Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------------- ------------------
Commission file number 0-30505
WEST POINTE BANCORP, INC.
(Exact Name of Registrant as Specified in Its Charter)
Illinois 36-4149655
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
West Pointe Bancorp, Inc.
5701 West Main Street
Belleville, Illinois 62226
(Address of Principal Executive Offices) (Zip Code)
(618) 234-5700
(Registrant's Telephone Number, Including Area Code)
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
[X] Yes [ ] No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
[ ] 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 August 10, 2004
----- ------------------------------
Common stock $1 par value 999,196
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, USE OF PROCEEDS AND ISSUER
PURCHASES OF EQUITY SECURITIES 20
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 21
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 21
ITEM 5. OTHER INFORMATION 21
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 21
SIGNATURE PAGE 22
EXHIBIT INDEX 23
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WEST POINTE BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
JUNE 30, DECEMBER 31,
2004 2003
------------- -------------
Assets
Cash and due from banks $ 11,633,788 $ 8,875,108
Interest bearing due from banks 158,622 104,775
------------- -------------
Cash and cash equivalents 11,792,410 8,979,883
Federal Home Loan Bank stock 12,912,300 12,520,600
Securities:
Available-for-sale, at fair value 149,113,770 166,700,103
Loans held for sale 273,893 338,729
Loans 228,481,707 216,754,989
Allowance for loan losses (2,960,354) (2,697,139)
------------- -------------
Net Loans 225,521,353 214,057,850
Bank premises and equipment 11,875,748 11,914,722
Cash surrender value of life insurance 10,374,071 8,374,188
Accrued interest and other assets 2,110,223 2,264,366
------------- -------------
Total Assets $ 423,973,768 $ 425,150,441
============= =============
Liabilities
Deposits:
Noninterest bearing $ 44,375,923 $ 41,470,256
Interest bearing 315,153,961 319,450,628
------------- -------------
Total Deposits 359,529,884 360,920,884
Repurchase agreements 22,231,194 19,185,867
Other borrowings 1,087,100 1,237,100
Federal Home Loan Bank advances 7,360,000 9,400,000
Accrued interest and other liabilities 3,093,167 3,675,177
------------- -------------
Total Liabilities 393,301,345 394,419,028
Stockholders' Equity
Preferred stock, $1 par value - 50,000 shares authorized and unissued -- --
Common stock, $1 par value - 10,000,000 shares authorized; 1,016,946
and 1,008,698 shares issued at June 30, 2004 and December 31, 2003,
respectively 1,016,946 1,008,698
Surplus 13,813,808 13,482,395
Retained earnings 17,271,697 15,943,128
Treasury stock, 17,750 shares (648,575) (648,575)
Accumulated other comprehensive income (loss) (781,453) 945,767
------------- -------------
Total Stockholders' Equity 30,672,423 30,731,413
------------- -------------
Total Liabilities and Stockholders' Equity $ 423,973,768 $ 425,150,441
============= =============
See the accompanying notes to consolidated financial statements.
3
WEST POINTE BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Interest and Fee Income:
Loans
Taxable $ 3,285,380 $ 3,747,743 $ 6,680,528 $ 7,528,950
Non-taxable 39,232 46,150 78,944 96,707
Securities
Taxable 1,172,095 1,037,144 2,309,504 2,053,993
Non-taxable 394,984 348,257 791,208 742,509
Deposits with banks 7,450 24,388 12,621 58,412
----------- ----------- ----------- -----------
Total Interest and Fee Income 4,899,141 5,203,682 9,872,805 10,480,571
Interest Expense:
Deposits 1,386,966 1,719,571 2,787,737 3,516,994
Repurchase agreements 67,166 80,721 133,011 172,662
Other borrowings 9,669 13,203 20,001 26,973
Federal Home Loan Bank advances 73,519 71,157 151,188 141,532
----------- ----------- ----------- -----------
Total Interest Expense 1,537,320 1,884,652 3,091,937 3,858,161
----------- ----------- ----------- -----------
Net Interest Income 3,361,821 3,319,030 6,780,868 6,622,410
Provision for Loan Losses 418,000 195,000 598,000 690,000
----------- ----------- ----------- -----------
Net Interest Income After
Provision For Loan Losses 2,943,821 3,124,030 6,182,868 5,932,410
Noninterest Income:
Service charges on deposits 387,102 330,009 741,957 668,074
Mortgage banking 122,700 287,401 236,876 560,753
Trust fees 183,666 171,740 351,040 348,773
Brokerage and insurance services 99,672 66,485 175,087 139,368
Credit card income 102,565 106,910 186,949 200,910
Increase in cash surrender value of life insurance 98,837 125,105 194,530 249,642
Gain on sale of securities, net 166,201 127,733 314,048 461,064
Other 48,876 73,183 97,763 131,623
----------- ----------- ----------- -----------
Total Noninterest Income 1,209,619 1,288,566 2,298,250 2,760,207
Noninterest Expense:
Employee compensation and benefits 1,737,613 1,602,437 3,463,821 3,230,061
Occupancy, net 187,478 145,596 353,185 332,394
Furniture and equipment 198,303 170,635 381,542 331,088
Legal and professional fees 19,095 302,390 279,870 573,518
Data processing 114,533 115,624 231,139 234,453
Advertising 123,411 95,701 201,875 181,872
Other 810,583 700,566 1,491,719 1,366,421
----------- ----------- ----------- -----------
Total Noninterest Expense 3,191,016 3,132,949 6,403,151 6,249,807
----------- ----------- ----------- -----------
Income Before Income Taxes 962,424 1,279,647 2,077,967 2,442,810
Income Tax Expense 202,400 319,600 461,200 598,400
----------- ----------- ----------- -----------
Net Income $ 760,024 $ 960,047 $ 1,616,767 $ 1,844,410
=========== =========== =========== ===========
Average Shares Outstanding:
Basic 995,632 981,592 993,751 980,108
Diluted 1,038,889 1,014,314 1,035,471 1,012,297
Per Share Data:
Net income:
Basic $ .76 $ .98 $ 1.63 $ 1.88
Diluted $ .73 $ .95 $ 1.56 $ 1.82
Dividends declared $ .15 $ .14 $ .29 $ .26
See the accompanying notes to consolidated financial statements.
4
WEST POINTE BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -----------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Net Income $ 760,024 $ 960,047 $ 1,616,767 $ 1,844,410
Other Comprehensive Income (Loss), Net Of Tax
Unrealized holding gains (losses) on securities
available for sale (net of income tax (benefit)
of $(1,366,747) and $(939,280) for the three and six
months ended June 30, 2004 and $113,708 and
$(133,805) for the three and six months ended
June 30, 2003, respectively) (2,229,955) 185,524 (1,532,510) (218,314)
Less adjustment for realized gains included in net
income (net of income taxes of $63,156 and $119,338
for the three and six months ended June 30, 2004
and $48,538 and $175,204 for the three and six
months ended June 30, 2003, respectively) 103,045 79,195 194,710 285,860
----------- ----------- ----------- -----------
Other Comprehensive Income (Loss) (2,333,000) 106,329 (1,727,220) (504,174)
----------- ----------- ----------- -----------
Comprehensive Income (Loss) $(1,572,976) $ 1,066,376 $ (110,453) $ 1,340,236
=========== =========== =========== ===========
See the accompanying notes to consolidated financial statements.
5
WEST POINTE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
-----------------------------------
2004 2003
------------ ------------
Operating Activities
Net income $ 1,616,767 $ 1,844,410
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 392,903 351,917
Net amortization on securities 463,796 704,882
Gain on sale of securities, net (314,048) (461,064)
Gain on sale of mortgage loans (174,571) (516,390)
Gain on sale of foreclosed property (700) --
Federal Home Loan Bank stock dividends (391,700) (410,400)
Provision for loan losses 598,000 690,000
Proceeds from sales of mortgage loans held for sale 11,026,910 33,823,980
Originations of mortgage loans held for sale (10,787,503) (32,051,390)
Increase in cash surrender value of life insurance policies (194,530) (249,642)
Increase in other assets and other liabilities, net 593,299 1,096,897
------------ ------------
Net Cash Provided By Operating Activities 2,828,623 4,823,200
Investing Activities
Proceeds from sales of securities available for sale 8,680,559 13,132,978
Proceeds from maturities of securities available for sale 13,430,248 51,788,439
Purchases of securities available for sale (7,460,060) (78,092,097)
Net increase in loans (12,106,704) (1,822,461)
Purchases of life insurance policies (1,752,000) --
Proceeds from sale of foreclosed property 30,000 --
Purchases of bank premises and equipment (353,929) (851,885)
------------ ------------
Net Cash Provided By (Used In) Investing Activities 468,114 (15,845,026)
Financing Activities
Net increase in noninterest bearing deposits 2,905,667 1,344,984
Net increase (decrease) in interest bearing deposits (4,296,667) 4,579,550
Net increase (decrease) repurchase agreements 3,045,327 (3,355,623)
Decrease in other borrowings (150,000) (150,000)
Repayment of FHLB advances (2,040,000) --
Proceeds from issuance of common stock 339,661 238,396
Dividends paid (288,198) (254,957)
------------ ------------
Net Cash (Used In) Provided By Financing Activities (484,210) 2,402,350
------------ ------------
Net Increase (Decrease) in Cash and Cash Equivalents 2,812,527 (8,619,476)
Cash and cash equivalents - Beginning of year 8,979,883 22,474,026
------------ ------------
Cash and cash equivalents - End of Period $ 11,792,410 $ 13,854,550
============ ============
Supplemental Disclosure of Cash Flow Information
Interest paid $ 3,121,544 $ 4,009,354
Income taxes paid 338,000 225,000
Real estate acquired in settlement of loans 45,201 103,212
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, 2003. 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, 2003 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 2003 amounts have been reclassified where appropriate to conform
to the consolidated financial statement presentation used in 2004.
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, 2003. 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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------------- ---------------------------------
2004 2003 2004 2003
------------- ------------- ------------- -------------
Net income, as reported $ 760,024 $ 960,047 $ 1,616,767 $ 1,844,410
Less: Total stock-based employee
compensation cost determined under the fair
value based method, net of income taxes (49,524) (56,533) (105,841) (108,908)
------------- ------------- ------------- -------------
Pro forma net income $ 710,500 $ 903,514 $ 1,510,926 $ 1,735,502
============= ============= ============= =============
Earnings per share:
Basic - as reported $ .76 $ .98 $ 1.63 $ 1.88
Basic - pro forma .71 .92 1.52 1.77
Diluted - as reported .73 .95 1.56 1.82
Diluted - pro forma .68 .89 1.46 1.71
7
NOTE B -- NET INCOME PER SHARE
The calculation of net income per share is summarized as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------------------- ----------------------------------------
2004 2003 2004 2003
------------------ ------------------ ------------------ ------------------
Basic
Net Income $ 760,024 $ 960,047 $ 1,616,767 $ 1,844,410
================== ================== ================== ==================
Average common shares outstanding 995,632 981,592 993,751 980,108
================== ================== ================== ==================
Net income per common share - basic $ .76 $ .98 $ 1.63 $ 1.88
================== ================== ================== ==================
Diluted
Net Income $ 760,024 $ 960,047 $ 1,616,767 $ 1,844,410
================== ================== ================== ==================
Average common shares outstanding 995,632 981,592 993,751 980,108
Dilutive potential due to stock options 43,257 32,722 41,720 32,189
------------------ ------------------ ------------------ ------------------
Average common shares outstanding 1,038,889 1,014,314 1,035,471 1,012,297
================== ================== ================== ==================
Net income per common share - diluted $ .73 $ .95 $ 1.56 $ 1.82
================== ================== ================== ==================
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 six-month periods ended June 30, 2004 and 2003, and
its financial condition, asset quality, and capital resources as of June 30,
2004 and December 31, 2003. 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 (the "SEC"), 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 (the
"FDIC"), the State of Illinois Department of Financial and Professional
Regulation, the Financial Accounting Standards Board (the "FASB"), the Public
Company Accounting Oversight Board (the "PCAOB") and the SEC 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 second quarter of 2004 was $760,024 or $.73 per diluted
common share compared to net income of $960,047 or $.95 per diluted common share
for the second quarter of 2003. Net income for the first six months of 2004 was
$1,616,767 or $1.56 per diluted common share compared to net income of
$1,844,410 or $1.82 per diluted common share for the first six months of 2003.
Return on average assets for the second quarter and first six months of 2004 was
..71% and .76%, respectively, compared to .93% and .90% for the second quarter
and first six months of 2003, respectively. Return on average equity for the
second quarter and first six months of 2004 was 9.72% and 10.28%, respectively,
compared to 13.10% and 12.75% for the second quarter and first six months of
2003, respectively.
The decrease in net income, for the six-month periods compared, was
primarily attributable to a decrease in noninterest income and an increase in
noninterest expense, partially offset by an increase in net interest income and
a decrease in the provision for loan losses. The decrease in net income, for the
quarters compared, was primarily attributable to an increase in the provision
for loan losses, partially offset by a decrease in income tax expense.
Total assets at June 30, 2004 decreased modestly to $423,973,768 from
$425,150,441 at December 31, 2003. At June 30, 2004, loans totaled $228,481,707
compared to $216,754,989 at December 31, 2003. At June 30, 2004, securities
totaled $149,113,770 compared to $166,700,103 at December 31, 2003. West
Pointe's primary funding source for assets is deposits, which totaled
$359,529,884 at June 30, 2004 compared to $360,920,884 at December 31, 2003.
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
June 30, Change
------------------------ -------------------------
2004 2003 Amount Percent
---------- ---------- ---------- ----------
Total interest income
(fully tax-equivalent) $5,091,978 $5,375,150 $ (283,172) (5.3)%
Total interest expense 1,537,320 1,884,652 (347,332) (18.4)
---------- ---------- ----------
Net interest income 3,554,658 3,490,498 64,160 1.8
Provision for loan losses 418,000 195,000 223,000 114.4
Noninterest income:
Service charges on deposits 387,102 330,009 57,093 17.3
Mortgage banking 122,700 287,401 (164,701) (57.3)
Trust fees 183,666 171,740 11,926 6.9
Brokerage and insurance services 99,672 66,485 33,187 49.9
Credit card income 102,565 106,910 (4,345) (4.1)
Increase in cash surrender value of life insurance 98,837 125,105 (26,268) (21.0)
Gain on sale of securities, net 166,201 127,733 38,468 30.1
Other 48,876 73,183 (24,307) (33.2)
---------- ---------- ----------
Total Noninterest Income 1,209,619 1,288,566 (78,947) (6.1)
---------- ---------- ----------
Noninterest Expense:
Employee compensation and benefits 1,737,613 1,602,437 135,176 8.4
Occupancy, net 187,478 145,596 41,882 28.8
Furniture and equipment 198,303 170,635 27,668 16.2
Legal and professional fees 19,095 302,390 (283,295) (93.7)
Data processing 114,533 115,624 (1,091) (0.9)
Advertising 123,411 95,701 27,710 29.0
Other 810,583 700,566 110,017 15.7
---------- ---------- ----------
Total Noninterest Expense 3,191,016 3,132,949 58,067 1.9
---------- ---------- ----------
Income Before Income Taxes 1,155,261 1,451,115 (295,854) (20.4)
Less: tax-equivalent adjustment 192,837 171,468 21,369 12.5
Income tax expense 202,400 319,600 (117,200) (36.7)
---------- ---------- ----------
Net Income $ 760,024 $ 960,047 $ (200,023) (20.8)%
========== ========== ==========
10
Six Months Ended
June 30, Change
-------------------------- ---------------------------
2004 2003 Amount Percent
----------- ----------- ----------- -----------
Total interest income
(fully tax-equivalent) $10,260,129 $10,844,422 $ (584,293) (5.4)%
Total interest expense 3,091,937 3,858,161 (766,224) (19.9)
----------- ----------- -----------
Net interest income 7,168,192 6,986,261 181,931 2.6
Provision for loan losses 598,000 690,000 (92,000) (13.3)
Noninterest income:
Service charges on deposits 741,957 668,074 73,883 11.1
Mortgage banking 236,876 560,753 (323,877) (57.8)
Trust fees 351,040 348,773 2,267 0.6
Brokerage and insurance services 175,087 139,368 35,719 25.6
Credit card income 186,949 200,910 (13,961) (6.9)
Increase in cash surrender value of life
insurance 194,530 249,642 (55,112) (22.1)
Gain on sale of securities, net 314,048 461,064 (147,016) (31.9)
Other 97,763 131,623 (33,860) (25.7)
----------- ----------- -----------
Total Noninterest Income 2,298,250 2,760,207 (461,957) (16.7)
----------- ----------- -----------
Noninterest expense:
Employee compensation and benefits 3,463,821 3,230,061 233,760 7.2
Occupancy, net 353,185 332,394 20,791 6.3
Furniture and equipment 381,542 331,088 50,454 15.2
Legal and professional fees 279,870 573,518 (293,648) (51.2)
Data processing 231,139 234,453 (3,314) (1.4)
Advertising 201,875 181,872 20,003 11.0
Other 1,491,719 1,366,421 125,298 9.2
----------- ----------- -----------
Total Noninterest Expense 6,403,151 6,249,807 153,344 2.5
----------- ----------- -----------
Income before income taxes 2,465,291 2,806,661 (341,370) (12.2)
Less: tax-equivalent adjustment 387,324 363,851 23,473 6.5
Income tax expense 461,200 598,400 (137,200) (22.9)
----------- ----------- -----------
Net Income $ 1,616,767 $ 1,844,410 $ (227,643) (12.3)%
=========== =========== ===========
NET INTEREST INCOME
Tax-equivalent net interest income increased $64,160 or 1.8% for the
second quarter of 2004 compared to the same period of 2003 and increased
$181,931 or 2.6% for the first six months of 2004 compared to the same period of
2003. The increases in tax-equivalent net interest income, for all periods
compared, were principally attributable to decreases in interest expense,
partially offset by decreases in tax-equivalent interest income.
Total tax-equivalent interest income decreased $283,172 or 5.3% for the
second quarter of 2004 compared to the same period of 2003 and decreased
$584,293 or 5.4% for the first six months of 2004 compared to the same period of
2003. The decreases in tax-equivalent interest income for the quarters and
six-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 $13,296,987 or 3.5% for the second quarter of
2004 compared to the same quarter of 2003 and increased $13,913,786 or 3.6% for
the first six months of 2004 compared to the same period of 2003. The yield on
average earning assets decreased 46 basis points for the second quarter of 2004
compared to the same quarter of 2003 and decreased 51 basis points for the first
six months of 2004 compared to the same period of 2003. The increases in the
volume of average earning assets for the periods compared were primarily due to
internal growth in the securities portfolio. The decreases in the yields on
average earning assets were primarily the result of a declining interest rate
environment.
Total interest expense decreased $347,332 or 18.4% for the second quarter
of 2004 compared to the same period of 2003 and decreased $766,224 or 19.9% for
the first six months of 2004 compared to the same period of 2003. 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 $4,375,417 for
11
the second quarter of 2004 compared to the same period of 2003 and increased
$5,135,538 for the first six months of 2004 compared to the same period of 2003.
The average rate paid on interest-bearing liabilities decreased 42 basis points
to 1.77% for the second quarter of 2004 compared to the same period of 2003. The
average rate paid on interest-bearing liabilities decreased 48 basis points to
1.77% for the first six months of 2004 compared to the same period of 2003. The
decreases in the average rate paid for the periods compared were primarily due
to a declining interest rate environment.
The net interest margin was 3.60% for the second quarter of 2004 compared
to 3.65% for the second quarter of 2003. The net interest margin for the first
six months of 2004 was 3.63% compared to 3.68% for the first six months of 2003.
The compression in the net interest margin for the periods compared occurred as
the yields on interest-earning assets decreased at a faster pace than the cost
of interest-bearing liabilities. West Pointe management continues efforts to
monitor and maintain the Company's net interest margin.
PROVISION FOR LOAN LOSSES
The provision for loan losses was $418,000 and $598,000 for the second
quarter and first six months of 2004, respectively, compared to $195,000 and
$690,000 for the second quarter and first six months of 2003, 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, a review of individual loans, size and quality of the loan
portfolio, current and projected economic conditions, regulatory guidelines, and
historical loan loss experience. The increase in the provision for loan losses
for the second quarter of 2004 compared to the second quarter of 2003 was
primarily reflective of 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 $1,209,619 for the second quarter of 2004
compared to $1,288,566 for the second quarter of 2003. Noninterest income
totaled $2,298,250 for the first six months of 2004 compared to $2,760,207 for
the same period of 2003. Service charges on deposit accounts increased $57,093
for the second quarter of 2004 compared to the second quarter of 2003 and
increased $73,883 for the six-month periods compared. The increases in service
charges on deposit accounts for the periods compared were primarily attributable
to growth in the volume of deposit accounts on which service charges are
assessed coupled with increases in various service charges that resulted from an
analysis of the Company's service charge schedule. The results of that analysis,
completed during the fourth quarter of 2003, were implemented on January 1,
2004. Income from mortgage banking services decreased $164,701 for the second
quarter of 2004 compared to the second quarter of 2003 and decreased $323,877
for the six-month periods compared. The decreases in mortgage banking income for
the periods compared were primarily attributable to a slightly higher interest
rate environment associated with West Pointe's mortgage activities. This
slightly higher interest rate environment resulted in a reduced level of
mortgage originations and refinancing activities. Assuming that interest rates
remain stable and the local real estate market remains strong, Company
management anticipates that the level of mortgage banking income will remain
stable during the remainder of 2004. Income from trust fees remained relatively
constant for the quarters and six-month periods compared. Income from brokerage
and insurance services increased $33,187 for the second quarter of 2004 compared
to the second quarter of 2003 and increased $35,719 for the six-month periods
compared. The increases in income from brokerage and insurance services, for the
periods compared, were primarily attributable to commissions earned on annuity
product renewals and continuing new business development. Credit card income
remained relatively constant for the quarters and six-month periods compared.
During the second quarter and first six months of 2004, West Pointe recorded
increases in cash surrender value of life insurance of $98,837 and $194,530,
respectively, compared to increases of $125,105 and $249,642 recorded during the
second quarter and first six months of 2003, respectively. These cash surrender
value increases relate to various bank owned life insurance ("BOLI") policies,
which generally serve as funding mechanisms for West Pointe's director fee
deferral program and West Pointe's salary continuation plans which have been
established for various officers of the Company. The remaining policies were
purchased to provide additional life insurance benefits to certain Company
officers. 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. The decreases in income from this component of
noninterest income, for the periods compared, were primarily attributable to
lower interest rates earned on the BOLI policies. Net securities
12
gains recorded during the second quarter and the first six months of 2004
totaled $166,201 and $314,048, respectively, compared to net securities gains of
$127,733 and $461,064 recorded during the second quarter and the first six
months of 2003, respectively. Net securities gains recorded during 2004 resulted
from opportunities in the marketplace to take such gains. Net securities gains
recorded during 2003 resulted from management's decisions to decrease interest
income on non-taxable securities to minimize alternative minimum tax and to
reconfigure certain segments of the investment portfolio to limit potential
interest rate risk that could result from a rising interest rate environment.
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. The decreases in other noninterest
income for the periods compared resulted from modest declines in a number of
categories of other noninterest income.
NONINTEREST EXPENSE
Total noninterest expense was $3,191,016 for the second quarter of 2004
compared to $3,132,949 for the second quarter of 2003. For the first six months
of 2004, total noninterest expense was $6,403,151 compared to $6,249,807 for the
same period of 2003. The increases in noninterest expense were primarily
attributable to increases in employee compensation and benefits and other
noninterest expense, partially offset by decreases in legal and professional
fees. Employee compensation and benefit expenses increased $135,176 for the
second quarter of 2004 compared to the second quarter of 2003 and increased
$233,760 for the six-month periods compared. The increases in employee
compensation and benefits for the quarters and six-month periods compared were
primarily attributable to normal merit increases and staff additions associated
with overall growth in banking operations. Net occupancy expenses increased
$41,882 for the second quarter of 2004 compared to the second quarter of 2003
and increased $20,791 for the six-month periods compared. The increases in net
occupancy expenses for the periods compared were primarily attributable to
increased real estate taxes associated with West Pointe's banking locations.
Furniture and equipment expenses increased $27,668 for the second quarter of
2004 compared to the second quarter of 2003 and increased $50,454 for the
six-month periods compared. The increases in furniture and equipment expenses
for the periods compared were attributable to normal operations. Legal and
professional fees decreased $283,295 for the second quarter of 2004 compared to
the second quarter of 2003 and decreased $293,648 for the six-month periods
compared. The decreases in legal and professional fees for the periods compared
were primarily attributable to the recovery of approximately $371,000 from the
Company's insurance carrier of legal fees previously paid in connection with
certain lawsuits of which the Bank was a party to in the ordinary course of
business. Data processing expenses declined modestly for the quarters and
six-month periods compared. Advertising expenses increased $27,710 for the
second quarter of 2004 compared to the second quarter of 2003 and increased
$20,003 for the six-month periods compared. The increases in advertising
expenses for the periods compared were primarily attributable to expanded
promotional activities associated with the Company's operations. Other
noninterest expenses increased $110,017 for the second quarter of 2004 compared
to the second quarter of 2003 and increased $125,298 for the six-month periods
compared. Other noninterest expense includes such items as FDIC insurance
premiums, mortgage banking expenses, telephone expenses, postage costs, certain
credit card program expenses and other miscellaneous expenses. The increases in
other noninterest expense for the periods compared were attributable to various
categories of other noninterest expense, none of which were individually
significant.
INCOME TAX EXPENSE
West Pointe recorded income tax expense of $202,400 for the second quarter
of 2004 compared to $319,600 for the second quarter of 2003. For the first six
months of 2004, income tax expense was $461,200 compared to $598,400 for the
same period of 2003. The decreases in income tax expense for the 2004 periods
compared to the 2003 periods primarily resulted from lower levels of income
before income taxes. The effective income tax rates were 21.0% and 25.0% for the
second quarter of 2004 and 2003, respectively. The decreases in the effective
income tax rates for the 2004 periods compared to the 2003 periods were
attributable to the levels of taxable income and to changes in mix of taxable
and non-taxable revenues.
13
FINANCIAL CONDITION
GENERAL
Certain components of West Pointe's consolidated balance sheet at June 30,
2004 compared to December 31, 2003 are presented in summary form in Table 2.
Total assets decreased $1,176,673 to $423,973,768 compared to $425,150,441 at
December 31, 2003. The modest decrease in total assets was primarily due to
normal fluctuations.
TABLE 2 - Selected Comparative Balance Sheet Items
June 30, December 31,
2004 2003
---------------- ----------------
Total assets $ 423,973,768 $ 425,150,441
Loans 228,481,707 216,754,989
Securities 149,113,770 166,700,103
Deposits 359,529,884 360,920,884
Repurchase agreements 22,231,194 19,185,867
Other borrowings 1,087,100 1,237,100
Federal Home Loan Bank advances 7,360,000 9,400,000
Stockholders' equity 30,672,423 30,731,413
LOANS
Loans increased 5.4%, or $11,726,718, from year-end 2003 to June 30, 2004.
The majority of this increase was derived from growth in the commercial,
financial and agricultural and commercial real estate segments of the portfolio.
West Pointe also experienced a modest increase in the 1-4 family residential
real estate segment of the portfolio. During the second quarter of 2004, West
Pointe experienced an increase in loan demand when compared to the past several
quarters.
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
June 30, December 31,
2004 2003
--------------------------- ---------------------------
Amount Percent Amount Percent
------------ ------- ------------ -------
Commercial borrowers:
Commercial, financial and agricultural $ 62,023,502 27.1% $ 55,147,337 25.5%
Commercial real estate 84,029,001 36.8 79,620,879 36.7
Real estate construction 19,392,168 8.5 19,489,319 9.0
------------ ----- ------------ -----
Total commercial 165,444,671 72.4 154,257,535 71.2
------------ ----- ------------ -----
Consumer borrowers:
1-4 family residential real estate 52,941,597 23.2 52,059,308 24.0
Other consumer loans 10,095,439 4.4 10,438,146 4.8
------------ ----- ------------ -----
Total consumer 63,037,036 27.6 62,497,454 28.8
------------ ----- ------------ -----
Total loans $228,481,707 100.0% $216,754,989 100.0%
============ ===== ============ =====
SECURITIES
Total securities decreased $17,586,333 to $149,113,770 at June 30, 2004
compared to $166,700,103 at year-end 2003. The security 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 security portfolio also supplies securities as required
collateral for certain deposits and for repurchase agreements. The
14
majority of this decrease resulted from principal payments received on the
Company's mortgage-backed securities and from management's decision to sell
certain securities, which resulted from favorable opportunities in the market
place. Proceeds from the aforementioned principal payments and sales were used
to fund West Pointe's increased loan demand. Additional information regarding
West Pointe's repurchase agreements is presented and discussed under
"Borrowings."
Available-for-sale securities are recorded at fair value. Net unrealized
losses on available-for-sale securities totaled $1,260,409 at June 30, 2004,
compared to net unrealized gains of $1,525,430 at December 31, 2003. The change
in net unrealized gains and losses from December 31, 2003 to June 30, 2004 was
attributable to the slightly higher interest rate environment. West Pointe
management does not currently expect any losses to result from any unrealized
losses in the portfolio, as maturities of securities and other funding sources
should meet the Company's liquidity needs. Any losses taken will result from
strategic or discretionary decisions to adjust the security portfolio.
Table 4 presents the composition of securities at their carrying values
for the periods presented.
TABLE 4 - Security Portfolio Composition
June 30, December 31,
2004 2003
---------------- ----------------
Available-for-sale securities:
Mortgage-backed securities 114,233,868 126,843,672
Obligations of states and political subdivisions 34,879,902 39,856,431
---------------- ----------------
Total available-for-sale $ 149,113,770 $ 166,700,103
================ ================
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 decreased $1,391,000 to $359,529,884 at June 30, 2004 from
year-end 2003. The noninterest bearing demand deposit and time deposit
components of the deposit portfolio increased $2,905,667 and $5,328,025,
respectively, from year-end 2003. The increase in noninterest bearing demand
deposits was primarily attributable to seasonal fluctuations. The majority of
the increase in time deposits was attributable to additional deposits received
from one public entity. Savings and money market deposit account balances
decreased $8,082,949 from year-end 2003 to June 30, 2004. The majority of this
decrease related to deposits associated with one public entity. Deposit balances
with this entity fluctuate significantly from time to time.
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
June 30, December 31,
2004 2003
-------------------------------- -------------------------------
Amount Percent Amount Percent
---------------- ------- --------------- -------
Noninterest bearing demand deposits $ 44,375,923 12.3% $ 41,470,256 11.5%
Interest bearing demand deposits 32,403,631 9.0 33,945,374 9.4
Savings and money market deposits 109,017,186 30.3 117,100,135 32.4
Time deposits $100,000 or more 64,234,775 17.9 59,379,919 16.5
Time deposits less than $100,000 109,498,369 30.5 109,025,200 30.2
---------------- ----- --------------- -----
Total deposits $ 359,529,884 100.0% $ 360,920,884 100.0%
================ ===== =============== =====
15
BORROWINGS
Total borrowings amounted to $30,678,294 at June 30, 2004, compared to
$29,822,967 at year-end 2003. At June 30, 2004 and December 31, 2003, borrowings
consisted of repurchase agreements, Federal Home Loan Bank advances and a
short-term borrowing with an unaffiliated bank.
Repurchase agreements increased $3,045,327 from year-end 2003. 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 June 30, 2004 and December 31, 2003, the Bank had one $5,000,000
Federal Home Loan Bank term 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. In addition to the term advance, the Bank, at June 30, 2004 and
December 31, 2003, had overnight advances in the amounts of $2,360,000 and
4,400,000, respectively. These overnight advances served as funding alternatives
to federal funds purchased.
At June 30, 2004, other borrowings consisted of a $1,087,100 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, 2005, and bears interest at a rate of 50 basis points under the
prime-lending rate. As of December 31, 2003, the amount of this borrowing
totaled $1,237,100.
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 June 30, 2004, nonperforming assets totaled $6,149,465 or 1.45% of
total assets, compared to nonperforming assets at year-end 2003 of $2,504,550 or
..59% of total assets. Nonperforming assets at June 30, 2004, included $250,000
relating to two parcels of 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, management evaluates
the foreclosed properties and a valuation allowance is established if the
estimated fair value declines. As of June 30, 2004, management does not
anticipate any significant losses upon the disposition of the remaining
foreclosed property. Nonperforming loans in the commercial real estate segment
of the portfolio increased $3,760,650 from December 31, 2003. The majority of
this increase is related to loans to two commercial borrowers. A detailed review
of the loans to these two borrowers resulted in the second quarter 2004 increase
in the provision for loan losses, which, in turn contributed to the increase in
the June 30, 2004 allowance for loan losses as management allocated appropriate
allowances for these loans. Management is in various stages of workout to remedy
or liquidate these and other nonperforming loans. The remaining categories of
nonperforming loans remained relatively stable at June 30, 2004 compared to
December 31, 2003.
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
June 30, 2004 December 31, 2003
--------------------------------- --------------------------------
Loans and Loans and
Foreclosed Non-performing Foreclosed Non-performing
Property Assets Property Assets
------------ ------------- ------------ --------------
Commercial borrowers:
Commercial, financial and agricultural $ 62,023,502 $ 113,480 $ 55,147,337 $ 60,753
Commercial real estate 84,029,001 4,707,527 79,620,879 946,877
Real estate construction 19,392,168 -- 19,489,319 --
------------ ------------ ------------ ------------
Total commercial 165,444,671 4,821,007 154,257,535 1,007,630
Consumer borrowers:
1-4 family residential
real estate 52,941,597 1,017,818 52,059,308 1,213,500
Other consumer loans 10,095,439 60,640 10,438,146 53,420
------------ ------------ ------------ ------------
Total consumer 63,037,036 1,078,458 62,497,454 1,266,920
------------ ------------ ------------ ------------
Total loans 228,481,707 5,899,465 216,754,989 2,274,550
Foreclosed property 250,000 250,000 230,000 230,000
------------ ------------ ------------ ------------
Total $228,731,707 $ 6,149,465 $216,984,989 $ 2,504,550
============ ============ ============ ============
Nonaccrual loans $ 5,667,678 $ 1,676,187
Accruing loans past due 90 days or more 231,787 598,363
------------ ------------
Total nonperforming loans 5,899,465 2,274,550
Foreclosed property 250,000 230,000
------------ ------------
Total nonperforming assets $ 6,149,465 $ 2,504,550
============ ============
Nonperforming loans to total loans 2.58% 1.05%
Nonperforming assets to total loans
and foreclosed property 2.69% 1.15%
Nonperforming assets to total assets 1.45% .59%
Net charge-offs for the second quarter of 2004 totaled $916 compared to
$199,731 for the second quarter of 2003. During the first six months of 2004,
net charge-offs totaled $334,785 compared to $308,290 for the first six months
of 2003. Net charge-offs recorded in the residential real estate segment during
the first six months of 2004 primarily related to several loans to one borrower.
Charge-offs and recoveries recorded during the second quarter and first six
months of 2004 in all other segments of the loan portfolio were not significant.
West Pointe's allowance for loan losses at June 30, 2004 increased to
$2,960,354 from $2,697,139 at December 31, 2003. The increase in the allowance
for loan losses was primarily due to overall growth in the loan portfolio as
well as an increase in non-performing loans. At June 30, 2004, the allowance for
loan losses represented 50.18% of nonperforming loans compared to 126.11% at
June 30, 2003. The ratio of the allowance for loan losses to total loans was
1.30% at June 30, 2004 compared to 1.26% at June 30, 2003. Management believes
that the allowance for loan losses at June 30, 2004 was adequate to absorb
probable incurred 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 Six Months Ended
June 30, June 30,
------------------------------ ------------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Balance at beginning of period $2,543,270 $2,795,887 $2,697,139 $2,409,446
Loans charged off:
Commercial, financial and agricultural 38 188,381 15,102 229,100
Real estate:
Commercial 924 -- 924 --
Residential 4,042 -- 356,321 89,390
---------- ---------- ---------- ----------
Total real estate 4,966 -- 357,245 89,390
Consumer -- 16,022 31,377 40,413
---------- ---------- ---------- ----------
Total charge-offs 5,004 204,403 403,724 358,903
---------- ---------- ---------- ----------
Recoveries of loans previously charged off:
Commercial, financial and agricultural -- 3,666 4,030 49,339
Residential real estate 3,364 -- 63,816 --
Consumer 724 1,006 1,093 1,274
---------- ---------- ---------- ----------
Total recoveries 4,088 4,672 68,939 50,613
---------- ---------- ---------- ----------
Net charge-offs 916 199,731 334,785 308,290
Provision for loan losses 418,000 195,000 598,000 690,000
---------- ---------- ---------- ----------
Balance at end of period $2,960,354 $2,791,156 $2,960,354 $2,791,156
========== ========== ========== ==========
Net charge-offs (annualized) as a
percent of average total loans NM .36% .31% .28%
Allowance for loan losses to total loans 1.30% 1.26% 1.30% 1.26%
Allowance for loan losses to
nonperforming loans 50.18% 126.11% 50.18% 126.11%
NM - Not Meaningful-Less than 0.01%
CAPITAL RESOURCES
CAPITAL RESOURCES
Total stockholders' equity decreased $58,990 from $30,731,413 at
December 31, 2003 to $30,672,423 at June 30, 2004. Net income for the six-month
period ended June 30, 2004 was $1,616,767. At June 30, 2004 compared to December
31, 2003, the decrease to stockholders' equity resulting from the change in
accumulated other comprehensive income was partially offset by net income for
the six-month period. The change in accumulated other comprehensive income is
comprised of the unrealized gain or loss on available-for-sale securities.
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 June 30, 2004, West Pointe's
Tier 1 and Total Capital ratios were 12.15% and 13.29%, 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
June 30, 2004, was 7.36%. Accordingly, West Pointe has satisfied these
regulatory guidelines.
18
RECENT ACCOUNTING PRONOUNCEMENTS
As of the date of this Report, there are no newly issued accounting
pronouncements which would have a significant effect on the Company's financial
statements.
CRITICAL ACCOUNTING POLICIES
There have been no significant changes in the Company's critical
accounting policies from those disclosed as of December 31, 2003.
CONTRACTUAL OBLIGATIONS
The Company enters into certain contractual obligations in the ordinary
course of operations. The required payments under these contracts represent
future cash requirements of the Company. The Company's significant fixed and
determinable contractual obligations, as of June 30, 2004, are set forth in the
following table:
Payments Due
---------------------------------------------------------------------------
After After
One Year Three Years
One Year Through Through After
or Less Three Years Five Years Five Years Total
--------------- ------------- ------------- ---------- ---------------
Time certificates of deposit $ 133,467,582 $ 30,928,986 $ 9,327,881 $ 8,695 $ 173,733,144
Federal Home Loan Bank advances 7,360,000 -- -- -- 7,360,000
Other borrowings 1,087,100 -- -- -- 1,087,100
Operating leases 47,520 95,040 19,800 -- 162,360
--------------- ------------- ------------- ------- ---------------
Total contractual cash obligations $ 141,962,202 $ 31,024,026 $ 9,347,681 $ 8,695 $ 182,342,604
=============== ============= ============= ======= ===============
OFF- BALANCE SHEET ARRANGEMENTS
For information on the Company's significant off-balance sheet commitments
as of December 31, 2003, see the information incorporated by reference under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2003.
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, 2003, the end of the last fiscal year.
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the Company's
principal executive officer and principal financial officer carried out an
evaluation, with the participation of the Company's other management, of the
effectiveness of the Company's disclosure controls and procedures. Based upon
this evaluation, the principal executive officer and principal financial officer
have concluded that the Company's disclosure controls and procedures are
effective in ensuring that information required to be disclosed by the Company
in reports that it files or submits under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms. It should be
noted that the design of the Company's disclosure controls and procedures is
based in part upon certain reasonable assumptions about the likelihood of future
events, and there can be no reasonable assurance that any design of disclosure
controls and procedures will succeed in achieving its stated goals under all
potential future conditions, regardless of how remote. However, the Company's
principal executive officer and principal financial officer have concluded that
the Company's disclosure controls and procedures are, in fact, effective at a
reasonable assurance level.
19
CHANGES IN INTERNAL CONTROL
There have been no changes in the Company's internal control over
financial reporting identified in connection with the evaluation described in
the above paragraph that occurred during the Company's last fiscal quarter that
has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
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 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, the Bank, is subject to various claims, lawsuits and
administrative proceedings arising in the ordinary course of
business from time to time. The Bank's 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, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
SECURITIES
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
The Company does not have any plans or programs to repurchase shares
of its common stock, nor has the Company made any repurchases of its
securities during the second quarter of 2004.
ISSUER PURCHASES OF EQUITY SECURITIES
-------------------------------------------------------------------------------------
Total Number of Maximum Number of
Shares Purchased as Shares that May Yet
Part of Publicly Be Purchased Under
Total Number of Average Price Paid Announced Plans or the Plans or
Period Shares Purchased per Share Programs Programs
---------- ---------------- ------------------ ------------------- -------------------
April 2004 -- -- -- --
May 2004 -- -- -- --
June 2004 -- -- -- --
---------------- ------------------ ------------------- -------------------
Total -- -- -- --
================ ================== =================== ===================
20
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Proxies were mailed to shareholders on March 15, 2004 for the
Company's Annual Meeting of Shareholders, which was held on April
14, 2004. The only matter submitted to, and approved by,
shareholders is listed below, as is a tabulation of voting.
(1) The following persons nominated as Directors were re-elected:
Class I For Against Withheld
------------------- ------------ ------- --------
William C. Allison 801,687.4964 0 1,000
Harry E. Cruncleton 801,687.4964 0 1,000
Other directors continuing in office are as follows: David G. Embry,
Jack B. Haydon, Charles G. Kurrus, III, Terry W. Schaefer, Edward J.
Szewczyk and Wayne W. Weeke.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: See Exhibit Index on page 23 hereof.
(b) Reports on Form 8-K: No reports on Form 8-K were filed by West
Pointe during the second quarter of 2004.
21
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: August 13, 2004 By:/s/ Terry W. Schaefer
- ---------------------- ---------------------
Terry W. Schaefer
President and Chief
Executive Officer
(on behalf of the Registrant)
DATE: August 13, 2004 By:/s/ Bruce A. Bone
- ---------------------- -----------------
Bruce A. Bone
Executive Vice President and
Chief Financial Officer
(as principal financial officer)
22
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 601of Regulation S-K.
23