10-Q 1 c87589e10vq.txt QUARTERLY REPORT 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.

TABLE OF CONTENTS

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

See the accompanying notes to consolidated financial statements. 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, 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:

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 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

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

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

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

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

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

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

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:

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.

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:

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

(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

WEST POINTE BANCORP INC 10-Q