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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, 2003
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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
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 7, 2003
- ------------------------- -------------------------------
Common stock $1 par value 987,951
1
TABLE OF CONTENTS
Page
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of 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 19
ITEM 4. CONTROLS AND PROCEDURES 19
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 20
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 20
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 20
ITEM 5. OTHER INFORMATION 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 20
SIGNATURE PAGE 21
EXHIBIT INDEX 22
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WEST POINTE BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
SEPTEMBER 30 DECEMBER 31
2003 2002
-------------- --------------
Assets
Cash and due from banks $ 11,279,065 $ 10,660,773
Interest bearing due from banks 10,306,530 11,813,253
-------------- --------------
Cash and cash equivalents 21,585,595 22,474,026
Investments:
Available-for-sale, at fair value (amortized cost of $174,609,259 and
$143,220,825 at September 30, 2003 and December 31, 2002,
respectively) 175,729,949 146,751,455
Loans 211,749,325 221,581,298
Allowance for loan losses (2,388,497) (2,409,446)
-------------- --------------
Net Loans 209,360,828 219,171,852
Accrued interest receivable 1,811,852 2,086,560
Real estate acquired by foreclosure 365,000 365,000
Bank premises and equipment 12,089,216 11,712,031
Income taxes receivable 97,024 961,133
Other assets 8,704,263 8,296,532
-------------- --------------
Total Assets $ 429,743,727 $ 411,818,589
============== ==============
Liabilities
Deposits:
Noninterest bearing $ 40,079,546 $ 40,604,261
Interest bearing 326,426,453 310,385,576
-------------- --------------
Total Deposits 366,505,999 350,989,837
Securities sold under agreements to repurchase 23,712,817 21,692,278
Other borrowings 1,312,100 1,537,100
Federal Home Loan Bank advance 5,000,000 5,000,000
Accrued interest payable 659,971 874,845
Deferred tax liability, net 837,196 1,568,717
Other liabilities 2,062,124 1,616,109
-------------- --------------
Total Liabilities 400,090,207 383,278,886
Stockholders' Equity
Preferred stock, $1 par value - 50,000 shares authorized
and unissued -- --
Common stock, $1 par value - 10,000,000 shares authorized;
1,005,701, and 995,835 shares issued at September 30, 2003 and
December 31, 2002, respectively 1,005,701 995,835
Surplus 13,366,228 13,005,154
Retained earnings 15,235,338 12,998,298
Treasury stock, 17,750 shares, at cost (648,575) (648,575)
Accumulated other comprehensive income 694,828 2,188,991
-------------- --------------
Total Stockholders' Equity 29,653,520 28,539,703
-------------- --------------
Total Liabilities and Stockholders' Equity $ 429,743,727 $ 411,818,589
============== ==============
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
----------------------- ------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Interest and Fee Income:
Loans
Taxable $3,525,846 $3,887,671 $11,054,796 $11,481,466
Non-taxable 41,807 47,312 136,878 97,503
Investments
Taxable 986,289 1,265,301 3,040,282 3,616,908
Non-taxable 353,173 417,406 1,097,318 1,200,434
Federal funds sold -- 383 -- 570
Deposits with banks 33,088 75,516 91,500 178,701
---------- ---------- ---------- -----------
Total Interest and Fee Income 4,940,203 5,693,589 15,420,774 16,575,582
Interest Expense:
Deposits 1,537,373 2,144,722 5,054,367 6,403,182
Securities sold under agreements to repurchase 72,373 100,136 245,035 248,961
Other borrowings 11,729 17,554 38,702 52,906
Federal Home Loan Bank advance 71,939 71,939 213,471 213,471
---------- ---------- ---------- -----------
Total Interest Expense 1,693,414 2,334,351 5,551,575 6,918,520
---------- ---------- ---------- -----------
Net Interest Income 3,246,789 3,359,238 9,869,199 9,657,062
Provision for Loan Losses 160,000 150,000 850,000 450,000
---------- ---------- ---------- -----------
Net Interest Income After
Provision For Loan Losses 3,086,789 3,209,238 9,019,199 9,207,062
Noninterest Income:
Service charges on deposits 331,336 366,324 999,410 1,033,800
Mortgage banking 228,806 149,951 789,559 302,355
Trust fees 165,062 150,344 513,835 448,217
Brokerage income 93,551 69,007 232,919 182,213
Credit card income 88,230 94,424 289,140 273,332
Increase in cash surrender value of life insurance 123,560 94,263 373,202 241,616
Gain on sale of investments, net -- -- 461,064 340,312
Other 51,145 74,703 182,768 214,908
---------- ---------- ---------- -----------
Total Noninterest Income 1,081,690 999,016 3,841,897 3,036,753
Noninterest Expense:
Employee compensation and benefits 1,647,654 1,437,703 4,877,715 4,229,096
Occupancy, net 194,693 191,598 527,087 545,076
Furniture and equipment 170,405 158,186 501,493 441,503
Legal and professional fees 257,148 219,624 830,666 506,444
Data processing 112,285 110,538 346,738 338,476
Advertising 100,483 88,388 282,355 267,348
Other 664,188 652,410 2,030,609 1,839,036
---------- ---------- ---------- -----------
Total Noninterest Expense 3,146,856 2,858,447 9,396,663 8,166,979
---------- ---------- ---------- -----------
Income Before Income Taxes 1,021,623 1,349,807 3,464,433 4,076,836
Income Tax Expense 236,200 366,500 834,600 1,168,000
---------- ---------- ---------- -----------
Net Income $ 785,423 $ 983,307 $2,629,833 $ 2,908,836
========== ========== ========== ===========
Average Shares Outstanding:
Basic 984,754 975,182 981,674 973,678
Diluted 1,019,996 996,446 1,014,699 992,339
Per Share Data:
Net income:
Basic $ .80 $ 1.01 $ 2.68 $ 2.99
Diluted $ .77 $ .99 $ 2.59 $ 2.93
Dividends declared $ .14 $ .12 $ .40 $ .32
See the accompanying notes to consolidated financial statements.
4
WEST POINTE BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------------- -----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Net Income $ 785,423 $ 983,307 $2,629,833 $2,908,836
Other Comprehensive Income (Loss), Net Of Tax
Unrealized holding gains (losses) on investments
available for sale (net of income tax (benefit) of
$(606,767) and $(740,573) for the three and nine
months ended September 30, 2003 and $335,806 and
$1,357,746 for the three and nine months ended
September 30, 2002, respectively) (989,989) 547,893 (1,208,303) 2,215,269
Less adjustment for realized gains included in net
income (net of income taxes of $0 and $175,204 for
the three and nine months ended September 30, 2003
and $0 and $129,319 for the three and nine months
ended September 30, 2002, respectively) -- -- 285,860 210,993
---------- ---------- ---------- ----------
Other Comprehensive Income (Loss) (989,989) 547,893 (1,494,163) 2,004,276
---------- ---------- ---------- ----------
Comprehensive Income (Loss) $ (204,566) $1,531,200 $1,135,670 $4,913,112
========== ========== ========== ==========
See the accompanying notes to consolidated financial statements.
5
WEST POINTE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30
-------------------------------
2003 2002
-------------- --------------
Operating Activities
Net income $ 2,629,833 $ 2,908,836
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 535,615 486,226
Net amortization on investments 1,086,623 531,888
Gain on sale of investments, net (461,064) (340,312)
Gain on sale of mortgage loans (717,151) (273,011)
Gain on sale of real estate acquired by foreclosure (25,948) --
Loss on disposition of bank premises and equipment 9,895 --
Deferred income tax 184,256 (20,379)
Federal Home Loan Bank stock dividends (595,300) (237,200)
Provision for loan losses 850,000 450,000
Changes in:
Accrued interest receivable 274,708 (168,657)
Accrued interest payable (214,874) (235,215)
Mortgage loans held for sale 3,033,463 476,442
Other assets and other liabilities, net 1,275,595 230,667
-------------- --------------
Net Cash Provided By Operating Activities 7,865,651 3,809,285
Investing Activities
Proceeds from sales of investments available for sale 13,132,978 24,698,994
Proceeds from maturities of investments available for sale 76,086,591 22,922,446
Purchases of investments available for sale (120,638,262) (69,244,758)
Net (increase) decrease in loans 6,541,500 (13,718,169)
Purchases of life insurance policies -- (3,096,860)
Increase in cash surrender value of life insurance policies (373,202) (241,616)
Proceeds from sales of real estate acquired by foreclosure 129,160 149,219
Purchases of bank premises and equipment (922,695) (508,509)
-------------- --------------
Net Cash Used In Investing Activities (26,043,930) (39,039,253)
Financing Activities
Net decrease in noninterest bearing deposits (524,715) (1,884,080)
Net increase in interest bearing deposits 16,040,877 25,619,920
Net increase in securities sold under agreements to repurchase 2,020,539 11,239,068
Increase (decrease) in other borrowings (225,000) 124,600
Proceeds from issuance of common stock 370,940 155,036
Purchase of treasury stock -- (311,075)
Dividends paid (392,793) (311,534)
-------------- --------------
Net Cash Provided By Financing Activities 17,289,848 34,631,935
-------------- --------------
Net Decrease in Cash and Cash Equivalents (888,431) (598,033)
Cash and Cash Equivalents - Beginning of Year 22,474,026 20,281,637
-------------- --------------
Cash and Cash Equivalents - End of Period $ 21,585,595 $ 19,683,604
============== ==============
Supplemental Disclosure of Cash Flow Information
Interest paid $ 5,766,449 $ 7,153,735
Income taxes paid 345,000 1,443,898
Real estate acquired in settlement of loans 103,212 260,000
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, 2002. 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 balance sheet of the Company as of December 31, 2002 has been
derived from the audited consolidated balance sheet of the Company as of that
date.
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary West Pointe Bank And Trust Company (the
"Bank"), an Illinois chartered commercial bank. All material intercompany
transactions and balances are eliminated. West Pointe is a bank holding company
that engages in its business through its sole subsidiary.
In preparing the consolidated 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 consolidated balance sheet and
revenues and expenses for the period. Actual results could differ significantly
from those estimates.
Material estimates that are particularly susceptible to significant
change relate to the determination of allowance for loan losses and the
valuation of real estate acquired in connection with foreclosures or in
satisfaction of loans. In connection with the determination of the allowance for
loan losses and the valuation of real estate acquired by foreclosure, management
obtains independent appraisals for significant properties.
Certain 2002 amounts have been reclassified where appropriate to
conform to the consolidated financial statement presentation used in 2003.
The Company has a stock-based employee compensation plan, which is
described more fully in West Pointe's annual report on Form 10-K for the year
ended December 31, 2002. The Company accounts for this plan under the
recognition and measurement principles of Accounting Principles Board (APB)
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. No stock-based employee compensation cost is reflected in net
income, as all options granted under those plans had an exercise price equal to
the market value of the underlying common stock on the grant date. The following
table illustrates the effect on net income and earnings per share if the Company
had applied the fair value recognition provisions of Statement of Financial
Accounting Standard (SFAS) No. 123, "Accounting for Stock-Based Compensation,"
to stock-based employee compensation:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------------- -----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Net income, as reported $ 785,423 $ 983,307 $2,629,833 $2,908,836
Less: Total stock-based employee
compensation cost determined under the fair
value based method, net of income taxes (54,454) (43,588) (163,362) (130,764)
---------- ---------- ---------- ----------
Pro forma net income $ 730,969 $ 939,719 $2,466,471 $2,778,072
========== ========== ========== ==========
Earnings per share:
Basic - as reported $ .80 $ 1.01 2.68 $ 2.99
Basic - pro forma .74 .96 2.51 2.85
Diluted - as reported .77 .99 2.59 2.93
Diluted - pro forma .72 .94 2.43 2.80
7
NOTE B--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
----------------------- -----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Basic
Net Income $ 785,423 $ 983,307 $2,629,833 $2,908,836
========== ========== ========== ==========
Average common shares outstanding 984,754 975,182 $ 981,674 973,678
========== ========== ========== ==========
Net income per common share - basic $ .80 $ 1.01 2.68 $ 2.99
========== ========== ========== ==========
Diluted
Net Income $ 785,423 $ 983,307 $2,629,833 $2,908,836
========== ========== ========== ==========
Average common shares outstanding 984,754 975,182 981,674 973,678
Dilutive potential due to stock options 35,242 21,264 33,025 18,661
---------- ---------- ---------- ----------
Average common shares outstanding 1,019,996 996,446 1,014,699 992,339
========== ========== ========== ==========
Net income per common share - diluted $ .77 $ .99 $ 2.59 $ 2.93
========== ========== ========== ==========
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, 2003 and 2002,
and its financial condition, asset quality, and capital resources as of
September 30, 2003 and December 31, 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. These
forward-looking statements are not based on historical information, but rather
are based on assumptions and describe future plans, strategies, projections and
expectations of West Pointe and 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 Board of Governors of the Federal Reserve System, 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. Additionally,
the policies of the Federal Deposit Insurance Corporation (FDIC), the State of
Illinois Office of Banks and Real Estate, the Financial Accounting Standards
Board (FASB) and the Securities and Exchange Commission could cause actual
results to differ from those currently anticipated. 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 2003 was $785,423 or $.77 per
diluted common share compared to net income of $983,307 or $.99 per diluted
common share for the third quarter of 2002. Net income for the first nine months
of 2003 was $2,629,833 or $2.59 per diluted common share compared to net income
of $2,908,836 or $2.93 per diluted common share for the first nine months of
2002. Return on average assets for the third quarter and first nine months of
2003 was .74% and .84%, respectively, compared to .97% and 1.03% for the third
quarter and first nine months of 2002, respectively. Return on average equity
for the third quarter and first nine months of 2003 was 10.58% and 12.01%,
respectively, compared to 14.44% and 15.39% for the third quarter and first nine
months of 2002, respectively.
The decrease in net income for the quarters compared, was primarily
attributable to a reduction in net interest income and an increase in
noninterest expense, partially offset by an increase in noninterest income and a
reduction in income tax expense. The decrease in net income for the nine-month
periods compared, was primarily attributable to an increase in the provision for
loan losses and an increase in noninterest expense, partially offset by an
increase in noninterest income and a reduction in income tax expense.
Total assets at September 30, 2003 increased to $429,743,727 from
$411,818,589 at December 31, 2002. The increase in total assets was primarily
associated with an increase in investments, partially offset by a decrease in
loans. The increase in total assets was funded primarily by an increase in
deposits.
9
RESULTS OF OPERATIONS
Table 1 summarizes West Pointe's statements of income and the change in
each category for the periods presented.
TABLE 1 - Comparative Statements of Income
Three Months Ended
September 30 Change
------------------------------- --------------------------
2003 2002 Amount Percent
------------ ------------ ---------- -------
Total interest income
(fully tax-equivalent) $ 5,114,798 $ 5,861,624 $ (746,826) (12.7)%
Total interest expense 1,693,414 2,334,351 (640,937) (27.5)
------------ ------------ ----------
Net interest income 3,421,384 3,527,273 (105,889) (3.0)
Provision for loan losses 160,000 150,000 10,000 6.7
Noninterest income:
Service charges on deposits 331,336 366,324 (34,988) (9.6)
Mortgage banking 228,806 149,951 78,855 52.6
Trust fees 165,062 150,344 14,718 9.8
Brokerage income 93,551 69,007 24,544 35.6
Credit card income 88,230 94,424 (6,194) (6.6)
Increase in cash surrender value of life insurance 123,560 94,263 29,297 31.1
Other 51,145 74,703 (23,558) (31.5)
------------ ------------ ----------
Total 1,081,690 999,016 82,674 8.3
------------ ------------ ----------
Noninterest expense:
Employee compensation and benefits 1,647,654 1,437,703 209,951 14.6
Occupancy, net 194,693 191,598 3,095 1.6
Furniture and equipment 170,405 158,186 12,219 7.7
Legal and professional fees 257,148 219,624 37,524 17.1
Data processing 112,285 110,538 1,747 1.6
Advertising 100,483 88,388 12,095 13.7
Other 664,188 652,410 11,778 1.8
------------ ------------ ----------
Total 3,146,856 2,858,447 288,409 10.1
------------ ------------ ----------
Income before income taxes 1,196,218 1,517,842 (321,624) (21.2)
Less: tax-equivalent adjustment 174,595 168,035 6,560 3.9
Income tax expense 236,200 366,500 (130,300) (35.6)
------------ ------------ ----------
Net income $ 785,423 $ 983,307 $ (197,884) (20.1)%
============ ============ ==========
10
Nine Months Ended
September 30 Change
------------------------------- --------------------------
2003 2002 Amount Percent
------------ ------------ ------------ ---------
Total interest income
(fully tax-equivalent) $ 15,959,219 $ 17,055,982 $ (1,096,763) (6.4)%
Total interest expense 5,551,575 6,918,520 (1,366,945) (19.8)
------------ ------------ ------------
Net interest income 10,407,644 10,137,462 270,182 2.7
Provision for loan losses 850,000 450,000 400,000 88.9
Noninterest income:
Service charges on deposits 999,410 1,033,800 (34,390) (3.3)
Mortgage banking 789,559 302,355 487,204 161.1
Trust fees 513,835 448,217 65,618 14.6
Brokerage income 232,919 182,213 50,706 27.8
Credit card income 289,140 273,332 15,808 5.8
Increase in cash surrender value of life insurance 373,202 241,616 131,586 54.5
Gain on sale of investments, net 461,064 340,312 120,752 35.5
Other 182,768 214,908 (32,140) (15.0)
------------ ------------ ------------
Total 3,841,897 3,036,753 805,144 26.5
------------ ------------ ------------
Noninterest expense:
Employee compensation and benefits 4,877,715 4,229,096 648,619 15.3
Occupancy, net 527,087 545,076 (17,989) (3.3)
Furniture and equipment 501,493 441,503 59,990 13.6
Legal and professional fees 830,666 506,444 324,222 64.0
Data processing 346,738 338,476 8,262 2.4
Advertising 282,355 267,348 15,007 5.6
Other 2,030,609 1,839,036 191,573 10.4
------------ ------------ ------------
Total 9,396,663 8,166,979 1,229,684 15.1
------------ ------------ ------------
Income before income taxes 4,002,878 4,557,236 (554,358) (12.2)
Less: tax-equivalent adjustment 538,445 480,400 58,045 12.1
Income tax expense 834,600 1,168,000 (333,400) (28.5)
------------ ------------ ------------
Net income $ 2,629,833 $ 2,908,836 $ (279,003) (9.6)%
============ ============ ============
NET INTEREST INCOME
Tax-equivalent net interest income decreased $105,889 or 3.0% for the
third quarter of 2003 compared to the same quarter of 2002 and increased
$270,182 or 2.7% for the first nine months of 2003 compared to the same period
of 2002. The decrease in tax-equivalent net interest income for the third
quarter of 2003 was principally attributable to a decrease in tax-equivalent
interest income partially offset by a decrease in interest expense. The increase
in tax-equivalent net interest income for the first nine months of 2003 was
principally attributable to a decrease in interest expense partially offset by a
decrease in tax-equivalent interest income.
Total tax-equivalent interest income decreased $746,826 or 12.7% for
the third quarter of 2003 compared to the same quarter of 2002 and decreased
$1,096,763 or 6.4% for the first nine months of 2003 compared to the same period
of 2002. 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.
Average earning assets increased $20,107,886 or 5.4% for the third quarter of
2003 compared to the same quarter of 2002 and increased $33,026,397 or 9.4% for
the first nine months of 2003 compared to the same period of 2002. Average
earning assets excluding loans increased $14,344,283 for the third quarter of
2003 compared to the same quarter of 2002 and increased $18,009,029 for the
first nine months of 2003 compared to the same period of 2002. The yield on
these assets decreased 130 basis points for the third quarter of 2003 compared
to the same quarter of 2002 and decreased 116 basis points for the first nine
months of 2003 compared to the same period of 2002. Average loans increased
$5,763,603 for the third quarter of 2003 compared to the same quarter of 2002
and increased $15,017,368 for the first nine months of 2003 compared to the same
period of 2002. The yield on loans decreased 84 basis points for the third
quarter of 2003 compared to the same quarter of 2002 and decreased 71 basis
points for the first nine months of 2003 compared to the same period of 2002.
The increase in the volume of
11
average earning assets for all periods compared was due to internal growth in
the loan and investment portfolios. The decrease in the yield was a result of a
declining interest rate environment.
Total interest expense decreased $640,937 or 27.5% for the third
quarter of 2003 compared to the same quarter of 2002 and decreased $1,366,945 or
19.8% for the first nine months of 2003 compared to the same period of 2002. The
decreases in interest expense were primarily attributable to the lower interest
rate environment, partially offset by higher volumes of interest-bearing
liabilities. Average interest-bearing liabilities increased $15,939,448 for the
third quarter of 2003 compared to the same quarter of 2002 and increased
$30,056,644 for the first nine months of 2003 compared to the same period of
2002. The average rate paid on interest-bearing liabilities decreased 84 basis
points to 1.91% for the third quarter of 2003 compared to the same quarter of
2002. The average rate paid on interest-bearing liabilities decreased 78 basis
points to 2.13% for the first nine months of 2003 compared to the same period of
2002. The decrease in the average rate for all periods compared was due to a
declining interest rate environment.
The net interest margin was 3.48% for the third quarter of 2003
compared to 3.77% for the same quarter of 2002. The net interest margin for the
first nine months of 2003 was 3.61% compared to 3.85% for the same period of
2002. The decreases in the net interest margin for the quarters and nine-month
periods compared primarily resulted from the Company's yield on interest earning
assets declining at a faster pace than the Company's cost of funds.
PROVISION FOR LOAN LOSSES
The provision for loan losses was $160,000 and $850,000 for the third
quarter and first nine months of 2003, respectively, compared to $150,000 and
$450,000 for the third quarter and first nine months of 2002, 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 increases in the provision for
loan losses for the quarter and nine-month period ending September 30, 2003
compared to the same periods of 2002 were primarily reflective of higher net
charge-offs and an increase in non-performing loans. Activity in the allowance
for loan losses and nonperforming loan data are presented under "ASSET QUALITY."
NONINTEREST INCOME
Total noninterest income was $1,081,690 for the third quarter of 2003
compared to $999,016 for the same quarter of 2002. Noninterest income totaled
$3,841,897 for the first nine months of 2003 compared to $3,036,753 for the same
period of 2002. Income from mortgage banking services increased $78,855 for the
third quarter of 2003 compared to the same quarter of 2002 and increased
$487,204 for the nine-month periods compared. The increases in mortgage banking
income for the periods compared were primarily attributable to the lower
interest rate environment, which improved the level of origination and
refinancing activities. Mortgage banking income includes revenue generated from
the sale of mortgage loans and the servicing of previously sold mortgage loans.
The mortgage loan sales volume depends heavily on the prevailing interest rates
and the strength of the local real estate market. Due to a slight increase in
interest rates during the third quarter, Company management anticipates that the
level of mortgage loan origination and refinancing activities will decrease for
the remainder of 2003. Income from trust fees increased $14,718 for the third
quarter of 2003 compared to the same quarter of 2002 and increased $65,618 for
the nine month periods compared. The increase in income from trust fees for the
quarters and nine month periods compared was primarily attributable to new
fiduciary relationships. Brokerage income increased $24,544 for the third
quarter of 2003 compared to the same quarter of 2002, and increased $50,706 for
the nine-month periods compared. The increase in brokerage income for all
periods was primarily attributable to additional volume of brokerage
transactions from both new and existing customer relationships. During the third
quarter and first nine months of 2003, West Pointe recorded increases in cash
surrender value of life insurance of $123,560 and $373,202, respectively,
compared to increases of $94,263 and $241,616 recorded during the third quarter
and first nine months of 2002, respectively. These cash surrender value
increases relate to various bank owned life insurance (BOLI) policies which
generally serve as informal funding mechanisms for various benefit plans
established for directors and certain officers of the Company. These BOLI
policies provide certain benefits to the Company including, but not limited to,
the exclusion from income taxes on the increase in their cash surrender values.
Net securities gains recorded during the first nine months of 2003 totaled
$461,064, compared to net securities gains of
12
$340,312 recorded during the first nine months of 2002. There were no net
securities gains recorded during the third quarter of 2003 or 2002. Net
securities gains recorded during the 2003 and 2002 periods resulted from
management's decision to continue efforts to reconfigure certain segments of the
investment portfolio to limit potential interest rate risk that could result
from a rising interest rate environment.
NONINTEREST EXPENSE
Total noninterest expense was $3,146,856 for the third quarter of 2003
compared to $2,858,447 for the same quarter of 2002. For the first nine months
of 2003, total noninterest expense was $9,396,663 compared to $8,166,979 for the
same period of 2002. The increases in noninterest expense were primarily
attributable to increases in employee compensation and benefits and legal and
professional fees. Employee compensation and other benefit expenses increased
$209,951 for the third quarter of 2003 compared to the same quarter of 2002 and
increased $648,619 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. Legal and
professional fees increased $37,524 for the third quarter of 2003 compared to
the same quarter of 2002 and increased $324,222 for the nine-month periods
compared. The increase in legal and professional fees was primarily attributable
to legal fees incurred to defend various lawsuits of which the Bank is a party
in the ordinary course of business. Other noninterest expenses increased $11,778
for the third quarter of 2003 compared to the same quarter of 2002 and increased
$191,573 for the nine-month periods compared. Other noninterest expense includes
such items as FDIC insurance premiums, mortgage banking expenses, postage costs
and certain credit card program expenses. The increases in other noninterest
expense for the periods compared were attributable to numerous categories of
other noninterest expense.
INCOME TAX EXPENSE
West Pointe recorded income tax expense of $236,200 for the third
quarter of 2003 compared to $366,500 for the same quarter of 2002. For the first
nine months of 2003, income tax expense was $834,600 compared to $1,168,000 for
the same period of 2002. The effective income tax rates were 23.1% and 27.2% for
the third quarter of 2003 and 2002, respectively. The effective income tax rates
were 24.1% and 28.6% for the first nine months of 2003 and 2002, respectively.
The decreases in income tax expense and the related effective income tax rates
for the 2003 periods compared to the 2002 periods primarily resulted from lower
levels of income before income taxes, as well as an increase in the amount of
income exempt from income taxes.
13
FINANCIAL CONDITION
GENERAL
Certain components of West Pointe's consolidated balance sheet at
September 30, 2003 compared to December 31, 2002 are presented in summary form
in Table 2. Total assets increased $17,925,138 to $429,743,727 compared to
$411,818,589 at December 31, 2002. This increase was primarily associated with
an increase in investments, partially offset by a decrease in loans. The
increase in investments was funded primarily by an increase in deposits.
TABLE 2 - Selected Comparative Balance Sheet Items
September 30 December 31
2003 2002
---------------- ----------------
Total assets $ 429,743,727 $ 411,818,589
Loans 211,749,325 221,581,298
Investments 175,729,949 146,751,455
Deposits 366,505,999 350,989,837
Repurchase agreements 23,712,817 21,692,278
Other borrowings 1,312,100 1,537,100
Federal Home Loan Bank advance 5,000,000 5,000,000
Stockholders' equity 29,653,520 28,539,703
Loans
Loans decreased 4.4%, or $9,831,973, from year-end 2002 to September
30, 2003. Commercial, financial and agricultural loans decreased $7,115,471,
commercial real estate loans decreased $4,613,890 and 1-4 family residential
real estate loans decreased $1,439,642 from year end 2002 to September 30, 2003.
The decreases were partially offset by an increase in real estate construction
loans of $3,908,800. Competitive pricing in West Pointe's marketplace and a
decline in loan demand contributed to the decrease in loans.
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.
TABLE 3 - Loan Portfolio Composition
September 30 December 31
2003 2002
---------------------------- ----------------------------
Amount Percent Amount Percent
---------------- ------- ---------------- -------
Commercial borrowers:
Commercial, financial and agricultural $ 52,569,661 24.8% $ 59,685,132 26.9%
Commercial real estate 80,533,472 38.0 85,147,362 38.5
Real estate construction 15,461,420 7.3 11,552,620 5.2
---------------- ----- ---------------- -----
Total commercial 148,564,553 70.1 156,385,114 70.6
---------------- ----- ---------------- -----
Consumer borrowers:
1-4 family residential real estate 51,989,765 24.6 53,429,407 24.1
Other consumer loans 11,195,007 5.3 11,766,777 5.3
---------------- ----- --------------- -----
Total consumer 63,184,772 29.9 65,196,184 29.4
---------------- ----- =============== =====
Total loans $ 211,749,325 100.0 $ 221,581,298 100.0%
================ ===== =============== =====
INVESTMENTS
Total investments increased to $175,729,949 at September 30, 2003
compared to $146,751,455 at year-end 2002. 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
14
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 investments are recorded at fair value. Net
unrealized gains on available-for-sale investments totaled $1,120,690 at
September 30, 2003, compared to net unrealized gains of $3,530,630 at December
31, 2002.
Table 4 presents the composition of investments at their carrying
values for the periods presented.
TABLE 4 - Investment Portfolio Composition
September 30 December 31
2003 2002
---------------- ----------------
Available-for-sale securities:
U. S. government agencies $ 2,002,500 $ 9,087,650
Mortgage-backed securities 123,956,435 89,547,303
Obligations of states and political subdivisions 37,465,914 38,806,702
Equity securities 12,305,100 9,309,800
---------------- ----------------
Total available-for-sale $ 175,729,949 $ 146,751,455
================ ================
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 $15,516,162 to $366,505,999 at September 30,
2003 from year-end 2002. The interest bearing demand deposit and savings and
money market deposit components of the deposit portfolio increased $4,482,771
and $18,581,326, respectively, from year-end 2002. The majority of the increase
in interest bearing demand deposits was attributable to an increase in account
balances associated with one particular public entity. In the normal course of
business, account balances associated with this public entity may, on a daily
basis, fluctuate significantly. Balances in time deposits decreased $7,023,220
from year-end 2002. This decrease was primarily attributable to a shift from
time deposits to more liquid interest-bearing deposits. 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
2003 2002
---------------------------- -------------------------------
Amount Percent Amount Percent
---------------- ------- --------------- -------
Noninterest bearing demand deposits $ 40,079,546 10.9% $ 40,604,261 11.6%
Interest bearing demand deposits 34,364,821 9.4 29,882,050 8.5
Savings and money market deposits 122,551,445 33.5 103,970,119 29.6
Time deposits $100,000 or more 59,496,281 16.2 59,388,680 16.9
Time deposits less than $100,000 110,013,906 30.0 117,144,727 33.4
---------------- ----- --------------- -----
Total deposits $ 366,505,999 100.0% $ 350,989,837 100.0%
================ ===== =============== =====
15
BORROWINGS
Total borrowings amounted to $30,024,917 at September 30, 2003,
compared to $28,229,378 at year-end 2002. At September 30, 2003 and December 31,
2002, borrowings consisted of securities sold under agreements to repurchase
(repurchase agreements), a Federal Home Loan Bank advance and a short-term
borrowing with an unaffiliated bank.
Repurchase agreements totaled $23,712,817 at September 30, 2003 and
increased $2,020,539 from year-end 2002. 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, 2003 and December 31, 2002, 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. This advance is
callable on a quarterly basis.
At September 30, 2003, other borrowings consisted of a $1,312,100
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, 2004, and bears interest at a rate of 50 basis points
under the prime-lending rate. As of December 31, 2002, the amount of this
borrowing totaled $1,537,100.
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, 2003, nonperforming assets totaled $2,478,572, or .58%
of total assets, compared to nonperforming assets at year-end 2002 of $2,101,904
or .51% of total assets. Nonperforming assets, at September 30, 2003, included
$365,000 relating to foreclosed property. All foreclosed property is held for
sale and is initially recorded on an individual property basis at estimated fair
value less cost to sell. Subsequent to foreclosure, foreclosed properties are
evaluated by management and a valuation allowance is established if the
estimated fair value declines. As of September 30, 2003, management does not
anticipate any significant losses upon the disposition of the remaining
foreclosed property. Nonperforming loans in the commercial, financial and
agricultural segment of the portfolio decreased $686,809 from December 31, 2002.
The majority of this decrease related to a charge-off of a loan to one
commercial borrower. Nonperforming loans in the 1-4 family residential real
estate segment of the portfolio increased $1,058,483 and primarily related to
several loans to two borrowers. The remaining categories of nonperforming loans
relating to other consumer loans remained relatively stable at September 30,
2003 compared to December 31, 2002. Management is in various stages of workout
or liquidation of the remaining nonperforming loans.
16
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, 2003 December 31, 2002
----------------------------------- ----------------------------------
Loans and Loans and
Foreclosed Non-performing Foreclosed Non-performing
Property Assets Property Assets
--------------- ---------------- ---------------- --------------
Commercial borrowers:
Commercial, financial and agricultural $ 52,569,661 $ 154,373 $ 59,685,132 $ 841,182
Commercial real estate 80,533,472 714,802 85,147,362 721,896
Real estate construction 15,461,420 -- 11,552,620 --
--------------- ---------------- ---------------- -------------
Total commercial 148,564,553 869,175 156,385,114 1,563,078
Consumer borrowers:
1-4 family residential
real estate 51,989,765 1,205,316 53,429,407 146,833
Other consumer loans 11,195,007 39,081 11,766,777 26,993
--------------- ---------------- ---------------- -------------
Total consumer 63,184,772 1,244,397 65,196,184 173,826
--------------- ---------------- ---------------- -------------
Total loans 211,749,325 2,113,572 221,581,298 1,736,904
Foreclosed property 365,000 365,000 365,000 365,000
--------------- ---------------- ---------------- -------------
Total $ 212,114,325 $ 2,478,572 $ 221,946,298 $ 2,101,904
=============== ================ ================ =============
Nonaccrual loans 1,670,244 $ 796,349
Accruing loans past due 90 days or more 443,328 940,555
Troubled debt restructurings -- --
---------------- -------------
Total nonperforming loans 2,113,572 1,736,904
Foreclosed property 365,000 365,000
---------------- -------------
Total nonperforming assets $ 2,478,572 $ 2,101,904
================ =============
Nonperforming loans to total loans 1.00% .78%
Nonperforming assets to total loans
and foreclosed property 1.17% .95%
Nonperforming assets to total assets .58% .51%
Net charge-offs for the third quarter of 2003 totaled $562,659 compared
to $131,664 for the third quarter of 2002. During the first nine months of 2003,
net charge-offs totaled $870,949 compared to $273,306 for the first nine months
of 2002. Charge-offs recorded in the commercial, financial and agricultural
segment of the loan portfolio during the third quarter and first nine months of
2003 totaled $520,323 and $749,423, respectively and were primarily due to four
borrowers. Charge-offs and recoveries recorded during the third quarter and
first nine months of 2003 and 2002 in all other segments of the loan portfolio
were not significant.
West Pointe's allowance for loan losses at September 30, 2003,
decreased to $2,388,497 from $2,409,446 at December 31, 2002. The decrease in
the allowance for loan losses was primarily due to charge-offs recorded on
non-performing loans. At September 30, 2003, the allowance for loan losses
represented 113.01% of nonperforming loans compared to 698.11% at September 30,
2002. The higher ratio of the allowance for loan losses to nonperforming loans
at September 30, 2002, was due to a lower level of nonperforming loans at that
date. The ratio of the allowance for loan losses to total loans was 1.13% at
September 30, 2003 and September 30, 2002. Management believes that the
allowance for loan losses at September 30, 2003 was adequate to absorb probable
losses 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.
17
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
---------------------------- -------------------------------
2003 2002 2003 2002
------------ ------------ ------------ -----------
Balance at beginning of period $ 2,791,156 $ 2,382,710 $ 2,409,446 $ 2,224,352
Loans charged off:
Commercial, financial and
agricultural 520,323 85,400 749,423 144,657
Real estate:
Commercial 23,874 26,756 23,874 60,691
Residential 3,310 849 92,700 20,610
------------ ------------ ------------ -----------
Total real estate 27,184 27,605 116,574 81,301
------------ ------------ ------------ -----------
Consumer 5,586 4,311 31,105 22,623
Credit cards 10,705 14,948 25,599 39,169
------------ ------------ ------------ -----------
Total charge-offs 563,798 132,264 922,701 287,750
------------ ------------ ------------ -----------
Recoveries of loans previously charged off:
Commercial, financial and
agricultural 275 -- 49,614 2,619
Real estate:
Commercial -- -- -- 7,722
Residential -- -- -- 275
------------ ------------ ------------ -----------
Total real estate -- -- -- 7,997
------------ ------------ ------------ -----------
Consumer 469 563 1,640 3,791
Credit cards 395 37 498 37
------------ ------------ ------------ -----------
Total recoveries 1,139 600 51,752 14,444
------------ ------------ ------------ -----------
Net charge-offs 562,659 131,664 870,949 273,306
Provision for loan losses 160,000 150,000 850,000 450,000
------------ ------------ ------------ -----------
Balance at end of period $ 2,388,497 $ 2,401,046 $ 2,388,497 $ 2,401,046
============ ============ ============ ===========
Net charge-offs (annualized) as a
percent of average total loans 1.04% .25% .53% .18%
Allowance for loan losses to total loans 1.13% 1.13% 1.13% 1.13%
Allowance for loan losses to
nonperforming loans 113.01% 698.11% 113.01% 698.11%
CAPITAL RESOURCES
CAPITAL RESOURCES
Total stockholders' equity increased $1,113,817 from $28,539,703 at
December 31, 2002 to $29,653,520 at September 30, 2003. Net income for the nine
month period ended September 30, 2003 was $2,629,833. Accumulated other
comprehensive income decreased $1,494,163 to $694,828 at September 30, 2003.
This decrease is attributable to investment gains realized during the first nine
months of 2003 as well as a decrease in the market value of the remainder of the
investment portfolio.
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
18
to risk-weighted assets of 4% and 8%, respectively. At September 30, 2003, West
Pointe's Tier 1 and Total capital ratios were 11.80% and 12.77%, 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, 2003, was 6.88%. Accordingly, West Pointe has satisfied these
regulatory guidelines.
RECENT ACCOUNTING PRONOUNCEMENTS
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities." This statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities under SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This statement is effective for contracts entered into
or modified after September 30, 2003, except for hedging relationships
designated after September 30, 2003. As the Company does not have these
instruments, this statement is not anticipated to materially affect the
Company's operating results or financial condition.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." This
statement establishes standards for how certain financial instruments with
characteristics of both liabilities and equity should be classified. All
financial instruments that are within the scope of this statement should now be
classified as liabilities. This statement is effective for financial statements
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after September 13, 2003. As the
Company does not have these instruments, this statement is not anticipated to
materially affect the Company's operating results or financial condition.
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, 2002, 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 (as defined in Exchange Act Rule 13a-15(c)) as of the
end of the period covered by 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.
There were no changes in the Company's internal control over financial reporting
during the period covered by this quarterly report that has materially affected,
or is reasonably likely to materially affect, the Company's internal control
over financial reporting.
19
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company, West Pointe Bancorp, Inc., is not a party to any material
pending legal proceedings before any court, administrative agency or tribunal,
nor is the Company aware of any litigation threatened against it in any court,
administrative agency or other tribunal. The Company's wholly owned subsidiary,
West Pointe Bank And Trust Company (the "Bank"), along with various other banks,
brokerage houses, accounting firms, law firms, James Gibson, SBU, Inc., a
Missouri corporation, SBU of Illinois, Inc., an Illinois corporation (SBU, Inc.
and SBU of Illinois, Inc. are referred to herein collectively as "SBU"), and
individuals, is presently a defendant in five separate actions in the 20th
Judicial Circuit, St. Clair County, Illinois, originally filed between May 10,
2001 and October 4, 2001, which have been consolidated in Carl Cox, et al. v.
Old National Bank, f/k/a First National Bank of Carbondale, et al., No.
01-L-282. The Bank also is a defendant in one case in the Circuit Court of Cook
County, Illinois, Arutyun Topsakalyan et al. v. Thompson Coburn et al., No.
00-L-011030, in which the trial court entered judgment in the Bank's favor;
however, that case currently is being appealed to the Appellate Court of
Illinois, First District, Case No. 03-0539.
The foregoing lawsuits are related to various trusts owned by SBU.
These trusts were set-up by SBU to make payments over time to certain creditors.
Generally, these payments were to be funded from the proceeds received in
settlement of personal injury claims and invested with SBU. Beginning in June of
1995, the Bank served as trustee of several SBU trusts for a brief period of
time. In November of 1995, the Bank resigned as trustee of the SBU trusts, and
upon its resignation, the Bank notified the SBU trust creditors by certified
mail of its resignation, as trustee, and the transfer of such trustee duties to
another financial institution, possessing trust powers, designated by SBU. The
majority of the trust assets originally administered by the Bank (and the trust
assets of several other trusts administered by other trustees) were later
misappropriated following a subsequent transfer of the trust assets by that
financial institution to Flag Finance, a successor trustee designated by SBU and
owned by James Gibson, President of SBU. James Gibson pled guilty to federal
criminal charges that he converted the SBU trust funds to his own use. The
claims against the Bank and the other defendants were brought by the creditors
of the trusts. The claims against the Bank generally are based upon alleged
failure to disclose purported information about SBU and Mr. Gibson. The
plaintiffs are seeking actual and punitive damages. The Bank has notified its
insurance carrier of this potential loss exposure.
In addition to the Gibson matters, the Bank is subject to various
claims, lawsuits and administrative proceedings arising in the ordinary course
of business from time to time. The 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 22 hereof.
(b) Reports on Form 8-K: No reports on Form 8-K were filed by West
Pointe during the third quarter of 2003.
20
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, 2003 By:/s/ Terry W. Schaefer
---------------------
Terry W. Schaefer
President and Chief
Executive Officer
DATE: November 13, 2003 By:/s/ Bruce A. Bone
-----------------
Bruce A. Bone
Executive Vice President and
Chief Financial Officer
21
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- ------------------------------------------------------------------
3.1 Articles of Incorporation (1)
3.2 Bylaws of West Pointe Bancorp, Inc. (1)
11.1 Computation of Net Income Per Share (incorporated by reference to
Note B of West Pointe's unaudited interim consolidated financial
statements included herein).
31.1 Certification of President and Chief Executive Officer Pursuant to
Rule 13a-14(a) or 15d-15(e) of the Exchange Act, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Executive Vice President and Chief Financial
Officer Pursuant to Rule 13a-14(a) or 15d-15(e) of the Exchange
Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
32.1 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.
32.2 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.
(1) Documents incorporated by reference to the Company's Registration Statement
on Form 10 (file no. 000-30505) at the corresponding exhibit. All such
previously filed documents are hereby incorporated by reference in
accordance with Item 601 of Regulation S-K.
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