are classified into two categories, "held
to maturity" and "available for sale." Held to maturity securities include those
securities where the Company has both the ability and positive intent to hold
them to maturity. Securities not meeting this criteria are classified as
available for sale. Held to maturity securities are carried at amortized
historical cost while available for sale securities are carried at fair value
with net unrealized gains and losses (net of tax) reported as a separate
component of shareholders' equity. Gains or losses on disposition are based on
the net proceeds and the adjusted carrying amount of the securities sold, using
the specific identification method. The Company does not engage in trading
activities. The Company has not utilized futures, forwards, swaps or option
contracts in order to manage its interest rate risk or otherwise.
LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans are stated at the amount of unpaid principal, reduced by an allowance for
loan losses. Interest on loans is recognized based upon the principal amount
outstanding. Accrual of interest is generally discontinued on a loan when it
becomes 90 days past due or when management believes, after considering
economic and business conditions and collection efforts, that the borrowers'
financial condition is such that collection of principal or interest is
doubtful. In some circumstances, a loan that is more than 90 days past due can
remain on accrual status if it can be established that payment will be received
within another 90 days or if it is fully secured and in the process of
collection. When a loan has been placed on nonaccrual status, interest that has
been earned but not collected is charged back to the appropriate interest
income account. When payments are received on nonaccrual loans they are first
applied to principal, then to expenses incurred for collection and finally to
interest income.
The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance for loan
losses when management believes that the collectibility of the principal is
unlikely. The allowance is an amount that management believes will be adequate
to absorb losses on existing loans that may become uncollectible, based on
evaluations of the collectibility of loans and prior loan loss experience. The
evaluations take into consideration such factors as changes in the nature and
volume of the loan portfolio, overall portfolio quality, review of specific
problem loans and current economic conditions that may affect the borrowers'
ability to pay.
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") 114, "Accounting by Creditors for Impairment of a
Loan," and SFAS 118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures," which addresses the accounting by creditors for
impairment of certain loans. SFAS 114 defines a loan as impaired when it is
probable that the creditor will be unable to collect all amounts due, both
principal and interest, according to the contractual terms of the loan
agreement. Impairment is measured based on the present value of expected future
cash flows discounted at the loan's effective interest rate, the loan's
observable market price, or the fair value of the loan's collateral, if
repayment of the loan is collateral dependent. A valuation allowance is
required for the amount of impairment. The Company reviews its commercial and
real estate construction and non-residential loans on a quarterly basis to
determine impairment. Generally, loans 90 or more days
11
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
past due and all loans on a nonaccrual basis are considered impaired. Interest
income on impaired loans is recognized in a manner consistent with the
Company's interest policy. The adoption of SFAS 114 and SFAS 118 did not have a
material effect on the Company's financial condition or results of operations.
LOANS HELD FOR SALE
Loans are identified as either held for investment or held for sale upon their
origination. Loans held for sale are recorded at the lower of amortized cost or
market value, determined on an aggregate basis. Unrealized losses, if any, are
recognized on a current basis.
MORTGAGE SERVICING RIGHTS
Effective January 1, 1996, the Company adopted SFAS 122, "Accounting for
Mortgage Servicing Rights," which requires certain accounting for mortgage
servicing rights and the valuation and recognition of impairment of mortgage
servicing rights. The adoption of SFAS 122 did not have a material effect on
the Company's financial condition or results of operations.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation, which
is generally computed on the straight-line method over the estimated useful
lives of the assets. Leasehold improvements are amortized on the straight-line
method over the shorter of the estimated useful lives of the improvements or
the terms of the related leases.
OTHER REAL ESTATE
Other real estate includes properties acquired in partial or total settlement
of problem loans. The properties are recorded at the lower of cost or fair
value less estimated selling costs at the date acquired. Losses arising at the
time of acquisition of such properties are charged to the allowance for loan
losses. Any subsequent decline in value is charged to current operations. The
revenue received from, and expenses incurred in maintaining, such properties
are also included in current operations. The amounts the Company could
ultimately recover from other real estate could differ materially from the
amounts used in determining the net carrying value of the assets because of
future market factors beyond the Company's control or changes in the Company's
strategy for recovering its investment. Management believes the net carrying
value of other real estate is a reasonable estimate of its net realizable
value.
INTANGIBLES
The Company accounted for the acquisition of its thrift subsidiary, WSB Aurora,
using the purchase method of accounting. The related intangibles are being
amortized over 15 years on the straight-line method.
Effective January 1, 1996 the Company adopted SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
which requires that long-lived assets and certain identifiable intangibles that
are used in operations be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of assets might not be
recoverable. The adoption of SFAS 121 did not have a material effect on the
Company's financial condition or result of operation.
TRUST ASSETS AND FEES
Assets held in fiduciary or agency capacities are not included in the
consolidated balance sheets since such items are not assets of the Company.
Income from trust fees is recorded when received. This income does not differ
materially from trust fees computed on an accrual basis.
INCOME TAXES
The Parent files consolidated federal and state income tax returns with the
Subsidiaries.
EARNINGS PER SHARE
Earnings per share are calculated on the basis of the daily weighted average
number of shares outstanding.
CASH FLOWS
For purposes of reporting cash flows, cash and cash equivalents include cash
and due from banks, interest-bearing deposits in financial institutions and
federal funds sold. Generally, federal funds are sold for one day periods.
RECLASSIFICATIONS
Certain reclassifications have been made in prior years' financial statements
to conform with the current year's presentation.
12
------------------------------------------------------------------------------
NOTE 2 - INVESTMENT SECURITIES
The amortized cost and fair value of investment securities available for sale
are as follows at December 31:
1996
--------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------- -------------- -------------- --------------
Corporate $64,634 $283 ($322) $64,595
U.S. government agencies and
corporations 63,591 134 (890) 62,835
U.S. Treasury 16,151 (206) 15,945
States and political subdivisions 1,168 8 (3) 1,173
-------------- -------------- -------------- --------------
Total debt securities 145,544 425 (1,421) 144,548
Federal Home Loan
Mortgage Corp. Preferred
Stock and other equity
securities 14,070 16 (56) 14,030
-------------- -------------- -------------- --------------
Total $159,614 $441 ($1,477) $158,578
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
1995
--------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------- -------------- -------------- --------------
Corporate $69,731 $1,053 ($105) $70,679
U.S. government agencies and
corporations 36,119 254 (783) 35,590
U.S. Treasury 16,291 (107) 16,184
States and political subdivisions 1,157 14 (33) 1,138
-------------- -------------- -------------- --------------
Total debt securities 123,298 1,321 (1,028) 123,591
Federal Home Loan
Mortgage Corp. Preferred
Stock and other equity
securities 10,841 117 (30) 10,928
-------------- -------------- -------------- --------------
Total $134,139 $1,438 ($1,058) $134,519
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
13
NOTE 2 - INVESTMENT SECURITIES (CONTINUED)
The amortized cost and fair value of investment securities held to maturity are
as follows at December 31:
1996
--------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------- -------------- -------------- --------------
U.S. government agencies and
corporations $130,250 $164 ($383) $130,031
States and political subdivisions 39,941 312 (82) 40,171
-------------- -------------- -------------- --------------
Total $170,191 $476 ($465) $170,202
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
1995
--------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------- -------------- -------------- --------------
U.S. government agencies and
corporations $83,237 $159 ($140) $83,256
States and political subdivisions 32,800 216 (73) 32,943
-------------- -------------- -------------- --------------
Total $116,037 $375 ($213) $116,199
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
In November 1995, the Financial Accounting Standards Board ("FASB") issued a
Special Report on Implementation of SFAS 115. In applying the provisions of
this report, the Company transferred to available for sale those corporate
bonds that had previously been classified as held to maturity. These corporate
bonds had an aggregate market value of $32.8 million, and an unrealized gain,
net of tax, of $.3 million at the transfer date.
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties. The amortized cost and fair value of debt securities
available for sale and held to maturity at December 31, 1996 by contractual
maturity are as follows:
Available for Sale Held to Maturity
------------------------------ ------------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
-------------- -------------- -------------- --------------
Due in 1 year or less $33,530 $33,587 $13,139 $13,170
Due after 1 year through 5 years 86,654 86,396 122,559 122,467
Due after 5 years through 10 years 25,065 24,270 20,663 20,667
Due after 10 years 295 295 13,830 13,898
-------------- -------------- -------------- --------------
Total $145,544 $144,548 $170,191 $170,202
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Gross gains and gross (losses) of $476 and ($27), $161 and ($120), $1,639 and
($115) were realized on sales in 1996, 1995 and 1994, respectively.
Investment securities with a carrying value of approximately $29,848 and
$21,125 at December 31, 1996 and 1995, respectively, were pledged to secure
public deposits, fiduciary activities and for other purposes required or
permitted by law.
14
NOTE 3 - LOANS
Major classifications of loans were as follows at December 31:
1996 1995
-------------- --------------
Commercial $232,210 $200,986
Installment 37,511 37,986
Real estate:
Mortgage 299,664 302,062
Home equity 124,805 120,802
Construction 73,432 81,787
Held for sale 1,043 1,523
VISA - credit card 17,951 19,034
Other 7,229 5,407
-------------- --------------
Total 793,845 769,587
Allowance for loan losses (9,603) (8,900)
-------------- --------------
Loans, net $784,242 $760,687
-------------- --------------
-------------- --------------
The Company makes commercial, personal and residential loans primarily to
customers throughout the western suburbs of Chicago. The Company's loans to the
construction and land development industries represented 9.3% and 10.6% of
total loans at December 31, 1996 and 1995, respectively. The Company's real
estate construction loans are generally made within the market areas of the
Subsidiaries. The Company manages this exposure by continually reviewing local
market conditions and closely monitoring collateral values. No unusual losses
are anticipated as a result of these concentrations.
Loans on which the accrual of interest has been discontinued or reduced
amounted to $2,283, $1,478 and $279 at December 31, 1996, 1995 and 1994,
respectively. If interest on those loans had been accrued, such income would
have approximated $136, $146 and $15 for 1996, 1995 and 1994, respectively.
Changes in the allowance for loan losses were as follows for the years ended
December 31:
1996 1995 1994
-------------- -------------- --------------
Balance, beginning of year $8,900 $8,445 $7,125
Provision for loan losses 1,505 1,850 2,216
Loans charged-off (1,097) (1,729) (1,292)
Recoveries 295 334 396
-------------- -------------- --------------
Balance, end of year $9,603 $8,900 $8,445
-------------- -------------- --------------
-------------- -------------- --------------
The Company's impaired loans consisted of commercial loans totaling $17,555 at
December 31, 1996 and $13,351 at December 31, 1995. Of these impaired loans,
$1,422 required a valuation allowance of $182 at December 31, 1996 compared to
impaired loans of $2,522 with a valuation allowance of $408 at December 31,
1995. The average outstanding balance of impaired loans was approximately
$17,120 and $10,043 for the years ended December 31, 1996 and 1995,
respectively. The interest income recognized on impaired loans was
approximately $1,706 and $897 for the years ended December 31, 1996 and 1995,
respectively. The Company had no impaired real estate construction or non-
residential loans during 1996 or 1995.
Mortgage loans serviced for others are not included in the accompanying
consolidated balance sheets. Servicing loans for others generally consists of
collecting mortgage payments, maintaining escrow accounts, disbursing payments
to investors and foreclosure processing. Loan servicing income is recorded on
the accrual basis and includes servicing fees from investors and certain
charges collected from borrowers. At December 31, 1996 and 1995, the Company
was servicing loans for the benefit of others with aggregate unpaid principal
balances of $296,282 and $330,042, respectively.
15
NOTE 3 - LOANS (CONTINUED)
At December 31, 1996 and 1995, the Company had outstanding banker's acceptances
of $304 and $753, respectively. A banker's acceptance is a draft that has been
drawn on and accepted by the Company for payment at a future date. Funds are
advanced to the drawer of the acceptance by discounting the accepted draft. The
Company has an unconditional obligation to fund the holder upon presentation of
the draft. Likewise, the customer has an unconditional obligation to fund the
Company at or before the maturity date specified in the instrument.
NOTE 4 - PREMISES AND EQUIPMENT
Major classifications of these assets are summarized as follows at December 31:
1996 1995
-------------- --------------
Land $5,848 $5,848
Premises 24,944 23,160
Leasehold improvements 679 652
Furniture and equipment 25,612 24,008
-------------- --------------
57,083 53,668
Less accumulated depreciation and amortization (26,953) (24,462)
-------------- --------------
Total $30,130 $29,206
-------------- --------------
-------------- --------------
NOTE 5 - DEPOSITS
The major categories of deposits are summarized as follows at December 31:
1996 1995
-------------- --------------
Demand and other noninterest-bearing $102,582 $104,821
NOW accounts 182,862 191,626
Money market savings 342,872 340,714
Time, $100,000 and over 86,343 68,063
Time, other 384,738 324,565
-------------- --------------
Total $1,099,397 $1,029,789
-------------- --------------
-------------- --------------
Interest expense on interest-bearing deposits is summarized as follows for the
years ended December 31:
1996 1995 1994
-------------- -------------- --------------
NOW accounts $2,836 $3,057 $3,004
Money market savings 12,314 13,836 9,656
Time, $100,000 and over 3,675 2,848 1,788
Time, other 18,962 17,247 12,645
-------------- -------------- --------------
Total $37,787 $36,988 $27,093
-------------- -------------- --------------
-------------- -------------- --------------
NOTE 6 - BORROWINGS
Federal Home Loan Bank ("FHLB") advances are used as a source of liquidity to
meet cash demands. There were FHLB advances outstanding of $1.35 million with
an annual rate of 6.5% at December 31, 1996. At December 31, 1995, there were
no FHLB advances outstanding.
16
NOTE 7 - INCOME TAXES
The income tax provision (benefit) reflected in the Consolidated Statements of
Income is as follows for the years ended December 31:
1996 1995 1994
------- ------- -------
Current:
Federal $9,068 $7,593 $7,656
State 1,615 1,271 1,313
Deferred (2,185) (593) (18)
------- ------- -------
Total $8,498 $8,271 $8,951
------- ------- -------
------- ------- -------
A reconciliation between taxes computed at the statutory income tax rates and
the consolidated effective tax rates follows:
1996 1995 1994
------- ------- -------
Statutory income tax rates 35.0% 35.0% 35.0%
(Decrease) increase in taxes resulting from:
Federal tax-exempt income (3.9) (2.3) (2.4)
State income taxes, net of federal tax benefit 4.8 4.8 4.8
Other (1.1) 0.4 3.3
------- ------- -------
Consolidated effective tax rates 34.8% 37.9% 40.7%
------- ------- -------
------- ------- -------
The temporary differences which created deferred tax assets and liabilities at
December 31 are detailed below:
1996 1995
------- -------
Deferred tax assets:
Allowance for loan loss $3,208 $2,929
Deferred compensation 991 837
Unrealized loss on securities available for sale 412
Other 1,892 365
------- -------
Total deferred tax assets 6,503 4,131
------- -------
Deferred tax liabilities:
Depreciation 935 1,160
Unrealized gain on securities available for sale 151
------- -------
Total deferred tax liabilities 935 1,311
------- -------
Net deferred tax assets $5,568 $2,820
------- -------
------- -------
NOTE 8 - EMPLOYEE BENEFIT PLANS
Historically, the Company maintained a stock ownership plan covering
substantially all full-time employees who have satisfied specific age and
service requirements. During the first quarter of 1994, the West Suburban
Bank Stock Bonus Trust Plan was converted into an employee stock ownership
plan and renamed the West Suburban Bank Employee Stock Ownership Plan (the
"Plan"). The respective boards of directors of the Subsidiaries took the
actions necessary to allow their respective employees to participate in the
Plan. The Plan is a tax-qualified stock bonus plan under Section 401(a) of
the Internal Revenue Code of 1986, as amended (the "Code"). The Plan is
designed to provide incentives to participants by granting them an interest
in the Company's common stock in which the Plan invests. The Plan is an
individual account defined contribution plan, which means that an individual
account is established for each participant of the Plan and that the amount
of benefits payable upon retirement, termination, disability or death is
based upon service and the amount of the employer's contributions and any
income, expenses, gains or losses which may have been allocated to the
participant's account. Annual contributions to the current and former plans
were made in accordance with resolutions passed by the boards of directors of
the Subsidiaries and in aggregate amounted to $1,221 in 1996, $1,117 in 1995
and $1,112 in 1994. The Subsidiaries also maintain deferred compensation
plans in which former and current executive officers participate. The
deferred compensation expense for the years ended December 31, 1996, 1995 and
1994 amounted to $406, $219, and $180, respectively. These plans are not
qualified under the Code and, therefore, tax deductions are allowed only when
benefits are paid.
17
NOTE 8 - EMPLOYEE BENEFIT PLANS (CONTINUED)
During 1996, the Company terminated the Aurora Federal Savings Bank, F.S.B.
Pension Plan (the "Aurora Pension Plan"). The Aurora Pension Plan was a
successor plan to the Financial Institutions Retirement Fund program (the
"FIRF Plan") which WSB Aurora maintained prior to its acquisition by the
Company. As a result of the termination of the Aurora Pension Plan,
approximately $1.1 million of excess assets reverted to the Company. This
amount was recognized as income by the Company during 1996 and is reflected
in other operating income-other.
NOTE 9 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit
and standby letters of credit. These financial instruments involve, to
varying degrees, elements of credit and interest rate risks in addition to
the amount recognized in the consolidated balance sheets. The contractual
amounts of those instruments reflect the extent of involvement the Company
has in particular classes of financial instruments.
The Company's exposure to credit risk in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual amount of those
instruments. The Company uses the same credit policies in making commitments
and conditional obligations as it does for on-balance-sheet instruments.
Unless noted otherwise, the Company requires collateral or other security to
support financial instruments with credit risk. A summary of the contractual
amount of the Company's exposure to off-balance-sheet risk as of December 31
is as follows:
1996 1995
-------- --------
Financial instruments whose contractual amounts
represent credit risks:
Commitments to extend credit $353,460 $329,372
Letters of credit 32,566 31,373
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments are
expected to expire without being exercised, the total commitment amounts do
not necessarily represent future cash requirements. The Company evaluates
each customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by the Company upon extension of
credit, is based on management's credit evaluation of the counterparty.
Collateral held varies and may include accounts receivable, inventory,
property and equipment and commercial or residential properties.
Letters of credit written are conditional commitments issued by the Company
to either extend credit to a customer or to guarantee the performance of a
customer to a third party. Guarantees of performance are primarily issued to
support public and private borrowing arrangements. The credit risk involved
in issuing letters of credit is essentially the same as that involved in
extending loan facilities to customers. The Company holds collateral
supporting those commitments for which collateral is deemed necessary. The
extent of collateral held for those commitments varies.
NOTE 10 - CONTINGENT LIABILITIES
The Company is a party to various legal actions arising from normal business
activities. Management believes that pending actions are either without merit
or that the ultimate liability, if any, resulting from them will not
materially affect the Company's consolidated financial position or results of
operations.
NOTE 11 - FINANCIAL INSTRUMENTS FAIR VALUE DISCLOSURE
Estimated fair values of financial instruments have been calculated based on
certain assumptions and selected data from within the Company's various
financial instrument classifications. For short-term maturing assets (i.e.
cash and due from banks, federal funds sold and interest-bearing deposits
with financial institutions) it has been assumed that their estimated fair
values approximate their carrying values. Similarly, for loans and deposits
with variable interest rates, it has been assumed that their estimated fair
values also approximate their carrying values.
18
NOTE 11 - FINANCIAL INSTRUMENTS FAIR VALUE DISCLOSURE (CONTINUED)
The estimated fair values of the Company's financial instruments as of
December 31 are set forth in the table below:
1996 1995
-------------------------- ------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
----------- ------------ ---------- ------------
Financial assets:
Cash and cash equivalents $68,650 $68,650 $88,345 $88,345
Investment securities:
Available for sale 158,578 158,578 134,519 134,519
Held to maturity 170,191 170,202 116,037 116,199
Loans, less allowance for loan losses 784,242 779,945 760,687 760,420
----------- ------------ ---------- ------------
Total financial assets $1,181,661 $1,177,375 $1,099,588 $1,099,483
----------- ------------ ---------- ------------
----------- ------------ ---------- ------------
Financial liabilities:
Deposits $1,099,397 $1,100,862 $1,029,789 $1,031,926
Short-term borrowings 3,271 3,271 1,825 1,825
---------- ---------- ---------- ----------
Total financial liabilities $1,102,668 $1,104,133 $1,031,614 $1,033,751
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
The fair values for investment securities were derived from quoted market
values as of the close of business December 31, 1996 and 1995 when available,
or when quotes were not available, the fair value was estimated based on
quoted prices of comparable securities. The fair values for loans, less
allowance for loan losses were estimated by discounting the future cash flows
from loan repayments using current interest rates for loans having comparable
maturities. The fair values for deposits were estimated using the present
value discounted cash flow method at discount rates comparable to current
market rates for similar liabilities.
There is no material difference between the contractual amount and the
estimated fair value of off-balance-sheet items which totaled $386,026 at
December 31, 1996 and $360,745 at December 31, 1995 and are primarily
comprised of unfunded loan commitments which are generally priced at market
at the time of funding.
NOTE 12 - RELATED PARTY TRANSACTIONS
Certain directors and officers of the Company, and some of the corporations
and firms with which these individuals are associated, are customers of the
Subsidiaries in the ordinary course of business, and/or are indebted to a
Subsidiary for loans in the amounts of $60,000 or more. It is anticipated
that they will continue to be customers of and indebted to the Subsidiaries
in the future. All such loans, however, were made in the ordinary course of
business, did not involve more than the normal risk of collectibility or
present other unfavorable features, and were made on substantially the same
terms, including interest rates and collateral provided, as those prevailing
at the same time for comparable loans made by the Subsidiaries in
transactions with unaffiliated persons, although directors were regularly
allowed the lowest interest rate given to others on personal loans.
Certain officers and directors of the Company, their affiliates and companies
in which they have 10% or more beneficial ownership, were indebted to the
Company in the aggregate amount of $20,376 and $27,279 at December 31, 1996
and 1995, respectively. During 1996, $17,558 in additions and $24,461 in
reductions were made.
NOTE 13 - INVESTMENTS IN SUBSIDIARIES AND REGULATORY RESTRICTIONS
The Parent is economically dependent on the cash dividends received from the
Subsidiaries. These dividends represent the primary cash flow used to fund
dividend payments to the Parent's shareholders. Cash dividends received by
the Parent amounted to $8,136, $7,401 and $7,292 for the years ended December
31, 1996, 1995 and 1994, respectively.
19
NOTE 13 - INVESTMENTS IN SUBSIDIARIES AND REGULATORY RESTRICTIONS (CONTINUED)
The Company and the Subsidiaries are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory - and possibly
additional discretionary - actions by regulators that, if undertaken, could
have direct material effect on the Company's consolidated financial
statements. Under capital adequacy guidelines and the regulatory framework
for prompt corrective action, each entity must meet specific capital
guidelines that involve quantitative measures of each entity's assets,
liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. Capital amounts and classification are also
subject to qualitative judgements by the regulators about components, risk
weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Subsidiaries to maintain minimum amounts and
ratios (set forth in the table below) of total and Tier I capital to
risk-weighted assets, and of Tier I capital to average assets. Management
believes as of December 31, 1996, that the Company and the Subsidiaries meet
all capital adequacy requirements to which it is subject.
Management's present policy is to limit the amount of dividends from each
Subsidiary such that each Subsidiary qualifies as a "well-capitalized"
institution as defined by the Federal Deposit Insurance Corporation
Improvement Act of 1991, as amended, thereby minimizing the amount of Federal
Deposit Insurance Corporation ("FDIC") insurance premiums paid by the
Subsidiary and providing capital to fund growth. As of December 31, 1996, the
Subsidiaries could pay, in aggregate, dividends totaling $24,983 to the
Parent while remaining "well-capitalized" institutions. The Subsidiaries could
pay additional dividends without seeking regulatory approval.
To be categorized as "well-capitalized" the Parent and the Subsidiaries must
maintain total risk-based, Tier I risk-based and Tier I leverage ratios as
set forth in the table. The Company's capital amounts and ratios are also
presented in the table:
For Capital
Adequacy To Be Well
Actual Purposes Capitalized
----------------- ---------------- ------------------
Amount Ratio Amount Ratio Amount Ratio
--------- ------- -------- ------- --------- -------
AS OF DECEMBER 31, 1996
TOTAL CAPITAL (TO RISK WEIGHTED ASSETS):
West Suburban Bancorp, Inc. $126,811 13.0% $78,199 8.0% N/A N/A
West Suburban Bank 41,682 10.8 30,834 8.0 $38,543 10.0%
West Suburban Bank of Downers Grove/Lombard 17,310 16.6 8,344 8.0 10,429 10.0
West Suburban Bank of Darien 23,045 14.0 13,178 8.0 16,473 10.0
West Suburban Bank of ▇▇▇▇▇ Stream/Stratford Square 17,723 11.8 12,004 8.0 15,005 10.0
WSB Aurora 19,065 14.2 10,713 8.0 13,392 10.0
TIER 1 CAPITAL (TO RISK WEIGHTED ASSETS):
West Suburban Bancorp, Inc. 117,208 12.0 39,099 4.0 N/A N/A
West Suburban Bank 38,036 9.9 15,417 4.0 23,126 6.0
West Suburban Bank of Downers Grove/Lombard 16,000 15.3 4,172 4.0 6,258 6.0
West Suburban Bank of Darien 21,023 12.8 6,589 4.0 9,884 6.0
West Suburban Bank of ▇▇▇▇▇ Stream/Stratford Square 16,490 11.0 6,002 4.0 9,003 6.0
WSB Aurora 17,673 13.2 5,357 4.0 8,035 6.0
TIER 1 CAPITAL (TO AVERAGE ASSETS):
West Suburban Bancorp, Inc. 117,208 9.8 47,843 4.0 N/A N/A
West Suburban Bank 37,825 8.0 18,921 4.0 23,651 5.0
West Suburban Bank of Downers Grove/Lombard 15,761 10.8 5,822 4.0 7,277 5.0
West Suburban Bank of Darien 20,959 9.1 9,204 4.0 11,506 5.0
West Suburban Bank of ▇▇▇▇▇ Stream/Stratford Square 16,385 7.9 8,256 4.0 10,320 5.0
WSB Aurora 17,663 11.3 6,237 4.0 7,797 5.0
20
NOTE 13 - INVESTMENTS IN SUBSIDIARIES AND REGULATORY RESTRICTIONS (CONTINUED)
For Capital
Adequacy To Be Well
Actual Purposes Capitalized
-------------- -------------- --------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
AS OF DECEMBER 31, 1995
TOTAL CAPITAL (TO RISK WEIGHTED ASSETS):
West Suburban Bancorp, Inc. $117,121 12.9% $72,641 8.0% N/A N/A
West Suburban Bank 39,258 11.2 27,934 8.0 $34,917 10.0%
West Suburban Bank of Downers Grove/Lombard 16,075 14.6 8,803 8.0 11,004 10.0
West Suburban Bank of Darien 20,925 12.1 13,828 8.0 17,286 10.0
West Suburban Bank of ▇▇▇▇▇ Stream/Stratford Square 16,283 12.0 10,880 8.0 13,600 10.0
WSB Aurora 17,674 13.9 10,154 8.0 12,692 10.0
TIER 1 CAPITAL (TO RISK WEIGHTED ASSETS):
West Suburban Bancorp, Inc. 108,221 11.9 36,320 4.0 N/A N/A
West Suburban Bank 35,816 10.3 13,967 4.0 20,950 6.0
West Suburban Bank of Downers Grove/Lombard 14,796 13.4 4,402 4.0 6,602 6.0
West Suburban Bank of Darien 19,195 11.1 6,914 4.0 10,371 6.0
West Suburban Bank of ▇▇▇▇▇ Stream/Stratford Square 15,122 11.1 5,440 4.0 8,160 6.0
WSB Aurora 16,386 12.9 5,077 4.0 7,615 6.0
TIER 1 CAPITAL (TO AVERAGE ASSETS):
West Suburban Bancorp, Inc. 108,221 9.7 44,537 4.0 N/A N/A
West Suburban Bank 35,821 8.8 16,246 4.0 20,308 5.0
West Suburban Bank of Downers Grove/Lombard 14,709 10.1 5,802 4.0 7,275 5.0
West Suburban Bank of Darien 19,354 8.7 8,911 4.0 11,139 5.0
West Suburban Bank of ▇▇▇▇▇ Stream/Stratford Square 15,215 7.9 7,701 4.0 9,626 5.0
WSB Aurora 16,392 11.0 5,936 4.0 7,420 5.0
In accordance with the regulations of the Board of Governors of the Federal
Reserve System, the Subsidiaries must maintain noninterest-bearing cash
balances with the Federal Reserve Bank of Chicago. The average amount of these
balances for years ended December 31, 1996 and 1995 was approximately $7,767
and $7,124, respectively.
NOTE 14 - COMMON STOCK
The Company's common stock is divided into two classes consisting of Class A
and Class B common stock. Except as required by law, the rights, powers and
limitations of the Class A common stock and Class B common stock are identical.
NOTE 15 - NEW ACCOUNTING PRONOUNCEMENTS
In June 1996, FASB issued SFAS 125, "Accounting for the Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities", which
provides new accounting and reporting standards for transfers and servicing
of financial assets and extinguishments of liabilities. Those standards are
based on consistent application of a "financial-components" approach that
focuses on control. Under that approach, after a transfer of financial
assets, an entity recognizes the financial and servicing assets it controls
and the liabilities it has incurred, derecognizes financial assets when
control has been surrendered, and derecognizes liabilities when extinguished.
SFAS 125 is effective for the Company beginning January 1, 1997. Management
believes that the adoption of SFAS 125 will not have a material impact on the
Company's financial condition or results of operations.
In December 1996, FASB issued SFAS 127, "Deferral of the Effective Date of
Certain Provisions of SFAS 125", which defers the effective date of certain of
the provisions of SFAS 125 for one year.
21
NOTE 16 - CONDENSED FINANCIAL INFORMATION - PARENT ONLY
CONDENSED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS 1996 1995
------- -------
Cash on deposit in Subsidiaries $9,740 $8,354
Equity investment in Subsidiaries 108,594 101,492
Intangibles, net 1,731 1,935
Other assets 3 9
------- ------
TOTAL ASSETS $120,068 $111,790
------- -------
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Dividends payable $1,730 $1,622
------- -------
TOTAL LIABILITIES 1,730 1,622
Shareholders' equity 118,338 110,168
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $120,068 $111,790
------- -------
------- -------
CONDENSED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
OPERATING INCOME 1996 1995 1994
------- ------- -------
Dividends from Subsidiaries $8,136 $7,401 $7,292
Interest income 337 279 144
------- ------- -------
Total operating income 8,473 7,680 7,436
------- ------- -------
OPERATING EXPENSE
Amortization of intangibles 204 204 266
Other 240 205 238
------- ------- -------
Total operating expense 444 409 504
------- ------- -------
Income before income taxes 8,029 7,271 6,932
Income tax (benefit) expense 41 10 (37)
------- ------- -------
Income before equity in undistributed
net income of Subsidiaries 7,988 7,261 6,969
Equity in undistributed net income of Subsidiaries 7,954 6,264 6,057
------- ------- -------
NET INCOME $15,942 $13,525 $13,026
------- ------- -------
------- ------- -------
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $15,942 $13,525 $13,026
------- ------- -------
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in undistributed net income of
Subsidiaries (7,954) (6,264) (6,057)
Amortization of intangibles 204 204 266
Decrease in other assets 6 29 62
------- ------- -------
Total adjustments (7,744) (6,031) (5,729)
------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,198 7,494 7,297
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid (6,812) (6,379) (5,745)
------- ------- -------
NET CASH USED IN FINANCING ACTIVITIES (6,812) (6,379) (5,745)
------- ------- -------
Net increase in cash 1,386 1,115 1,552
Cash at beginning of year 8,354 7,239 5,687
------- ------- -------
Cash at end of year $9,740 $8,354 $7,239
------- ------- -------
------- ------- -------
22
SELECTED FINANCIAL DATA
(UNAUDITED)
The following table consists of financial data derived from the Consolidated
Financial Statements of the Company. This information should be read together
with Management's Discussion and Analysis of Financial Condition and Results of
Operations and the Company's Consolidated Financial Statements included
elsewhere in this report (dollars in thousands, except per share data).
Years Ended December 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
SELECTED OPERATING DATA
Interest income $88,558 $83,428 $69,112 $67,396 $74,098
Interest expense 38,359 37,414 27,431 26,728 34,376
-------- -------- -------- -------- --------
Net interest income 50,199 46,014 41,681 40,668 39,722
Provision for loan losses 1,505 1,850 2,216 5,339 3,905
-------- -------- -------- -------- --------
Net interest income after
provisions 48,694 44,164 39,465 35,329 35,817
Other operating income(1) 9,896 7,824 9,685 10,056 11,145
Other operating expense 34,150 30,192 27,173 26,886 28,071
-------- -------- -------- -------- --------
Income before income taxes 24,440 21,796 21,977 18,499 18,891
Income taxes 8,498 8,271 8,951 7,035 6,895
Cumulative effect of accounting
change 360
-------- -------- -------- -------- --------
Net income $15,942 $13,525 $13,026 $11,824 $11,996
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
PER SHARE DATA
Income before cumulative
effect of accounting change:
Primary $36.86 $31.27 $30.12 $28.41 $29.73
Fully diluted 36.86 31.27 30.12 26.85 28.74
Net income:
Primary 36.86 31.27 30.12 29.30 29.73
Fully diluted 36.86 31.27 30.12 27.72 28.74
Cash dividends declared 16.00 15.00 13.75 12.75 12.00
Book value 273.62 254.73 226.53 221.56 209.31
SELECTED BALANCES
Investment securities $328,769 $250,556 $226,007 $190,594 $231,121
Net loans 784,242 760,687 709,205 694,301 652,007
Total assets 1,235,604 1,154,349 1,041,495 999,878 1,000,200
Deposits 1,099,397 1,029,789 923,257 883,464 877,923
Long-term debt 13,348
Shareholders' equity 118,338 110,168 97,971 95,822 84,444
RATIOS
Return on average total assets 1.38% 1.27% 1.29% 1.20% 1.20%
Return on average
shareholders' equity 13.93 13.03 13.29 13.25 14.84
Cash dividends to net income 42.73 47.16 44.10 42.65 40.36
Average equity to average total
assets 9.90 9.71 9.67 9.03 8.12
Net interest margin (FTE)(2) 4.47 4.40 4.21 4.19 4.06
(1) Other operating income includes the following gains on sales of loans for
the years ended December 31, 1996, 1995, 1994, 1993 and 1992,
respectively: $151, $110, $213, $1,362 and $2,050.
(2) Net interest margin is presented on a tax equivalent basis, assuming a
federal income tax rate of 35% for the years ended December 31, 1996,
1995, 1994 and 1993 and 34% for the year ended December 31, 1992.
23
DISTRIBUTION OF ASSETS AND NET INTEREST INCOME AND
AVERAGE RATES AND YIELDS ON A TAX EQUIVALENT BASIS
(UNAUDITED)
The following table presents for the periods indicated the total dollar
amount of interest income from average interest-earning assets and the
resultant yields, as well as the interest expense on average interest-bearing
liabilities, and the resultant costs, expressed both in dollars and rates.
All average balances are daily average balances. To the extent received,
interest on nonaccruing loans has been included in the table (dollars in
thousands).
Years Ended December 31,
-------------------------------------------------------------------------------------------------------
1996 1995 1994
------------------------------- ------------------------------- -----------------------------
Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
------------------------------- ------------------------------- -----------------------------
Assets
Interest-bearing
deposits in financial
institutions $301 $16 5.3% $127 $7 5.5% $552 $33 6.0%
----------------------------------- -------------------------------- -----------------------------
Federal funds sold 34,719 1,840 5.3 34,422 1,949 5.7 17,819 743 4.2
----------------------------------- -------------------------------- -----------------------------
Investment securities:
Corporate 67,382 4,453 6.6 63,302 4,581 7.2 90,831 6,300 6.9
U.S. Treasury 19,308 975 5.0 16,363 798 4.9 14,923 72 4.8
U.S. government
agencies and
corporations 136,029 8,379 6.2 118,453 7,369 6.2 91,291 5,746 6.3
States and political
subdivisions (1) 39,626 3,137 7.9 23,678 1,985 8.4 21,630 1,837 8.5
FHLB stock 748 52 7.0 854 53 6.2 845 64 7.6
----------------------------------- -------------------------------- -----------------------------
Total investment
securities (1) 263,093 16,996 6.5 222,650 14,786 6.6 219,520 14,669 6.7
----------------------------------- -------------------------------- -----------------------------
Mortgage-backed
securities 7,246 740 10.2
----------------------------------- -------------------------------- -----------------------------
Loans:
Commercial and
industrial (1) 298,872 28,307 9.5 248,544 25,706 10.3 212,147 18,878 8.9
Real estate 299,492 24,812 8.3 305,822 23,777 7.8 295,559 20,415 6.9
Home equity 121,543 11,161 9.2 119,013 11,475 9.6 116,827 8,818 7.5
Installment 37,883 3,487 9.2 36,399 3,516 9.7 33,342 2,656 8.0
Visa and other 23,582 3,390 14.4 26,619 3,238 12.2 25,662 3,148 12.3
----------------------------------- -------------------------------- -----------------------------
Total loans (1) 781,372 71,157 9.1 736,397 67,712 9.2 683,537 53,915 7.9
----------------------------------- -------------------------------- -----------------------------
Total interest-
bearing
assets (1) 1,079,485 $90,009 8.3% 993,596 $84,454 8.5% 928,674 $70,100 7.5%
Cash and due from banks 37,349 35,666 37,428
Premises and equipment,
net 29,935 27,849 25,554
Other real estate 5,208 7,993 6,873
Allowance for loan losses (9,432) (8,909) (7,907)
Accrued interest and
other assets (2) 13,907 12,683 22,519
-------------- -------------- -------------
Total assets $1,156,452 $1,068,878 $1,013,141
-------------- -------------- -------------
-------------- -------------- -------------
(1) Interest income and yields are presented on a tax equivalent basis,
assuming a federal income tax rate of 35%.
(2) The average balances of nonaccrual loans are included in accrued interest
and other assets.
24
DISTRIBUTION OF ASSETS AND NET INTEREST INCOME
AVERAGE RATES AND YIELDS ON A TAX EQUIVALENT BASIS
(UNAUDITED)
(CONTINUED)
(Dollars in thousands)
Years Ended December 31,
-------------------------------------------------------------------------------------------------------
1996 1995 1994
-------------------------------- -------------------------------- ------------------------------
Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
-------------------------------- -------------------------------- ------------------------------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing deposits:
NOW accounts and
savings deposits $524,669 $15,152 2.9% $498,191 $16,893 3.4% $486,863 $12,660 2.6%
Time deposits:
Less than $100,000 334,177 18,960 5.7 308,039 17,248 5.6 275,693 12,645 4.6
$100,000 and greater 63,079 3,675 5.8 49,427 2,847 5.8 37,849 1,788 4.7
------------------------------- ------------------------------ ------------------------------
Total interest-
bearing deposits 921,925 37,787 4.1 855,657 36,988 4.3 800,405 27,093 3.4
Federal funds purchased 7,710 419 5.4 3,216 189 5.9 3,526 158 4.5
Deferred compensation 1,684 79 4.7 1,318 81 6.1 1,077 35 3.3
Real Estate Mortgage
Investment Conduit 579 18 3.1
FHLB advances 1,366 74 5.4 2,071 156 7.5 2,558 126 4.9
Subordinated convertible
capital notes 10 1 6.5
------------------------------- ------------------------------ -----------------------------
Total interest-
bearing liabilities 932,685 38,359 4.1 862,262 37,414 4.3 808,155 27,431 3.4
------------------- ------------------ -------------------
Demand deposits 103,448 100,269 96,428
Other liabilities 5,864 2,535 10,564
Shareholders' equity 114,455 103,812 97,994
--------- ---------- ---------
Total liabilities and
shareholders' equity $1,156,452 $1,068,878 $1,013,141
--------- ---------- ---------
--------- ---------- ---------
Net interest income $51,650 $47,040 $42,669
------- ------ ------
------- ------ ------
Net interest margin 4.5% 4.4% 4.2%
-------- -------- -------
-------- -------- -------
Net yield on interest
earning assets 4.8% 4.7% 4.6%
-------- -------- -------
-------- -------- -------
25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis provides information regarding the
Company's financial condition as of December 31, 1996 and 1995 and results of
operations for the years ended December 31, 1996, 1995 and 1994. The
discussion and analysis should be read in conjunction with the financial
statements, notes and tables included elsewhere in this annual report. The
financial information provided below may be rounded to the nearest decimal in
order to simplify the presentation of management's discussion and analysis.
However, the ratios and percentages provided below are calculated (adjusted
for rounding) using the detailed financial information contained in the
financial statements, notes and tables included elsewhere in this annual
report.
BALANCE SHEET ANALYSIS
TOTAL CONSOLIDATED ASSETS. Total consolidated assets of the Company
increased $81.3 million (7.0%) to $1,235.6 million at December 31, 1996 from
$1,154.3 million at December 31, 1995. Increases in investment securities
were the largest component of this increase.
CASH AND CASH EQUIVALENTS. The Company's cash and cash equivalents decreased
$19.7 million (22.3%) to $68.6 million at December 31, 1996 from $88.3
million at December 31, 1995. This resulted primarily from the Company's
decreased holdings in cash and due from banks along with federal funds sold
as the Company shifted a portion of these funds into investment securities.
INVESTMENT SECURITIES. Aggregate holdings in investment securities increased
$78.2 million (31.2%) to $328.8 million at December 31, 1996 from $250.6
million at December 31, 1995. The Company's objectives in managing its
securities portfolio are driven by the dynamics of the entire balance sheet
which includes monitoring the maturity structure of its portfolio along with
general economic conditions including the interest rate environment. In
managing its portfolio, the Company seeks to provide liquidity, minimize
exposure to interest rate risk and achieve an acceptable rate of return. The
increase in the portfolio is primarily attributable to growth in deposits
which resulted in additional funds available for investing purposes. The
Company will continue to seek high quality securities for the investment
portfolio and remain conservative in its management.
LOANS. Total loans outstanding increased $24.2 million (3.2%) to $793.8
million at December 31, 1996 from $769.6 million at December 31, 1995. The
Company benefitted from continued growth in the commercial and home equity
sector due in part to the strength of the economy, stable interest rates and
promotional efforts. Specifically, commercial loans increased $31.2 million
to $232.2 million at December 31, 1996 from $201.0 million at December 31,
1995. Home equity loans increased $4.0 million to $124.8 million at December
31, 1996 from $120.8 million at December 31, 1995. The Company will attempt
to remain competitive in its market by offering competitive rates on its loan
products while not compromising its credit evaluation standards or its net
interest margins to attract new business.
ALLOWANCE FOR LOAN LOSSES AND ASSET QUALITY. The allowance for loan losses is
an amount that management believes is adequate to absorb losses on existing
loans that may become uncollectible, based on evaluations of the
collectibility of loans and prior loan loss experience. In determining a
proper level of the allowance, management evaluates the adequacy of the
allowance based on past loan loss experience, known and inherent risks in the
loan portfolio, adverse situations that may affect the borrowers' ability to
repay, estimated value of any underlying collateral and current and
prospective economic conditions. The allowance for loan losses increased $.7
million (7.9%) to $9.6 million at December 31, 1996 from $8.9 million at
December 31, 1995. The ratio of the allowance for loan losses to total loans
outstanding increased to 1.21% at December 31, 1996 from 1.16% at December
31, 1995. The increase in this ratio was principally due to net charge-offs
on loans declining during 1996 when compared to 1995. Additionally, it should
be noted that the allowance for loan losses as of December 31, 1996 was
approximately 115% of the level of nonperforming loans. This is an increase
over the 69% coverage ratio of nonperforming loans at December 31, 1995. As
of December 31, 1996, the total nonperforming loans to total loans was 1.1%
compared to 1.7% at December 31, 1995. This decrease was principally due to
the reclassification of an $8.0 million commercial loan to accruing status.
The loan's maturity date was extended to January 2, 1997 and interest
payments were current as of December 31, 1996. The borrower, a not-for-profit
health care provider, filed for Chapter 11 bankruptcy protection in May 1995.
In those proceedings, the Company and certain other secured creditors
proposed a plan of reorganization which is proposed to reorganize the
borrower and appoint a new board and a third-party manager. The plan was
approved and
26
is presently being implemented. Pursuant to the plan, the taxable notes
that evidence the borrower's obligations will be exchanged for tax free
bonds. The exchange requires certain regulatory approvals, which are
presently being sought. The Company has not been made aware of any
circumstances that are reasonably expected to result in a denial of the
regulatory approvals that are necessary to the exchange. Management will
continue to monitor this loan closely and will take additional action, if
appropriate.
The following table is an analysis of the Company's nonperforming loans for
December 31, 1996 and 1995 (dollars in thousands):
1996 1995 Dollar Change
---------- --------- ---------------
Nonaccrual loans $2,283 $1,478 $805
Accruing loans 90 days past due 6,072 11,405 (5,333)
---------- ---------- ---------------
Total nonperforming loans $8,355 $12,883 ($4,528)
---------- ---------- ---------------
---------- ---------- ---------------
Nonperforming loans as a percent
of total loans 1.1% 1.7%
Other real estate $2,757 $8,317 ($5,560)
---------- ---------- --------------
---------- ---------- --------------
OTHER REAL ESTATE. During 1996, other real estate decreased $5.5 million
(66.9%) to $2.8 million at December 31, 1996 from $8.3 million at December
31, 1995. This decrease includes a $5.0 million reduction for a property that
was written off with the Company's interest of $3.8 million charged to
earnings. Sales of properties had an aggregate carrying value of $2.3 million
while additions of properties totaled of $2.1 million. Management continues
its efforts to reduce its holdings in other real estate.
DEPOSITS. Total deposits increased $69.6 million (6.8%) to $1,099.4 million
at December 31, 1996 from $1,029.8 million at December 31, 1995. This
increase was principally due to the successful marketing of certificates of
deposit. The proceeds from the increases in deposits were used to meet loan
demand and to purchase investment securities.
Year-end balances in the Company's major categories of deposits for December
31 are summarized in the following table (dollars in thousands):
Dollar Percent
1996 1995 Change Change
--------- ---------- -------- --------
Demand and other
noninterest-bearing $102,582 $104,821 ($2,239) (2.1)%
NOW accounts 182,862 191,626 (8,764) (4.6)
Money market savings 342,872 340,714 2,158 0.6
Time, $100,000 and over 86,343 68,063 18,280 26.9
Time, other 384,738 324,565 60,173 18.5
---------- ---------- -------- --------
Total $1,099,397 $1,029,789 $69,608 6.8%
---------- ---------- -------- --------
---------- ---------- -------- --------
The Company attempts to remain highly competitive in its market by offering
competitive rates on its savings and certificate of deposit products.
Although the Company promotes its deposit products when appropriate,
management does not intend to compromise its net interest margin to attract
deposits.
CAPITAL RESOURCES
Shareholders' equity increased $8.1 million (7.4%) to approximately $118.3
million at December 31, 1996 from $110.2 million at December 31, 1995. This
increase was the result of the net retention of 1996 earnings of $9.0 million
in addition to the change in the unrealized loss on securities available for
sale of $.9 million (net of taxes).
Management has been advised that as of December 31, 1996 and 1995, each of
the Subsidiaries qualified as a "well-capitalized" institution as defined by
the Federal Deposit Insurance Corporation Improvement Act of 1991, as amended.
27
LIQUIDITY
Effective liquidity management allows a banking institution to accommodate
the changing net funds flow requirements of customers who may deposit or
withdraw funds, or modify their credit requirements. One of the principal
obligations of the banking system, and individual banks, is to provide for
the withdrawal of funds by depositors and the credit demands of customers.
The Company manages its liquidity position through continuous monitoring of
profitability trends, asset quality, interest rate sensitivity, maturity
schedules of earning assets and liabilities. Appropriate responses to changes
in these conditions preserve customer confidence in the ability of the
Company to continually meet the deposit withdrawal and credit requirements of
its customers.
Generally, the Company uses cash and cash equivalents to meet its liquidity
needs. Additional liquidity is provided by maintaining assets which mature
within a short time-frame or which may be quickly converted to cash without
significant loss. These assets include interest-bearing deposits in financial
institutions and the FHLB, federal funds sold and investment securities
available for sale. As of December 31, 1996 and 1995, liquid assets
represented 18.4% and 19.3% of total assets, respectively.
During 1996, the Company's cash and cash equivalents decreased approximately
$19.7 million. Operating activities caused an increase to cash and cash
equivalents of approximately $24.3 million from the prior year. Investing
activities caused a decrease of approximately $108.1 million while financing
activities resulted in an increase of approximately $64.1 million.
INCOME STATEMENT ANALYSIS -- 1996 COMPARED TO 1995
GENERAL. The Company's 1996 net income of $15.9 million represented an
increase of $2.4 million (17.9%) from 1995 net income of $13.5 million. This
increase was primarily due to a $4.2 million improvement in net interest income
and other operating income also increased by $2.1 million during this period.
These increases were offset by an increase in total other operating expense of
$4.0 million.
NET INTEREST INCOME. Net interest income is the primary source of income for
the Company. Net interest income is the difference between interest income
earned on earning assets and interest expense paid on interest-bearing
liabilities. As such, net interest income is affected by changes in the
volume and yields on earning assets and the volume and rates paid on
interest-bearing liabilities. Interest-earning assets consist of loans,
deposits in financial institutions, deposits in the FHLB, federal funds sold
and investment securities. Interest-bearing liabilities primarily consist of
deposits, federal funds purchased and FHLB advances. Net interest margin is
the difference between tax equivalent net interest income and average earning
assets. Total interest income, on a tax equivalent basis, increased $5.5
million (6.6%) to $90.0 million for the year ended December 31, 1996 from
$84.5 million for year ended December 31, 1995. This increase resulted from
an increase of $6.9 million due to growth in average balances which was
offset by a ($1.4) million decrease due to declining interest rates. The
Company's average interest-earning assets grew $85.9 million (8.6%) to
$1,079.5 million at December 31, 1996 from $993.6 million at December 31,
1995. Yields on total interest-earning assets decreased primarily due to
decreases in average interest rates on the Company's commercial loan
portfolio and federal funds sold portfolio. Specifically, the Company's
average prime rate decreased to 8.3% for 1996 from 8.8% for 1995. The average
federal funds rate decreased to 5.3% for 1996 from 5.7% for 1995. Average
rates on the securities portfolio remained level as the Company sought to
minimize credit risk to the portfolio while achieving an acceptable rate of
return.
Total interest expense increased $1.0 million (2.5%) to $38.4 million for the
year ended December 31, 1996 from $37.4 million for the year ended December
31, 1995. Of this increase, $3.3 million was due to growth in average
balances while ($2.3) million was due to declining interest rates. Average
interest-bearing liabilities increased $70.4 million (8.2%) to $932.7 million
for the year ended December 31, 1996 from $862.3 million for the year ended
December 31, 1995 primarily due to deposit promotions.
28
The following table reflects the impact of changes in volume and interest
rates on interest-earning assets and interest-bearing liabilities for each of
the two years ended December 31, 1996 and 1995 (dollars in thousands):
December 31, 1996 December 31, 1995
compared to 1995 compared to 1994
Change due to: Change due to:
Volume Rate Total Volume Rate Total
-------- ------ ------- -------- ------ --------
INTEREST INCOME
Interest-earning deposits in
financial institutions $9 $9 ($23) ($3) ($26)
Federal funds sold 16 ($125) (109) 940 266 1,206
Investment securities 2,752 (542) 2,210 (80) 197 117
Mortgage-backed securities (740) (740)
Loans 4,095 (650) 3,445 4,861 8,936 13,797
-------- ------ ------- -------- ------ --------
Total interest income 6,872 (1,317) 5,555 4,958 9,396 14,354
-------- ------ ------- -------- ------ --------
INTEREST EXPENSE
Interest-bearing deposits 3,043 (2,244) 799 2,862 7,033 9,895
Borrowed funds 223 (77) 146 (40) 128 88
-------- ------ ------- -------- ------ --------
Total interest expense 3,266 (2,321) 945 2,822 7,161 9,983
-------- ------ ------- -------- ------ --------
Net interest income $3,606 $1,004 $4,610 $2,136 $2,235 $4,371
-------- ------ ------- -------- ------ --------
-------- ------ ------- -------- ------ --------
PROVISION FOR LOAN LOSSES. The provision for loan losses decreased $.3
million (18.6%) to $1.5 million in 1996 compared to $1.8 million in 1995. The
lower provision was the result of management determining the level of the
allowance for loan losses. A more detailed discussion concerning the
allowance for loan losses is presented in the Allowance for Loan Losses and
Asset Quality section of this report.
OTHER OPERATING INCOME. During 1996, other operating income increased $2.1
million (26.5%) to $9.9 million in 1996 compared to $7.8 million in 1995.
This increase was primarily due to the recording of $1.1 million of income
from a refund of the over funding of a terminated benefits plan of WSB
Aurora. The Company also experienced a gain on investment securities
available for sale of $.4 million during this period. Additionally, the
Company also recognized increased service fees along with increased
interchange income brought about from the Company's check card which was
introduced during mid-1995.
OTHER OPERATING EXPENSE. Other operating expense increased $4.0 million
(13.1%) to $34.2 million in 1996 from $30.2 million in 1995. Salary and
employee benefits increased $1.7 million due to increased salary levels and
the operation of additional facilities. FDIC insurance declined $.1 million
(8.2%) to $1.1 million for the year ended December 31, 1996 from $1.2 million
for the year ended December 31, 1995. This occurred due to reduced insurance
premiums being paid by the Company's bank subsidiaries. The reduced premiums
of the subsidiaries were offset by the payment by WSB Aurora of a special
assessment to the FDIC of $.8 million, which was imposed under the Deposit
Insurance Funds Act of 1996 (the "DIFA"). Other real estate expense increased
$1.5 million during the same period. This increase reflects a $3.8 million
write-down of a property and approximately $.9 million in expenses related to
this property during the year ended December 31, 1996. During 1995, the
Company incurred a $1.5 million write-down and approximately $1.8 million in
expenses related to this same property. Occupancy expense and furniture and
equipment expense increased $.1 million and $.2 million, respectively, for
the year ended December 31, 1996. These increases were primarily due to
expenses incurred with the opening and operation of new facilities. Data
processing expense decreased $.1 million during this period. Other operating
expense increased $.6 million during this period. This was principally due to
increased loan expense.
INCOME TAXES. Income tax expense increased $.2 million (2.7%) to $8.5
million in 1996 from $8.3 million in 1995. This increase was principally due
to higher taxable income and was offset by provisions made during the first
six months of 1995 for potential adjustments to prior years' income tax
returns.
RETURN ON AVERAGE TOTAL ASSETS. Return on average total assets was 1.38% for
1996 and 1.27% for 1995 as net income and average total assets grew. The
Company has consistently achieved at least a 1.0% annual return on average
total assets, which is considered an industry benchmark.
29
INCOME STATEMENT ANALYSIS -- 1995 COMPARED TO 1994
GENERAL. The Company's 1995 net income of $13.5 million represented an
increase of $.5 million (3.8%) from 1994 net income of $13.0 million. This
increase was primarily due to a $4.4 million improvement in net interest
income on a fully tax equivalent basis and reductions of $.4 million and $.7
million in the provision for loan losses and income tax expense,
respectively. Offsetting a portion of the rise in net income was a decrease
in total other operating income of $1.9 million and an increase in total
other operating expense of $3.0 million.
NET INTEREST INCOME. Net interest income is the primary source of income for
the Company. Net interest income is the difference between interest income
earned on earning assets and interest expense paid on interest-bearing
liabilities. As such, net interest income is affected by changes in the
volume and yields on earning assets and the volume and rates paid on
interest-bearing liabilities. Interest-earning assets consist of loans,
deposits in financial institutions, deposits in the FHLB, federal funds sold
and securities. Interest-bearing liabilities primarily consist of deposits,
federal funds purchased and FHLB advances. Net interest margin is the ratio
of tax equivalent net interest income to average earning assets. Total
interest income, on a tax equivalent basis, increased $14.4 million (20.5%)
to $84.5 million for the year ended December 31, 1995 from $70.1 million for
the year ended December 31, 1994. Of this increase, $5.0 million was due to
average balance changes while $9.4 million was due to interest rate changes.
The Company's average interest-earning assets grew $64.9 million (7.0%) to
$993.6 million at December 31, 1995 from $928.7 million at December 31, 1994.
Yields on total interest-earning assets increased primarily due to increases
in average interest rates on the loan portfolio as the Company's average
prime rate increased to 8.8% for 1995 from 7.2% for 1994. Average rates on
the securities portfolio remained level as the Company sought to minimize
credit risk to the portfolio while achieving an acceptable rate of return.
Additionally, the Company took advantage of higher yields on federal funds
sold during 1995.
Total interest expense increased $10.0 million (36.4%) to $37.4 million for
the year ended December 31, 1995 from $27.4 million for the year ended
December 31, 1994. Of this increase, $2.8 million was due to average balance
increases while $7.2 million was due to increases in interest rates. Average
interest-bearing liabilities increased $54.1 million (6.7%) to $862.3 million
at December 31, 1995 from $808.2 million at December 31, 1994 due to
customers taking advantage of the availability of higher rates on deposit
products.
PROVISION FOR LOAN LOSSES. The provision for loan losses decreased $.4
million (16.5%) to $1.8 million in 1995 compared to $2.2 million in 1994. The
lower provision was the result of management determining the level of the
allowance for loan losses.
OTHER OPERATING INCOME. During 1995, other operating income decreased $1.9
million (19.2%) to $7.8 million in 1995 compared to $9.7 million in 1994.
This decrease was primarily attributable to the $1.5 million net realized
gain on sales of securities available for sale during 1994. The 1994 income
was principally due to the liquidation of the mortgage-backed securities
portfolio. The Company also recognized a $.4 million gain on sale of other
real estate during 1994.
OTHER OPERATING EXPENSE. Other operating expense increased $3.0 million
(11.1%) to $30.2 million in 1995 from $27.2 million in 1994. Salary and
employee benefits increased $.4 million primarily due to expenses relating to
the opening of new facilities. Other real estate expense increased $2.7
million during this same period. This increase reflects a $1.5 million
write-down of a property classified as other real estate during 1995. In
addition, the Company incurred approximately $1.1 million in expenses related
to this property during the year ended December 31, 1995. FDIC insurance
premiums declined $.8 million (39.3%) to $1.2 million for the year ended
December 31, 1995 from $2.0 million for the year ended December 31, 1994.
This occurred due to the receipt by the Company's bank subsidiaries of
reimbursement credits of approximately $.5 million as a result of being
well-capitalized institutions and the over-funding of the insurance reserve
of the Bank Insurance Fund of the FDIC and reduced FDIC insurance premiums.
Occupancy expense and furniture and equipment expense increased $.5 million
and $.2 million, respectively, for the year ended December 31, 1995. These
increases were primarily due to expenses incurred with the opening and
operation of new facilities.
INCOME TAXES. Income tax expense declined $.7 million (7.6%) to $8.3 million
in 1995 from $9.0 million in 1994. The lower income tax expense in 1995 was
due to a reduction in the amounts provided for potential adjustments to prior
years' income tax returns.
30
RETURN ON AVERAGE TOTAL ASSETS. Return on average total assets was 1.27% for
1995 and 1.29% for 1994 as net income and average total assets grew. The
Company has consistently achieved at least a 1.0% annual return on average
total assets, which is considered an industry benchmark.
IMPACT OF NEW ACCOUNTING STANDARDS
In June 1996, FASB issued SFAS 125, "Accounting for the Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities", which
provides new accounting and reporting standards for transfers and servicing
of financial assets and extinguishments of liabilities. Those standards are
based on consistent application of a "financial-components" approach that
focuses on control. Under that approach, after a transfer of financial
assets, an entity recognizes the financial and servicing assets it controls
and the liabilities it has incurred, derecognizes financial assets when
control has been surrendered, and derecognizes liabilities when extinguished.
SFAS 125 is effective for the Company beginning January 1, 1997. Management
believes that the adoption of SFAS 125 will not have a material impact on the
Company's financial condition or results of operations.
In December 1996, FASB issued SFAS 127, "Deferral of the Effective Date of
Certain Provisions of SFAS 125", which defers the effective date of certain
of the provisions of SFAS 125 for one year.
INTEREST RATE SENSITIVITY
The Company attempts to maintain a conservative posture with regard to interest
rate risk by actively managing its asset/liability gap position and constantly
monitoring the direction and magnitude of gaps and risk. The Company attempts
to moderate the effects of changes in interest rates by adjusting its asset and
liability mix to achieve desired relationships between rate sensitive assets
and rate sensitive liabilities. Rate sensitive assets and liabilities are those
instruments that reprice within a given time period. An asset or liability
reprices when its interest rate is subject to change or upon maturity.
Movements in general market interest rates are a key element in changes in the
net interest margin. The Company's policy is to manage its balance sheet so
that fluctuations in net interest margin are minimized regardless of the level
of interest rates, although the net interest margin does vary somewhat due to
management's response to increasing competition from other financial
institutions.
31
Listed below are the balances in the major categories of rate sensitive assets
and liabilities that are subject to repricing as of December 31, 1996 (dollars
in thousands):
Over
Three Over One
Three Months To Year to Over
Months Twelve Five Five
or Less Months Years Years Total
--------------------------------------------------
Rate sensitive assets:
Interest-bearing deposits
in financial institutions $240 $240
Federal funds sold 29,890 29,890
Investment securities 18,910 $49,980 $198,248 $61,631 328,769
Loans 282,050 360,790 451 148,271 791,562
-------------------------------------------------
Total $331,090 $410,770 $198,699 $209,902 $1,150,461
-------------------------------------------------
-------------------------------------------------
Rate sensitive liabilities:
Money market savings $342,872 $342,872
NOW accounts 182,862 182,862
Time deposits:
Less than $100,000 107,854 $157,169 $119,715 384,738
$100,000 and over 47,464 23,195 $15,684 86,343
FHLB advances 1,350 1,350
-------------------------------------------------
Total $682,402 $180,364 $119,715 $15,684 $998,165
-------------------------------------------------
-------------------------------------------------
Interest sensitivity gap ($351,312) $230,406 $78,984 $194,218 $152,296
Cumulative interest
sensitivity gap (351,312) (120,906) (41,922) 152,296
Cumulative net interest-
earning assets as a
percentage of net
interest-bearing
liabilities 48.5% 86.0% 95.7% 115.3%
Cumulative interest
sensitivity gap as a
percentage of total assets (28.4) (9.8) (3.4) 12.3
The above table does not necessarily indicate the future impact of general
interest rate movements on the Company's net interest income because the
repricing of certain assets and liabilities is discretionary and is subject to
competitive and other pressures. As a result, assets and liabilities indicated
as repricing within the same period may in fact reprice at different times and
at different rate levels. Assets and liabilities are reported in the earliest
time frame in which maturity or repricing may occur. The consolidated interest
rate sensitivity position of the Company within the one year window at December
31, 1996 reflects cumulative net interest-earning assets compared to cumulative
net interest-bearing liabilities of 86.0% and cumulative net interest-earning
assets that reprice or mature within one year compared to similarly sensitive
liabilities of negative 9.8%. The percentage indicated for the cumulative net
interest-earning assets as a percentage of net interest-bearing liabilities is
within the Company's target range of acceptable gap values for the three-month
to twelve-month time frame.
EFFECTS OF INFLATION
Unlike industrial companies, virtually all of the assets and liabilities of the
Company are monetary in nature. As a result, interest rates have a more
significant impact on the Company's performance than do the effects of general
levels of inflation. Interest rates do not necessarily move in the same
direction or experience the same magnitude of change as goods and services,
since such prices are affected by inflation. In the current economic
environment, liquidity and interest rate adjustments are features of the
Company's assets and liabilities which are important to the maintenance of
acceptable performance levels. The Company attempts to maintain a balance
between monetary assets and monetary liabilities, over time, to offset these
potential effects.
32
RECENT DEVELOPMENTS
During January 1997, the Company settled a claim relating to an investment that
it made during the late 1980's. The settlement amount of $2.3 million was
received in February 1997 and recognized as other operating income in 1997.
During January 1997, the Company filed with the appropriate regulatory
authorities, applications to merge its four bank subsidiaries and its thrift
subsidiary into a single bank under the name "West Suburban Bank". The Company
anticipates that this merger will be completed during the second quarter of
1997.
During March 1997, the Company sold its interest in a property held as other
real estate for $1.5 million. As the property was previously written off, this
amount represents a gain recognized during 1997 as other operating income.
Effective April 1, 1997, ▇▇▇▇ ▇. ▇▇▇▇▇, President, Chief Executive Officer and
a director of the Company, will retire from service for the Company.
33
[INSERT WSB LOGO]
34
BOARDS OF DIRECTORS
WEST SUBURBAN BANCORP, INC.
▇▇▇▇▇ ▇. ▇▇▇▇▇ Chairman of the Board
▇▇▇▇ ▇. ▇▇▇▇▇ President and Chief Executive Officer
▇▇▇▇▇ ▇▇▇▇ Certified Public Accountant
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Business Operations Director, Inner City Impact
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Former Banker
WEST SUBURBAN BANK
▇▇▇▇▇ ▇. ▇▇▇▇▇ President and Chairman of the Board
▇▇▇▇▇ ▇▇▇▇ Certified Public Accountant
▇▇▇▇ ▇. ▇▇▇▇▇ Executive Vice President
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ J & E Duff, Inc.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Former Banker
▇▇▇▇▇ ▇▇▇▇ Director Emeritus
▇▇▇▇▇▇ ▇▇▇▇▇ Director Emeritus
WEST SUBURBAN BANK OF DOWNERS GROVE/▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇ Chairman of the Board
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Former ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Member Board of Directors, Lexington Health Care &
Retirement Communities
▇▇▇▇▇ ▇. ▇▇▇▇ President and Comptroller
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Senior Systems Analyst
▇▇▇▇▇▇ ▇▇▇▇▇▇ Director Emeritus
▇▇▇▇▇ ▇▇▇▇ Director Emeritus
WEST SUBURBAN BANK OF DARIEN
▇▇▇▇▇ ▇. ▇▇▇▇▇ President and Chairman of the Board
F. ▇▇▇▇▇▇ ▇▇▇▇▇▇ Attorney
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Vice President, Macom Corporation
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Contractor
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Executive Vice President
WEST SUBURBAN BANK OF ▇▇▇▇▇ STREAM/STRATFORD SQUARE
▇▇▇▇ ▇. ▇▇▇▇▇▇ Chairman of the Board; President, Macom Corporation
▇▇▇▇▇ ▇. ▇▇▇▇▇ President
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ President, Ditch Witch of Illinois
▇▇▇▇▇ ▇▇▇▇▇▇ President, ▇▇▇▇▇▇ Concrete
▇▇▇▇▇▇ ▇▇▇▇ Contractor
▇▇▇▇▇▇ ▇▇▇▇▇ President, Terrace Supply
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Vice President, Bracing Systems
WEST SUBURBAN BANK OF AURORA, F.S.B.
▇▇▇▇ ▇. ▇▇▇▇▇ Chairman of the Board and Executive Vice President
▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ President
▇▇▇▇▇ ▇. ▇▇▇▇▇ Chairman of the Board, West Suburban Bank of Downers
Grove/Lombard
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ President, Pomona Valley Farms, Inc.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Senior Vice President
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Vice President, Loans
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Vice President and Treasurer, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Corporation
▇▇▇▇▇ ▇▇▇▇▇ Director Emeritus
35
OFFICERS
WEST SUBURBAN BANCORP, INC.
▇▇▇▇ ▇. ▇▇▇▇▇ President and Chief Executive Officer
▇▇▇▇▇ ▇. ▇▇▇▇▇ Vice President, Chief Operations Officer
▇▇▇▇▇ ▇. ▇▇▇▇ Vice President, Chief Financial Officer, Secretary to the Board
and Treasurer
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Chief Compliance Officer
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Assistant Secretary to the Board and Assistant Treasurer
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Director of Internal Audit
WEST SUBURBAN BANK
▇▇▇▇▇ ▇. ▇▇▇▇▇ President and Data Processing Manager
▇▇▇▇ ▇. ▇▇▇▇▇ Executive Vice President
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Senior Vice President and Community Reinvestment Act Officer
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Senior Vice President, Business Administration
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Vice President, Operations
▇▇▇▇▇ ▇. ▇▇▇▇ Vice President and Comptroller
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Vice President, Facility Management
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Vice President, Data Processing
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Vice President, Investments and Trust Officer
▇▇▇▇▇ ▇. ▇▇▇ Vice President, Loans
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Vice President, Cashier and Secretary to the Board
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Vice President, Loans
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Vice President, Loss Prevention Officer
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Vice President, Operations and VISA
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Vice President, Facility Manager - ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Vice President, Loans
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Assistant Vice President, Financial Services
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Assistant Vice President, Facility Manager - Westmont
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Assistant Vice President, Operations
▇▇▇▇▇ ▇▇▇▇▇ Assistant Vice President, Facility Manager - Danada
▇▇▇▇▇ ▇. Dunk Assistant Vice President, Personnel Director
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Assistant Vice President, Facility Manager - Oakbrook Terrace
▇▇▇▇▇ ▇▇▇▇▇▇ Assistant Vice President, Facility Manager - Bolingbrook West
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Assistant Vice President, Facility Manager - Wheaton
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Assistant Vice President, Facility Manager - Villa Park
▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇▇ Assistant Vice President, Facility Manager - North Main
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ Assistant Vice President, Facility Manager - Naperville
▇▇▇▇▇ ▇▇▇▇▇▇▇ Assistant Vice President, Purchasing
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Assistant Vice President, Director of Employee Development
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Assistant Vice President, Facility Manager - President Street
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ Trust Officer
▇▇▇▇▇ ▇. ▇▇▇▇▇ Commercial Loan Operations Manager
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Director of Internal Audit
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Director of Marketing
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Home Equity Loan Operations Manager
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Compliance Officer
▇▇▇▇▇ ▇▇▇▇▇ Loan Officer
36
WEST SUBURBAN BANK OF DOWNERS GROVE/▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇ President and Comptroller
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ Vice President, Cashier
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Vice President and Community Reinvestment Act Officer
▇▇▇▇ ▇. ▇▇▇▇▇ Vice President, Loans
▇▇▇▇▇ ▇. ▇▇▇ Vice President, Loans
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Vice President, Loans
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Assistant Vice President, Financial Services
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Assistant Vice President, Facility Manager - Warrenville
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Assistant Vice President, Facility Manager - ▇▇▇▇▇▇ Road
▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇▇▇▇ Secretary to the Board
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Director of Internal Audit
WEST SUBURBAN BANK OF DARIEN
▇▇▇▇▇ ▇. ▇▇▇▇▇ President
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Executive Vice President and Secretary to the Board
▇▇▇▇ ▇▇▇▇▇ Little Vice President, Facility Manager - Cass Ave. and Cashier
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Vice President and Community Reinvestment Act Officer
▇▇▇▇ ▇. ▇▇▇▇▇ Vice President, Loans
▇▇▇▇▇ ▇. ▇▇▇▇ Vice President and Comptroller
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Assistant Vice President, Financial Services
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Assistant Vice President, Facility Manager - ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ Nuestrom Assistant Vice President, Facility Manager - Bolingbrook East
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Director of Internal Audit
WEST SUBURBAN BANK OF ▇▇▇▇▇ STREAM/STRATFORD SQUARE
▇▇▇▇▇ ▇. ▇▇▇▇▇ President
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Vice President and Community Reinvestment Act Officer
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. Vice President, Loans
▇▇▇▇ ▇. ▇▇▇▇▇ Vice President, Loans
▇▇▇▇▇ ▇. ▇▇▇▇ Vice President and Comptroller
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Assistant Vice President, Financial Services
▇▇▇▇▇▇ ▇▇▇▇ Assistant Vice President, Facility Manager - St. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Assistant Vice President, Facility Manager - Fair Oaks
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Assistant Vice President, Facility Manager - Glendale Heights
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Assistant Vice President, Facility Manager - ▇▇▇▇▇ Stream
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Assistant Vice President, Facility Manager - Stratford Square
▇▇▇▇▇ ▇▇▇▇▇▇ Assistant Vice President, Facility Manager - ▇▇▇▇▇▇▇▇
▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇▇▇▇ Secretary to the Board
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Director of Internal Audit
WEST SUBURBAN BANK OF AURORA, F.S.B.
▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ President
▇▇▇▇ ▇. ▇▇▇▇▇ Executive Vice President
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Senior Vice President and Community Reinvestment Act Officer
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Vice President, Loan Servicing
▇▇▇▇▇ ▇. ▇▇▇▇ Vice President and Comptroller
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Vice President, Loans
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Vice President, Secretary to the Board and Treasurer
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Assistant Vice President, Financial Services
▇▇▇ ▇. ▇▇▇▇▇▇▇ Assistant Vice President, Facility Manager - ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Assistant Vice President, Facility Manager - Lake Street
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Assistant Vice President, Facility Manager - Galena Blvd.
▇▇▇▇▇ ▇▇▇▇▇▇▇ Mortgage Operations Manager
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Director of Internal Audit
37
WEST SUBURBAN BANCORP, INC.
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
WEST SUBURBAN BANK
- West Suburban Bank: ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (630) 629-4200
- ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Facility: ▇▇▇ ▇. ▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (▇▇▇) ▇▇▇-▇▇▇▇
- Villa Park Facility: ▇▇ ▇. ▇▇. ▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ - (630) 832-8775
- Oakbrook Terrace Facility: ▇▇▇▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (▇▇▇) ▇▇▇-▇▇▇▇
- Metra Main Facility: ▇▇▇ ▇. ▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (630) 268-9010
- President Street Facility: ▇▇▇ ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (▇▇▇) ▇▇▇-▇▇▇▇
- Bolingbrook West Facility: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (▇▇▇) ▇▇▇-▇▇▇▇
- Danada Square Facility: ▇▇▇ ▇. ▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (▇▇▇) ▇▇▇-▇▇▇▇
- Wheaton Facility: ▇▇▇ ▇. ▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (▇▇▇) ▇▇▇-▇▇▇▇
- Westmont Facility: ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇., ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (▇▇▇) ▇▇▇-▇▇▇▇
- Naperville Facility: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (630) 416-3800
WEST SUBURBAN BANK OF DOWNERS GROVE/LOMBARD
- West Suburban Bank of Downers Grove/Lombard: ▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (▇▇▇) ▇▇▇-▇▇▇▇
- S. Main Street Facility: ▇▇▇▇ ▇. ▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (▇▇▇) ▇▇▇-▇▇▇▇
- Warrenville Facility: ▇▇▇▇▇ ▇▇▇. ▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (▇▇▇) ▇▇▇-▇▇▇▇
- Mr. Z's: ▇▇▇ ▇. ▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
WEST SUBURBAN BANK OF DARIEN
- West Suburban Bank of Darien: ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇., ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (630) 852-6900
- ▇▇▇▇ ▇▇▇▇▇▇ Facility: ▇▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (630) 852-9226
- Bolingbrook East Facility: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇/▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
- ▇▇▇▇ ▇▇▇▇▇▇▇▇ Bank of ▇▇▇▇▇ Stream/Stratford Square: ▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (▇▇▇) ▇▇▇-▇▇▇▇
- ▇▇▇▇▇ Stream Facility: ▇▇▇ ▇. ▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (▇▇▇) ▇▇▇-▇▇▇▇
- Fair Oaks Facility: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (▇▇▇) ▇▇▇-▇▇▇▇
- Glendale Heights Facility: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (▇▇▇) ▇▇▇-▇▇▇▇
- Bartlett Facility: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (▇▇▇) ▇▇▇-▇▇▇▇
- St. ▇▇▇▇▇▇▇ Facility: ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇., ▇▇. ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (▇▇▇) ▇▇▇-▇▇▇▇
WEST SUBURBAN BANK OF AURORA, F.S.B.
- West Suburban Bank - Aurora, F.S.B.: ▇▇▇ ▇. ▇▇▇▇ ▇▇., ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (▇▇▇) ▇▇▇-▇▇▇▇
- Galena Facility: ▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (▇▇▇) ▇▇▇-▇▇▇▇
- Montgomery Facility: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (▇▇▇) ▇▇▇-▇▇▇▇
WS 24 ATMs are available at all of the above banking locations.
VISA HEADQUARTERS, ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (▇▇▇) ▇▇▇-▇▇▇▇
FINANCIAL CENTER, ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
WHERE STRENGTH IS MATCHED BY SERVICE
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[INSERT MAP]
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ANNUAL REPORT ON FORM 10-K
A copy of West Suburban Bancorp, Inc.'s Annual Report on Form 10-K, filed with
the Securities and Exchange Commission, is available without charge by writing:
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇, Chief Financial Officer
West Suburban Bancorp, Inc., ▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇.
ANNUAL MEETING OF SHAREHOLDERS
The annual meeting of shareholders of West Suburban Bancorp, Inc. will be held
at West Suburban Bank, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ on Wednesday,
May 14, 1997 at 8:00 a.m. All shareholders are cordially invited to attend.
STOCK TRANSFER AGENT AND REGISTRAR
Inquiries regarding stock transfer, registration, lost certificates or changes
of name and address should be directed to the stock transfer agent and
registrar by writing:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Trust Officer
West Suburban Bank, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
COMMUNITY REINVESTMENT ACT
West Suburban Bancorp, Inc. adheres to a well-established policy of helping to
meet the credit needs of our local communities, consistent with safe and sound
lending practices, in accordance with the Community Reinvestment Act. For
additional information, contact:
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Senior Vice President and Community Reinvestment Act
Officer.
West Suburban Bank, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Two Prudential Plaza
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
MEMBER FDIC
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