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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period to
--------------- ---------------
Commission File No. 0-30505
----------------------
WEST POINTE BANCORP, INC.
(Exact name of registrant as specified in its charter)
Illinois 36-4149655
- -------------------------------------- ---------------------------------
(State of incorporation) (IRS Employer Identification No.)
West Pointe Bancorp, Inc.
5701 West Main Street
Belleville, Illinois 62226
----------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (618) 234-5700
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Class Outstanding at November 13, 2002
- ------------------------- --------------------------------
Common stock $1 par value 976,480
1
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statement of Changes in Stockholders'
Equity and Comprehensive Income 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 21
ITEM 4. CONTROLS AND PROCEDURES 21
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 22
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 22
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 22
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 22
ITEM 5. OTHER INFORMATION 22
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 22
SIGNATURE PAGE 23
CERTIFICATIONS 24
EXHIBIT INDEX 26
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WEST POINTE BANCORP, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30 DECEMBER 31
2002 2001
----------------- -----------------
ASSETS
Cash and due from banks $ 10,330,450 $ 11,162,097
Interest bearing due from banks 9,353,154 9,119,540
Investment securities:
Available-for-sale, at fair value (cost of $149,941,099 and
$128,272,156 at September 30, 2002 and December 31, 2001, respectively) 153,630,370 128,728,724
Loans 213,392,105 200,403,739
Allowance for loan losses (2,401,046) (2,224,352)
Net Loans 210,991,059 198,179,387
Accrued interest receivable 2,224,169 2,055,512
Real estate acquired by foreclosure 260,000 156,153
Bank premises and equipment 11,799,368 11,777,085
Income taxes receivable 107,690 ----
Deferred tax asset, net ---- 421,890
Other assets 8,400,869 5,113,605
----------------- -----------------
TOTAL ASSETS $407,097,129 $366,713,993
================= =================
LIABILITIES
Deposits:
Noninterest bearing $ 35,658,305 $ 37,542,385
Interest bearing 310,178,258 284,558,338
----------------- -----------------
Total Deposits 345,836,563 322,100,723
Securities sold under agreements to repurchase 23,476,197 12,237,129
Other borrowings 1,612,100 1,487,500
Federal Home Loan Bank advances 5,000,000 5,000,000
Accrued interest payable 895,707 1,130,922
Income taxes payable ---- 147,855
Deferred tax liability, net 786,158 ----
Other liabilities 1,657,142 1,222,142
----------------- -----------------
TOTAL LIABILITIES 379,263,867 343,326,271
STOCKHOLDERS' EQUITY
Preferred stock, $1 par value - 50,000 shares authorized;
none issued or outstanding at September 30, 2002 or December 31, 2001 ---- ----
Common stock, $1 par value - 10,000,000 shares authorized; 994,230 and 989,599
shares issued at September 30, 2002 and December 31, 2001, respectively 994,230 989,599
Surplus 12,949,380 12,798,975
Retained earnings 12,250,878 9,653,576
Treasury stock, 17,750 and 6,250 shares at September 30, 2002 and December 31,
2001, respectively, at cost (648,575) (337,500)
Accumulated other comprehensive income 2,287,349 283,072
----------------- -----------------
TOTAL STOCKHOLDERS' EQUITY 27,833,262 23,387,722
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $407,097,129 $366,713,993
================= =================
See the accompanying notes to consolidated financial statements.
3
WEST POINTE BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------------------------ -----------------------------------
2002 2001 2002 2001
---------------- ---------------- --------------- ----------------
Interest and Fee Income:
Interest and fees on loans $3,934,983 $4,235,227 $11,578,969 $12,693,955
Interest on U.S. Treasuries and agencies 1,258,394 1,304,201 3,595,704 4,195,385
Interest on state and municipal obligations 424,313 340,910 1,221,638 980,270
Interest on federal funds sold 383 8,308 570 54,755
Interest on deposits with banks 75,516 114,314 178,701 355,729
---------------- ---------------- --------------- ----------------
TOTAL INTEREST AND FEE INCOME 5,693,589 6,002,960 16,575,582 18,280,094
Interest Expense:
NOW, money market and savings deposits 483,687 760,853 1,428,954 2,598,829
Certificates of deposit 1,661,035 2,329,778 4,974,228 7,547,923
Securities sold under agreements to repurchase 100,136 117,708 248,961 353,463
Other borrowings 17,554 23,596 52,906 85,704
Federal Home Loan Bank advances 71,939 71,939 213,471 213,483
---------------- ---------------- --------------- ----------------
TOTAL INTEREST EXPENSE 2,334,351 3,303,874 6,918,520 10,799,402
---------------- ---------------- --------------- ----------------
NET INTEREST INCOME 3,359,238 2,699,086 9,657,062 7,480,692
Provision for Loan Losses 150,000 188,000 450,000 492,000
---------------- ---------------- --------------- ----------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 3,209,238 2,511,086 9,207,062 6,988,692
Noninterest Income:
Service charges on deposits 366,324 334,015 1,033,800 932,823
Mortgage banking 149,951 77,960 302,355 178,770
Trust fees 150,344 151,810 448,217 415,197
Brokerage and insurance services 69,007 74,111 182,213 153,353
Credit card income 94,424 81,129 273,332 234,638
Increase in cash surrender value of life 94,263 76,560 241,616 226,506
insurance
Gain on sale of investment securities, net ---- 54,630 340,312 390,469
Other 74,703 75,661 214,908 251,819
---------------- ---------------- --------------- ----------------
TOTAL NONINTEREST INCOME 999,016 925,876 3,036,753 2,783,575
Noninterest Expense:
Employee compensation and other benefits 1,437,703 1,279,716 4,229,096 3,737,416
Occupancy, net 191,598 195,589 545,076 551,920
Furniture and equipment 158,186 142,915 441,503 417,365
Data processing 110,538 99,065 338,476 294,833
Advertising 88,388 75,817 267,348 222,813
Other 872,034 715,597 2,345,480 2,032,632
---------------- ---------------- --------------- ----------------
TOTAL NONINTEREST EXPENSE 2,858,447 2,508,699 8,166,979 7,256,979
---------------- ---------------- --------------- ----------------
INCOME BEFORE INCOME TAXES 1,349,807 928,263 4,076,836 2,515,288
Income Tax Expense 366,500 240,200 1,168,000 595,600
---------------- ---------------- --------------- ----------------
NET INCOME $ 983,307 $ 688,063 $ 2,908,836 $ 1,919,688
================ ================ =============== ================
Average Shares Outstanding:
Basic 975,182 980,030 973,678 979,995
Diluted 996,446 988,788 992,339 988,340
Per Share Data:
Net income:
Basic $1.01 $.70 $2.99 $1.96
===== ==== ===== =====
Diluted $ .99 $.70 $2.93 $1.94
===== ==== ===== =====
Dividends declared $ .12 $.09 $ .32 $ .27
===== ==== ===== =====
See the accompanying notes to consolidated financial statements.
4
WEST POINTE BANCORP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE
INCOME (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2002
-----------------------------------------------------------------------------------------------------
ACCUMULATED
OTHER TOTAL
PREFERRED COMMON COMPREHENSIVE RETAINED TREASURY COMPREHENSIVE STOCKHOLDERS'
STOCK STOCK SURPLUS INCOME EARNINGS STOCK INCOME EQUITY
-------- ---------- ------------ ---------- ----------- --------- ---------- --------------
Balance - December 31, 2001 $---- $989,599 $12,798,975 $ 9,653,576 $(337,500) $ 283,072 $23,387,722
Issuance of common stock ---- 4,631 150,405 ---- ---- ---- 155,036
Purchase of treasury stock ---- ---- ---- ---- (311,075) ---- (311,075)
Net income ---- ---- ---- $2,908,836 2,908,836 ---- ---- 2,908,836
Other comprehensive
income, net of
tax-unrealized gains on
securities, net of
reclassification
adjustment (1) ---- ---- ---- 2,004,277 ---- ---- 2,004,277 2,004,277
----------
Comprehensive income $4,913,113
==========
Dividends paid ---- ---- ---- (311,534) ---- ---- (311,534)
-------- ---------- ------------ ----------- --------- ---------- --------------
Balance - September 30, 2002 $---- $994,230 $12,949,380 $12,250,878 $(648,575) $2,287,349 $27,833,262
======== ========== ============ =========== ========= ========== ==============
(1) Disclosure of reclassification adjustment:
NINE MONTHS
ENDED
SEPTEMBER 30, 2002
------------------
Unrealized gains arising during the period $2,215,270
Less reclassification adjustment for gains included in net income (210,993)
-----------------
Unrealized gains on investment securities $2,004,277
=================
See the accompanying notes to consolidated financial statements.
5
WEST POINTE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30
----------------------------------------------
2002 2001
-------------------- ---------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,908,836 $ 1,919,688
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization:
Bank premises and equipment 486,226 471,339
Discounts and premiums 531,888 (89,412)
Gains on sale of investment securities, net (340,312) (390,469)
Provision for loan losses 450,000 492,000
Change in assets and liabilities:
(Increase) decrease in accrued interest receivable (168,657) 774,028
Decrease in accrued interest payable (235,215) (186,228)
Increase (decrease) in income taxes, net (275,924) 233,590
Net change in other assets and other liabilities 486,212 450,031
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,843,054 3,674,567
CASH FLOWS FROM INVESTING ACTIVITIES
Principal repayments on investment securities 17,640,446 10,266,323
Sales of investment securities available for sale 24,698,994 24,297,775
Maturities of investment securities available for sale 5,282,000 51,881,000
Purchases of investment securities available for sale (69,481,958) (85,408,761)
Net increase in loans (13,514,738) (12,828,154)
Purchases of life insurance policies (3,096,860) ----
Increase in cash surrender value of life insurance policies (241,616) (242,371)
Sales of real estate acquired by foreclosure 149,219 40,259
Purchases of bank premises and equipment (508,509) (150,883)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (39,073,022) (12,144,812)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in noninterest bearing deposits (1,884,080) 1,999,064
Net increase in interest bearing deposits 25,619,920 16,076,942
Net increase in securities sold under agreements to repurchase 11,239,068 5,107,394
Increase (decrease) in other borrowings 124,600 (150,000)
Proceeds from issuance of common stock 155,036 60,726
Purchase of treasury stock (311,075) ----
Dividends paid (311,534) (264,546)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 34,631,935 22,829,580
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (598,033) 14,359,335
Cash and cash equivalents - Beginning of year 20,281,637 13,497,965
------------ ------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 19,683,604 $ 27,857,300
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 7,153,735 $ 10,985,630
Income taxes paid, net 1,443,898 331,513
Noncash investing and financing activities:
Investment securities transferred to available for sale ---- 2,821,121
Noncash transfer of loans to real estate acquired by foreclosure 260,000 ----
See the accompanying notes to consolidated financial statements.
6
WEST POINTE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A--PRINCIPLES OF ACCOUNTING
The consolidated financial statements of West Pointe Bancorp, Inc.
("West Pointe") or ("the Company") have been prepared in accordance with
accounting principles generally accepted in the United States of America for the
banking industry and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for annual reporting. Reference is hereby made to the notes to
consolidated financial statements contained in West Pointe's Annual Report on
Form 10-K for the year ended December 31, 2001. The foregoing consolidated
financial statements are unaudited. However, in the opinion of management, all
adjustments necessary for a fair presentation of the consolidated financial
statements have been made. All such adjustments are of a normal recurring
nature. The results of operations for the interim periods presented herein are
not necessarily indicative of the results to be expected for the full year.
The consolidated financial statements include the accounts of its
subsidiary. West Pointe is a bank holding company that engages in its business
through its sole subsidiary, West Pointe Bank And Trust Company (the "Bank"), an
Illinois chartered commercial bank. All material intercompany transactions and
balances are eliminated.
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and revenues and expenses for
the period. Actual results could differ significantly from those estimates.
Certain 2001 amounts have been reclassified where appropriate to
conform to the consolidated financial statement presentation used in 2002.
NOTE B--BUSINESS SEGMENTS
On January 1, 1998, West Pointe adopted Financial Accounting Standards
No. 131 (SFAS No. 131), "Disclosures about Segments of an Enterprise and Related
Information", which requires business segments to be reported based on the way
management organizes segments within an organization for making operating
decisions and assessing performance. SFAS No. 131 is effective for fiscal years
beginning after December 15, 1997. Management has not included disclosures
regarding specific segments since management makes operating decisions and
assesses performance based on West Pointe as a whole.
7
NOTE C--NET INCOME PER SHARE
The calculation of net income per share is summarized as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------------------- -----------------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
Basic
Net Income ........................................ $ 983,307 $ 688,063 $2,908,836 $1,919,688
========== ========== ========== ==========
Average common shares outstanding ................. 975,182 980,030 973,678 979,995
========== ========== ========== ==========
Net income per common share - basic ............... $ 1.01 $ .70 $ 2.99 $ 1.96
========== ========== ========== ==========
Diluted
Net Income ........................................ $ 983,307 $ 688,063 $2,908,836 $1,919,688
========== ========== ========== ==========
Average common shares outstanding ................. 975,182 980,030 973,678 979,995
Dilutive potential due to stock options ........... 21,264 8,758 18,661 8,345
---------- ---------- ---------- ----------
Average common shares outstanding ................. 996,446 988,788 992,339 988,340
========== ========== ========== ==========
Net income per common share - diluted ............. $ .99 $ .70 $ 2.93 $ 1.94
========== ========== ========== ==========
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion describes West Pointe's results of operations
during the three-month and nine-month periods ended September 30, 2002 and 2001,
and its financial condition, asset quality, and capital resources as of
September 30, 2002. This discussion should be read in conjunction with West
Pointe's unaudited consolidated financial statements and notes thereto. The
results of operations for the interim periods presented herein are not
necessarily indicative of the results to be expected for the full year.
FORWARD-LOOKING STATEMENTS
This filing and future filings made by West Pointe with the Securities
and Exchange Commission, as well as other filings, reports and press releases
made or issued by West Pointe, and oral statements made by executive officers or
directors of West Pointe may include forward-looking statements, which are based
on assumptions and describe future plans, strategies, projections and
expectations of West Pointe. These forward-looking statements are generally
identified by use of terms "believe", "expect", "intend", "anticipate",
"estimate", "project", or similar words. West Pointe's ability to predict
results or the actual effect of future plans or strategies is uncertain. Factors
which could have a material adverse effect on West Pointe's operations 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 and composition of the loan or investment portfolios, demand
for loan products, deposit flows, competition, demand for financial services in
West Pointe's market areas and accounting principles and guidelines. All of
these uncertainties, as well as others, are present in a banking operation and
stockholders are cautioned that management's view of the future on which it
prices its products, evaluates collateral, sets loan reserves and estimates
costs of operations and regulation may prove to be other than anticipated. West
Pointe assumes no obligation to update any forward-looking statements that are
made from time to time.
OVERVIEW
Net income for the third quarter of 2002 was $983,307 or $.99 per
diluted common share compared to net income of $688,063 or $.70 per diluted
common share for the third quarter of 2001. Net income for the first nine months
of 2002 was $2,908,836 or $2.93 per diluted common share compared to net income
of $1,919,688 or $1.94 per diluted common share for the first nine months of
2001. Return on average assets for the third quarter and first nine months of
2002 was .97% and 1.03%, respectively, compared to .77% and .73% for the third
quarter and first nine months of 2001, respectively. Return on average equity
for the third quarter and first nine months of 2002 was 14.44% and 15.39%,
respectively, compared to 11.97% and 11.72% for the third quarter and first nine
months of 2001, respectively.
The increases in net income, for the quarters and nine-month periods
compared, were primarily attributable to increases in net interest income and
noninterest income, coupled with reductions in the provisions for loan losses.
These items were partially offset by increases in noninterest expenses and
income tax expenses.
Total assets at September 30, 2002 increased to $407,097,129 from
$366,713,993 at December 31, 2001. The increase in total assets was primarily
attributable to growth in investment securities and loans. The increase in total
assets was primarily funded by increases in deposits and securities sold under
agreements to repurchase.
9
RESULTS OF OPERATIONS
Table 1 summarizes West Pointe's statement of income and the change in
each category for the periods presented.
TABLE 1 - Comparative Statements of Income
Three Months Ended
September 30 Change
--------------------------- -----------------------
2002 2001 Amount Percent
---------- ---------- ---------- ---------
Total interest income
(fully tax-equivalent) ...................................... $5,861,624 $6,118,396 $ (256,772) (4.2)%
Total interest expense ........................................... 2,334,351 3,303,874 (969,523) (29.3)
---------- ---------- ----------
Net interest income .................................... 3,527,273 2,814,522 712,751 25.3
Provision for loan losses ........................................ 150,000 188,000 (38,000) (20.2)
Noninterest income:
Service charges on deposits ................................. 366,324 334,015 32,309 9.7
Mortgage banking ............................................ 149,951 77,960 71,991 92.3
Trust fees .................................................. 150,344 151,810 (1,466) (1.0)
Brokerage and insurance services ............................ 69,007 74,111 (5,104) (6.9)
Credit card income .......................................... 94,424 81,129 13,295 16.4
Increase in cash surrender value of life insurance .......... 94,263 76,560 17,703 23.1
Investment securities gains ................................. -- 54,630 (54,630) (100.0)
Other ....................................................... 74,703 75,661 (958) (1.3)
---------- ---------- ----------
Total .................................................. 999,016 925,876 73,140 7.9
---------- ---------- ----------
Noninterest expense:
Employee compensation and other benefits .................... 1,437,703 1,279,716 157,987 12.3
Occupancy, net .............................................. 191,598 195,589 (3,991) (2.0)
Furniture and equipment ..................................... 158,186 142,915 15,271 10.7
Data processing ............................................. 110,538 99,065 11,473 11.6
Advertising ................................................. 88,388 75,817 12,571 16.6
Other ....................................................... 872,034 715,597 156,437 21.9
---------- ---------- ----------
Total .................................................. 2,858,447 2,508,699 349,748 13.9
---------- ---------- ----------
Income before income taxes ....................................... 1,517,842 1,043,699 474,143 45.4
Less: tax-equivalent adjustment ................................. 168,035 115,436 52,599 45.6
Income tax expense ............................................... 366,500 240,200 126,300 52.6
---------- ---------- ----------
Net income ....................................................... $ 983,307 $ 688,063 $ 295,244 42.9 %
========== ========== ==========
10
Nine Months Ended
September 30 Change
----------------------------- -----------------------
2002 2001 Amount Percent
----------- ----------- ----------- ---------
Total interest income
(fully tax-equivalent) .................................... $17,055,982 $18,586,524 $(1,530,542) (8.2)%
Total interest expense ......................................... 6,918,520 10,799,402 (3,880,882) (35.9)
----------- ----------- -----------
Net interest income .................................. 10,137,462 7,787,122 2,350,340 30.2
Provision for loan losses ...................................... 450,000 492,000 (42,000) (8.5)
Noninterest income:
Service charges on deposits ............................... 1,033,800 932,823 100,977 10.8
Mortgage banking .......................................... 302,355 178,770 123,585 69.1
Trust fees ................................................ 448,217 415,197 33,020 8.0
Brokerage and insurance services .......................... 182,213 153,353 28,860 18.8
Credit card income ........................................ 273,332 234,638 38,694 16.5
Increase in cash surrender value of life insurance ........ 241,616 226,506 15,110 6.7
Investment securities gains ............................... 340,312 390,469 (50,157) (12.8)
Other ..................................................... 214,908 251,819 (36,911) (14.7)
----------- ----------- -----------
Total ................................................ 3,036,753 2,783,575 253,178 9.1
----------- ----------- -----------
Noninterest expense:
Employee compensation and other benefits .................. 4,229,096 3,737,416 491,680 13.2
Occupancy, net ............................................ 545,076 551,920 (6,844) (1.2)
Furniture and equipment ................................... 441,503 417,365 24,138 5.8
Data processing ........................................... 338,476 294,833 43,643 14.8
Advertising ............................................... 267,348 222,813 44,535 20.0
Other ..................................................... 2,345,480 2,032,632 312,848 15.4
----------- ----------- -----------
Total ................................................ 8,166,979 7,256,979 910,000 12.5
----------- ----------- -----------
Income before income taxes ..................................... 4,557,236 2,821,718 1,735,518 61.5
Less: tax-equivalent adjustment ............................... 480,400 306,430 173,970 56.8
Income tax expense ............................................. 1,168,000 595,600 572,400 96.1
----------- ----------- -----------
Net income ..................................................... $ 2,908,836 $ 1,919,688 $ 989,148 51.5%
=========== =========== ===========
NET INTEREST INCOME
Tax-equivalent net interest income increased $712,751 or 25.3% for the
third quarter of 2002 compared to the same period of 2001 and increased
$2,350,340 or 30.2% for the first nine months of 2002 compared to the same
period of 2001. The increases in tax-equivalent net interest income, for both
periods compared, were principally attributable to decreases in interest expense
which were partially offset by decreases in tax-equivalent interest income.
Total tax-equivalent interest income decreased $256,772 or 4.2% for the
third quarter of 2002 compared to the same period of 2001 and decreased
$1,530,542 or 8.2% for the first nine months of 2002 compared to the same period
of 2001. The decreases in tax-equivalent interest income for the quarters and
nine-month periods compared were primarily attributable to the lower interest
rate environment, partially offset by higher volumes of interest earning assets.
Total interest expense decreased $969,523 or 29.3% for the third
quarter of 2002 compared to the same period of 2001 and decreased $3,880,882 or
35.9% for the first nine months of 2002 compared to the same period of 2001. The
decreases in interest expense were primarily attributable to the lower interest
rate environment, partially offset by higher volumes of interest bearing
liabilities.
The net interest margin was 3.77% for the third quarter of 2002
compared to 3.39% for the third quarter of 2001. The net interest margin for the
first nine months of 2002 was 3.85% compared to 3.20% for the first nine months
of 2001. The increases in the net interest margin for the quarters and
nine-month
11
periods compared primarily resulted from continuing efforts to control the
Company's cost of funds, which as a result, declined at a faster pace than the
Company's yield on interest earning assets.
PROVISION FOR LOAN LOSSES
The provision for loan losses was $150,000 and $450,000 for the third
quarter and first nine months of 2002, respectively, compared to $188,000 and
$492,000 for the third quarter and first nine months of 2001, respectively. The
provision for loan losses represents management's judgment of the cost
associated with credit risk inherent in the loan portfolio. Factors which
influence management's determination of the provision for loan losses include,
among other things, size and quality of the loan portfolio measured against
prevailing economic conditions, regulatory guidelines, a review of individual
loans and historical loan loss experience. The decreases in the provision for
loan losses for the quarter and nine-month period ending September 30, 2002
compared to the same periods of 2001 were primarily reflective of overall
improvement in the quality of the loan portfolio. Activity in the allowance for
loan losses and nonperforming loan data are presented under "ASSET QUALITY."
NONINTEREST INCOME
Total noninterest income was $999,016 for the third quarter of 2002
compared to $925,876 for the third quarter of 2001. Noninterest income totaled
$3,036,753 for the first nine months of 2002 compared to $2,783,575 for the same
period of 2001. Service charges on deposit accounts increased $32,309 for the
third quarter of 2002 compared to the third quarter of 2001 and increased
$100,977 for the nine-month periods compared. The increases in service charges
on deposit accounts for the periods compared were primarily attributable to the
growth in the volume of deposit accounts on which service charges are assessed.
Income from mortgage banking services increased $71,991 for the third quarter of
2002 compared to the third quarter of 2001 and increased $123,585 for the
nine-month periods compared. The increases in mortgage banking income for the
periods compared occurred as a result of a lower rate environment, which
improved the level of origination activities. Assuming that interest rates
remain at lower levels, Company management anticipates that the level of
mortgage loan origination and refinancing activities will remain relatively
strong for the remainder of 2002. Income from trust fees decreased $1,466 for
the third quarter of 2002 compared to the third quarter of 2001 and increased
$33,020 for the nine-month periods compared. The modest decrease in income from
trust fees for the quarters compared was primarily the result of a decrease in
the market value of trust assets on which certain fees are based. The increase
in income from trust fees for the nine-month periods compared was partially
attributable to one-time fees charged in connection with the administration of
certain estates and new business development. Income from brokerage and
insurance services decreased $5,104 for the third quarter of 2002 compared to
the third quarter of 2001. The modest decrease in income from brokerage and
insurance services for the quarters compared was primarily attributable to
uncertainty in the stock market. In January 2001, through an arrangement with
Raymond James Financial Services, Inc., member NASD and SIPC, West Pointe
expanded its products to include additional investment services. Products
available through this arrangement include stocks, bonds, mutual funds,
annuities and other non-deposit investment products. While brokerage and
insurance services were introduced in January 2001, income from this function
was not significant until the second quarter of that year. As a result, income
from brokerage and insurance services increased $28,860 for the nine-month
periods compared. Credit card income increased $13,295 during the third quarter
of 2002 compared to the third quarter of 2001 and increased $38,694 for the
nine-month periods compared. The modest increases in credit card income were
primarily due to additional merchant related revenues and additional revenues
related to West Pointe's "debit" card product. During the third quarter and
first nine months of 2002, West Pointe recorded increases in cash surrender
value of life insurance of $94,263 and $241,616, respectively, compared to
increases of $76,560 and $226,506 recorded during the third quarter and first
nine months of 2001, respectively. These cash surrender value increases relate
to various bank owned life insurance (BOLI) policies. Certain of these BOLI
policies serve
12
as funding mechanisms for West Pointe's director fee deferral program, West
Pointe's salary continuation plan which was established in 2000 for the
Company's President and Chief Executive Officer and for West Pointe's Community
Scholarship Program which was also established in 2000. The remaining policies
were purchased to provide additional employee benefits to certain company
officers. These BOLI policies provide certain benefits to the Company including,
but not limited to, the deferral of income taxes on the increases in their cash
surrender values. Net securities gains recorded during the third quarter of 2001
totaled $54,630. No net securities gains or losses were recorded during the
third quarter of 2002. Net securities gains recorded during the first nine
months 2002 totaled $340,312 compared to net securities gains of $390,469
recorded during the first nine months of 2001. Net securities gains recorded
during 2002 resulted from management's decision to reconfigure certain segments
of the investment portfolio so as to limit potential interest rate risk that
could result from a rising rate environment. These efforts to reconfigure the
investment portfolio resulted in the sale of certain U. S. Government agency and
mortgage-backed securities with par values totaling approximately $24,124,000,
in the available-for-sale portion of the investment portfolio. The majority of
the securities gains recorded in 2001 resulted from management's decision and
opportunities in the market place to sell certain U. S. Government agency
securities with par values totaling $18,485,000, in the available-for-sale
portion of the investment portfolio. Considering the rapidly declining interest
rate environment evident at that time, the majority of these securities were
likely to be called by the issuers in the near future. Other noninterest income
includes such items as interchange fees on automated teller machine (ATM)
transactions, safe deposit box rental fees, check printing fees and other
miscellaneous fees. Other noninterest income decreased $958 for the third
quarter of 2002 compared to the third quarter of 2001 and decreased $36,911 for
the nine-month periods compared. Modest declines in a number of categories of
other noninterest income contributed to these decreases.
NONINTEREST EXPENSE
Total noninterest expense was $2,858,447 for the third quarter of 2002
compared to $2,508,699 for the third quarter of 2001. For the first nine months
of 2002, noninterest expense was $8,166,979 compared to $7,256,979 for the same
period of 2001. The increases in noninterest expense were primarily attributable
to increases in employee compensation and benefits, the largest component of
noninterest expense. Employee compensation and other benefit expenses increased
$157,987 for the third quarter of 2002 compared to the third quarter of 2001 and
increased $491,680 for the nine-month periods compared. The increases in
employee compensation and benefits for the quarters and nine-month periods
compared were primarily attributable to normal merit increases and staff
additions associated with overall growth in banking operations. Net occupancy
expenses decreased $3,991 during the third quarter of 2002 compared to the third
quarter of 2001 and decreased $6,844 for the nine-month periods compared. These
decreases in net occupancy expenses were primarily attributable to an increase
in building rent income. This building rent income was derived from various
third party tenants that lease space from West Pointe. Furniture and equipment
expenses increased $15,271 during the third quarter of 2002 compared to the
third quarter of 2001 and increased $24,138 for the nine-month periods compared.
The increases for the periods compared related primarily to furniture and
equipment expenses associated with normal growth in operations. Data processing
expenses increased $11,473 for the third quarter of 2002 compared to the third
quarter of 2001 and increased $43,643 for the nine-month periods compared. The
increases in data processing expenses for the periods compared resulted
primarily from normal growth in operations. Advertising expenses increased
$12,571 for the third quarter of 2002 compared to the third quarter of 2001 and
increased $44,535 for the nine-month periods compared. The increases in
advertising expenses for the quarters and nine-month periods compared resulted
from normal increases associated with the Company's promotional advertising
activities. Other noninterest expenses increased $156,437 for the third quarter
of 2002 compared to the third quarter of 2001 and increased $312,848 for the
nine-month periods compared. Other noninterest expenses includes such items as
legal and professional fees, FDIC insurance premiums, mortgage banking expenses,
postage costs and certain credit card program expenses. The increases in other
noninterest
13
expenses for the periods compared were partially attributable to increased legal
and professional fees. Numerous other categories of noninterest expenses also
contributed to the increases.
INCOME TAX EXPENSE
West Pointe recorded income tax expense of $366,500 for the third
quarter of 2002 compared to $240,200 for the third quarter of 2001. For the
first nine months of 2002, income tax expense was $1,168,000 compared to
$595,600 for the same period of 2001. The effective income tax rates were 27.2%
and 25.9% for the third quarter of 2002 and 2001, respectively. The effective
income tax rates were 28.6% and 23.7% for the first nine months of 2002 and
2001, respectively. The increases in income tax expense and the related
effective income tax rates for the 2002 periods compared to the 2001 periods
primarily resulted from higher levels of earnings partially offset by the impact
of slightly higher levels of tax-exempt interest.
FINANCIAL CONDITION
GENERAL
Certain components of West Pointe's consolidated balance sheet at
September 30, 2002 compared to December 31, 2001 are presented in summary form
in Table 2. Total assets increased $40,383,136 to $407,097,129 compared to
$366,713,993 at December 31, 2001. This increase primarily resulted from
increases in loans and investment securities.
TABLE 2 - Selected Comparative Balance Sheet Items
September 30 December 31
2002 2001
------------------ -----------------
Total assets ....................................................... $407,097,129 $366,713,993
Loans .............................................................. 213,392,105 200,403,739
Investments ........................................................ 153,630,370 128,728,724
Deposits ........................................................... 345,836,563 322,100,723
Repurchase agreements .............................................. 23,476,197 12,237,129
Other borrowings ................................................... 1,612,100 1,487,500
Federal Home Loan Bank advances .................................... 5,000,000 5,000,000
Stockholders' equity ............................................... 27,833,262 23,387,722
LOANS
Loans increased 6.5% or $12,988,366 to $213,392,105 at September 30,
2002, from $200,403,739 at year-end 2001. The majority of this increase was
derived from growth in the commercial, financial and agricultural, commercial
real estate and real estate construction segments of the portfolio. West Pointe
also experienced modest growth in the residential real estate and other consumer
loan segments of the portfolio.
Table 3 presents the composition of the loan portfolio by type of
borrower and major loan category and the percentage of each to the total
portfolio for the periods presented.
14
TABLE 3 - Loan Portfolio Composition
September 30 December 31
2002 2001
------------------------------- -------------------------------
Commercial borrowers: Amount Percent Amount Percent
- --------------------- ---------------- ----------- ---------------- -----------
Commercial, financial and
agricultural............ $ 53,353,938 25.0% $ 48,560,141 24.2%
Commercial real estate....... 79,758,884 37.4 75,352,452 37.6
Real estate construction..... 12,439,468 5.8 9,816,970 4.9
---------------- ----------- ---------------- -----------
Total commercial... 145,552,290 68.2 133,729,563 66.7
---------------- ----------- ---------------- -----------
Consumer borrowers:
- -------------------
1-4 family residential
real estate............. 55,958,214 26.2 54,974,345 27.5
Other consumer loans......... 11,881,601 5.6 11,699,831 5.8
---------------- ----------- ---------------- -----------
Total consumer..... 67,839,815 31.8 66,674,176 33.3
---------------- ----------- ---------------- -----------
Total loans........ $ 213,392,105 100.0% $ 200,403,739 100.0%
================ =========== ================ ===========
INVESTMENTS
Total investments increased to $153,630,370, at September 30, 2002
compared to $128,728,724 at year-end 2001. Effective January 1, 2001, West
Pointe adopted Financial Accounting Standards No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities." Additional information
concerning the provisions of this pronouncement is reflected later in these
discussions under "RECENT ACCOUNTING PRONOUNCEMENTS." Although West Pointe does
not have any derivative instruments to record, management reconsidered its
ability and intent to hold certain debt securities to maturity and transferred
$2,821,121 of mortgage-backed securities to available for sale on January 1,
2001. As a result, as of January 1, 2001, West Pointe's entire investment
portfolio was classified as available for sale.
The investment portfolio provides a balance to interest rate and credit
risk in other categories of the balance sheet while providing a vehicle for the
investment of available funds not needed to fund loan demand. The investment
portfolio also supplies securities as required collateral for certain deposits
and for securities sold under agreements to repurchase. Additional information
regarding West Pointe's securities sold under agreements to repurchase is
presented and discussed under "Borrowings."
Available-for-sale investment securities are recorded at fair value.
Net unrealized gains on available-for-sale investment securities totaled
$3,689,271 at September 30, 2002, compared to net unrealized gains of $456,568
at December 31, 2001.
Table 4 presents the composition of investment securities at their
carrying values for the periods presented.
TABLE 4 - Investment Securities Portfolio Composition
September 30 December 31
2002 2001
--------------------- ---------------------
Available-for-sale securities:
Obligations of U.S. government corporations and agencies..... $ 11,421,810 $ 7,846,306
Mortgage-backed securities................................... 93,862,909 84,023,498
Obligations of states and political subdivisions............. 39,145,951 30,568,170
Equity securities............................................ 9,199,700 6,290,750
--------------------- ---------------------
Total available-for-sale................................ $ 153,630,370 $ 128,728,724
===================== =====================
15
DEPOSITS
West Pointe's deposit base is its primary source of liquidity and
consists of deposits originating within the communities served by its banking
locations. Deposits are West Pointe's primary and most reliable funding source
for interest earning assets.
Total deposits increased $23,735,840 to $345,836,563 at September 30,
2002 from year-end 2001. The savings and money market deposit and time deposit
components of the deposit portfolio increased $9,615,188 and $15,689,426,
respectively, from year-end 2001. Increases in these categories were partially
reflective of the poor performance of the stock market, during the first nine
months of 2002, which resulted in customer deposits into more stable interest
earning investments. Balances in noninterest bearing demand deposits decreased
$1,884,080 from year-end 2001. This decrease was primarily attributable to
seasonal fluctuations, which generally result in higher balances at year-end.
Interest bearing demand deposits remained relatively stable at September 30,
2002 compared to year-end 2001. West Pointe continues to emphasize sales efforts
and offers competitive pricing of deposits.
Table 5 sets forth the composition of deposits and the percentage of
each category to total deposits for the periods presented.
TABLE 5 - Deposit Liability Composition
September 30 December 31
2002 2001
------------------------------ ------------------------------
Amount Percent Amount Percent
--------------- ----------- --------------- -----------
Noninterest bearing demand deposits.... $ 35,658,305 10.3% $ 37,542,385 11.6%
Interest bearing demand deposits....... 28,522,473 8.2 28,207,167 8.8
Savings and money market deposits...... 101,167,207 29.3 91,552,019 28.4
Time deposits $100,000 or more......... 60,944,918 17.6 52,471,328 16.3
Time deposits less than $100,000....... 119,543,660 34.6 112,327,824 34.9
--------------- ----------- --------------- -----------
Total deposits.................... $ 345,836,563 100.0% $ 322,100,723 100.0%
=============== =========== =============== ===========
BORROWINGS
Total borrowings amounted to $30,088,297 at September 30, 2002,
compared to $18,724,629 at year-end 2001. At September 30, 2002 and December 31,
2001, borrowings consisted of securities sold under agreements to repurchase
(repurchase agreements), Federal Home Loan Bank advances and a short-term
borrowing with an unaffiliated bank.
Repurchase agreements increased $11,239,068 from year-end 2001. These
borrowings serve as an alternative funding source to deposits. The majority of
the increase in repurchase agreements was in the form of cash management
repurchase agreement accounts. Such accounts involve the daily transfer of
excess funds from noninterest bearing deposit accounts into interest bearing
cash management repurchase agreement accounts. Cash management repurchase
agreement accounts are marketed to commercial and individual deposit customers
and are considered to be a stable source of funds. Repurchase agreements, other
than cash management repurchase agreements, generally represent an alternative
to short-term certificates of deposit.
At September 30, 2002 and December 31, 2001, the Bank had one
$5,000,000 Federal Home Loan Bank advance, which reflected an interest rate of
5.63% and had a scheduled maturity of December 13, 2004. As of December 13,
2000, this advance is callable on a quarterly basis.
16
At September 30, 2002, other borrowings consisted of a $1,612,100
borrowing under a line of credit with an unaffiliated bank. This line of credit
allows for borrowings, by West Pointe, of up to $5,000,000. The line of credit
matures on January 7, 2003, and bears interest at a rate of 50 basis points
under the prime lending rate. As of December 31, 2001, the amount of this
borrowing totaled $1,487,500. The increase in the amount borrowed as of
September 30, 2002 compared to December 31, 2001 primarily resulted from the
purchase of 11,500 shares of West Pointe's common stock from an individual
stockholder. This increase was partially offset by principal payments totaling
$150,000 made during the first nine months of 2002.
ASSET QUALITY
West Pointe's asset quality management program, particularly with
regard to loans, is designed to analyze potential risk elements and to support
the growth of a high quality loan portfolio. The existing loan portfolio is
monitored via West Pointe's loan rating system. The loan rating system is used
to determine the adequacy of the allowance for loan losses. West Pointe's loan
analysis process proactively identifies, monitors and works with borrowers for
whom there are indications of future repayment difficulties. West Pointe's
lending philosophy is to invest in the communities served by its banking centers
so that it can effectively monitor and control credit risk.
At September 30, 2002, nonperforming assets totaled $603,935, or .15%
of total assets, compared to nonperforming assets at year-end 2001 of $1,262,125
or .34% of total assets. Nonperforming assets, at September 30, 2002, included
$260,000 relating to foreclosed property. During the first nine months of 2002,
four parcels of foreclosed property were sold. These foreclosed property
dispositions produced modest losses totaling $5,096. Management does not
anticipate any significant losses upon disposition of the remaining foreclosed
property. As of September 30, 2002, nonperforming loans totaled $343,935, or
..16% of total loans, compared to nonperforming loans at year-end 2001 of
$1,105,972, or .55% of total loans. Nonperforming loans in the commercial,
financial and agricultural segment of the portfolio consisted of one loan
totaling $51,114 and decreased $308,959 from December 31, 2001. Nonperforming
loans in the commercial real estate segment of the portfolio decreased $514,004
from December 31, 2001. At September 30, 2002, there were only two nonperforming
loans in the commercial real estate segment of the loan portfolio. Nonperforming
loans in the residential real estate segment of the portfolio increased $108,160
to $153,160 at September 30, 2002 compared to December 31, 2001. The increase in
this category of nonperforming loans was primarily attributable to a loan to one
borrower. Nonperforming loans relating to other consumer loans decreased to
$8,857 at September 30, 2002 from $56,091 at December 31, 2001. Management is in
various stages of workout or liquidation of the remaining nonperforming loans.
17
Table 6 sets forth a summary of West Pointe's loan portfolio mix and
nonperforming assets.
TABLE 6 - Loan Portfolio Mix and Nonperforming Assets
September 30, 2002 December 31, 2001
---------------------------------------- ----------------------------------------
Loans and Loans and
Foreclosed Non-performing Foreclosed Non-performing
Property Assets Property Assets
------------------ ------------------ ------------------ ------------------
Commercial borrowers:
- ---------------------
Commercial, financial and
agricultural........................ $ 53,353,938 $ 51,114 $ 48,560,141 $ 360,073
Commercial real estate................... 79,758,884 130,804 75,352,452 644,808
Real estate construction................. 12,439,468 ---- 9,816,970 ----
------------------ ------------------ ------------------ ------------------
Total commercial............... 145,552,290 181,918 133,729,563 1,004,881
Consumer borrowers:
- -------------------
1-4 family residential
real estate......................... 55,958,214 153,160 54,974,345 45,000
Other consumer loans..................... 11,881,601 8,857 11,699,831 56,091
------------------ ------------------ ------------------ ------------------
Total consumer................. 67,839,815 162,017 66,674,176 101,091
------------------ ------------------ ------------------ ------------------
Total loans.................... 213,392,105 343,935 200,403,739 1,105,972
Foreclosed property...................... 260,000 260,000 156,153 156,153
------------------ ------------------ ------------------ ------------------
Total.......................... $ 213,652,105 $ 603,935 $ 200,559,892 $ 1,262,125
================== ================== ================== ==================
Nonaccrual loans......................... $ 329,741 $ 421,662
Accruing loans past due
90 days or more..................... 14,194 370,080
Troubled debt restructurings............. ---- 314,230
------------------ ------------------
Total nonperforming loans........... 343,935 1,105,972
Foreclosed property...................... 260,000 156,153
------------------ ------------------
Total nonperforming assets.......... $ 603,935 $ 1,262,125
================== ==================
Nonperforming loans to total loans....... .16% .55%
Nonperforming assets to total loans
and foreclosed property............. .28% .63%
Nonperforming assets to total assets..... .15% .34%
Net charge-offs for the third quarter of 2002 totaled $131,664 compared
to $29,566 for the third quarter of 2001. During the first nine months of 2002,
net charge-offs totaled $273,306 compared to $105,527 for the first nine months
of 2001. Charge-offs recorded during the third quarter in the commercial,
financial and agricultural segment of the portfolio totaled $85,400, the
majority of which was associated with one commercial borrower. The charge-off
associated with this borrower along with a charge-off associated with one other
borrower accounted for the majority of the charge-offs for the first nine months
of 2002. Charge-offs recorded during the first nine months of 2001 in the
commercial, financial and agricultural segment of the loan portfolio totaled
$180,661, the majority of which was associated with three commercial borrowers.
Recoveries recorded during the first nine months of 2001 in the commercial,
financial and agricultural segment totaled $176,843 and primarily resulted from
a loan to one commercial borrower. The aforementioned recovery occurred during
the first quarter of 2001. Charge-offs and recoveries recorded during the third
quarter and first nine months of 2002 and 2001 in all other segments of the loan
portfolio were not significant.
West Pointe's allowance for loan losses at September 30, 2002,
increased to $2,401,046 from $2,156,166 and $2,224,352 at September 30, 2001 and
December 31, 2001, respectively. The increase in the allowance for loan losses
was primarily due to overall growth in the loan portfolio. At September 30,
18
2002, the allowance for loan losses represented 698.11% of nonperforming loans
compared to 318.93% at September 30, 2001. The ratio of the allowance for loan
losses to total loans was 1.13% at September 30, 2002 compared to 1.07% at
September 30, 2001, respectively. Managements believes that the allowance for
loan losses at September 30, 2002 was adequate to absorb potential losses
inherent in the loan portfolio. However, past loan loss experience as it relates
to current portfolio mix, evaluation of potential losses in the portfolio,
subsequent changes in economic conditions and other factors may require changes
in the levels of the allowance for loan losses.
Table 7 presents information pertaining to the activity in and an
analysis of West Pointe's allowance for loan losses for the periods presented.
TABLE 7 - Allowance For Loan Losses
Three Months Ended Nine Months Ended
September 30 September 30
------------------------------------ ------------------------------------
2002 2001 2002 2001
---------------- ---------------- ---------------- ----------------
Balance at beginning of period................... $ 2,382,710 $ 1,997,732 $ 2,224,352 $ 1,769,693
Loans charged off:
Commercial, financial and agricultural...... 85,400 3,631 144,657 180,661
Real estate:
Commercial............................. 26,756 ---- 60,691 ----
Residential............................ 849 50,898 20,610 51,997
---------------- ---------------- ---------------- ----------------
Total real estate................. 27,605 50,898 81,301 51,997
---------------- ---------------- ---------------- ----------------
Consumer.................................... 4,311 18,025 22,623 30,423
Credit cards................................ 14,948 6,638 39,169 33,196
---------------- ---------------- ---------------- ----------------
Total charge-offs................. 132,264 79,192 287,750 296,277
---------------- ---------------- ---------------- ----------------
Recoveries of loans previously charged off:
Commercial, financial and agricultural...... ---- 43,792 2,619 176,843
Real estate:
Commercial............................. ---- ---- 7,722 ----
Residential............................ ---- ---- 275 ----
---------------- ---------------- ---------------- ----------------
Total real estate................. ---- ---- 7,997 ----
---------------- ---------------- ---------------- ----------------
Consumer.................................... 563 5,815 3,791 11,144
Credit cards................................ 37 19 37 2,763
---------------- ---------------- ---------------- ----------------
Total recoveries.................. 600 49,626 14,444 190,750
---------------- ---------------- ---------------- ----------------
Net charge-offs.................................. 131,664 29,566 273,306 105,527
Provision for loan losses........................ 150,000 188,000 450,000 492,000
---------------- ---------------- ---------------- ----------------
Balance at end of period......................... $ 2,401,046 $ 2,156,166 $ 2,401,046 $ 2,156,166
================ ================ ================ ================
Net charge-offs (annualized) as a
percent of average total loans.............. .25% .06% .18% .07%
Allowance for loan losses to total loans......... 1.13% 1.07% 1.13% 1.07%
Allowance for loan losses to
nonperforming loans......................... 698.11% 318.93% 698.11% 318.93%
CAPITAL RESOURCES
CAPITAL RESOURCES
Total stockholders' equity increased $4,445,540 from $23,387,722 at
December 31, 2001 to $27,833,262 at September 30, 2002. Net income for the
nine-month period ended September 30, 2002 was $2,908,836. Stockholders' equity
at September 30, 2002 was also favorably impacted by an increase of $2,004,277
in other comprehensive income. The increase to stockholders' equity resulting
from these items was partially offset by a reduction to stockholders' equity
resulting from the purchase of 11,500 shares of
19
West Pointe's common stock from an individual stockholder. The purchase of these
shares is reflected as treasury stock in West Pointe's financial statements.
Financial institutions are required to maintain ratios of capital to
assets in accordance with guidelines promulgated by the federal banking
regulators. The guidelines are commonly known as "Risk-Based Guidelines" as they
define the capital level requirements of a financial institution based upon the
level of credit risk associated with holding various categories of assets. The
Risk-Based Guidelines require minimum ratios of Tier 1 and Total Capital to
risk-weighted assets of 4% and 8%, respectively. At September 30, 2002, West
Pointe's Tier 1 and Total capital ratios were 9.98% and 10.91%, respectively. In
addition to the Risk-Based Guidelines, the federal banking agencies have
established a minimum leverage ratio guideline for financial institutions (the
"Leverage Ratio Guideline"). The Leverage Ratio Guideline provides for a minimum
ratio of Tier 1 capital to average assets of 4%. West Pointe's leverage ratio at
September 30, 2002, was 6.42%. Accordingly, West Pointe has satisfied these
regulatory guidelines.
RECENT ACCOUNTING PRONOUNCEMENTS
In August 2001, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets". This standard supersedes
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets to Be Disposed
Of," and provides a single accounting model for long-lived assets to be disposed
of. This standard significantly changes the criteria that would have to be met
to classify an asset as held-for-sale. This distinction is important because
assets to be disposed of are stated at the lower of their fair values or
carrying amounts and depreciation is no longer recognized. The new rules will
also supercede the provisions of APB Opinion 30, "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," with
regard to reporting the effects of a disposal of a segment of a business and
will require expected future operating losses from discontinued operations to be
displayed in discontinued operations in the period in which the losses are
incurred, rather than as of the measurement date as required by APB 30. The
Company adopted SFAS No. 144 on January 1, 2002. Adoption of this statement by
the Company did not materially affect the results of operations or financial
condition of the Company.
In July 2001, a Staff Accounting Bulletin No. 102, "Selected Loan Loss
Allowance Methodology and Documentation Issues" ("SAB No. 102") was released. It
expresses the staff's views on the development, documentation, and application
of a systematic methodology as required by Financial Reporting Release No. 28,
"Accounting for Loan Losses by Registrants Engaged in Lending Activities," for
determining allowances for loan and lease losses in accordance with accounting
principles generally accepted in the United States of America. In particular,
SAB No. 102 focuses on the documentation the staff normally would expect
registrants to prepare and maintain in support of their allowances for loan
losses. West Pointe has a systematic methodology for determining an appropriate
allowance for loan losses, consistently followed and supported by written
documentation, policies and procedures. In light of SAB No. 102, West Pointe
management has reviewed its allowance for loan and lease loss methodology and
supporting documentation and finds both to be consistent with the bulletin's
provisions.
In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities." SFAS No. 138 amends the
accounting and reporting standards of SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities," for certain derivative instruments and
hedging activities. These amendments include the application of the normal
purchases and sales exception in SFAS No. 133, and redefinition of hedged risk.
SFAS No. 138 also amends SFAS No. 133 for decisions made by the FASB relating to
the Derivatives Implementation Group process. SFAS No. 138 was adopted
concurrently with SFAS No. 133 on January 1, 2001. The adoption of these
statements by the Company did not materially affect the results of operations or
financial condition of the Company.
20
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no material change to the market risk position from that
disclosed as of December 31, 2001, the end of the last fiscal year.
ITEM 4. CONTROLS AND PROCEDURES
An evaluation was performed under the supervision and with the
participation of the Company's management, including the President and Chief
Executive Officer and the Executive Vice President and Chief Financial Officer,
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures within 90 days before the filing date of this quarterly
report. Based on that evaluation, the Company's management, including the
President and Chief Executive Officer and the Executive Vice President and Chief
Financial Officer, concluded that the Company's disclosure controls and
procedures were effective. There have been no significant changes in the
Company's internal controls or in other factors that could significantly affect
internal controls subsequent to their evaluation.
21
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings
before any court, administrative agency or any tribunal, nor is the
Company aware of any litigation which is threatened against it in any
court, administrative agency, or other tribunal. The Bank is subject to
various claims, lawsuits and administrative proceedings arising in the
ordinary course of business from time to time. Bank management is of
the opinion, based upon present information, including evaluations by
outside counsel, that the Bank's financial condition, results of
operations or cash flows will not be materially affected by the
ultimate resolution of pending or threatened legal proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: See Exhibit Index on page 26 hereof.
(b) Reports on Form 8-K: No reports on Form 8-K were filed by West
Pointe during the third quarter of 2002.
22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WEST POINTE BANCORP, INC.
--------------------------------------
(Registrant)
DATE: November 13, 2002 By:/s/ Terry W. Schaefer
- ------------------------ ---------------------
Terry W. Schaefer
President and Chief
Executive Officer
DATE: November 13, 2002 By:/s/ Bruce A. Bone
- ------------------------ -----------------
Bruce A. Bone
Executive Vice President and
Chief Financial Officer
23
CERTIFICATIONS
Certification of Principal Executive Officer
I, Terry W. Schaefer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of West Pointe Bancorp,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures of a date within 90 days prior to the filing date of this quarterly
report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) All significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
November 13, 2002 /s/ Terry W. Schaefer
---------------------
Terry W. Schaefer
President and Chief Executive Officer
(Principal Executive Officer)
24
CERTIFICATIONS
Certification of Principal Executive Officer
I, Bruce A. Bone, certify that:
1. I have reviewed this quarterly report on Form 10-Q of West Pointe Bancorp,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures of a date within 90 days prior to the filing date of this quarterly
report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) All significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
November 13, 2002 /s/ Bruce A. Bone
------------------
Bruce A. Bone
Executive Vice President and Chief
Financial Officer
(Principal Financial Officer)
25
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
11.1 Computation of Net Income Per Share (incorporated by
reference to Note C to West Pointe's unaudited
interim consolidated financial statements included
herein).
99.1 Certification of President and Chief Executive
Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
99.2 Certification of Executive Vice President and Chief
Financial Officer Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
26