10-Q 1 c80867e10vq.txt FORM 10-Q 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

2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS WEST POINTE BANCORP, INC. CONSOLIDATED BALANCE SHEETS

3 WEST POINTE BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

See the accompanying notes to consolidated financial statements. 4 WEST POINTE BANCORP, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

See the accompanying notes to consolidated financial statements. 5 WEST POINTE BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

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:

7 NOTE B--NET INCOME PER SHARE The calculation of net income per share is summarized as follows:

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

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

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

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

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

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

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

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

(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. 22

WEST POINTE BANCORP INC 10-Q