-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E8xpRyQ1OLVsSx1cdw6whVmbiSU4zWXgetLJmtaHzxRafocqQ99c9uBWmtoLbL/a vD8CRdefxDEF5ptzL8b7Zg== 0000743530-00-000005.txt : 20000216 0000743530-00-000005.hdr.sgml : 20000216 ACCESSION NUMBER: 0000743530-00-000005 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WASHINGTON BANCORP CENTRAL INDEX KEY: 0001002907 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 421446740 STATE OF INCORPORATION: IA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-27910 FILM NUMBER: 545474 BUSINESS ADDRESS: STREET 1: 102 EAST MAIN ST CITY: WASHINGTON STATE: IA ZIP: 52353 BUSINESS PHONE: 3196537256 MAIL ADDRESS: STREET 1: 102 EAST MAIN ST CITY: WASHINGTON STATE: IA ZIP: 52353 10QSB 1 FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1999 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 0-25076 Washington Bancorp ----------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Iowa 42-1446740 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 102 East Main Street, Washington, Iowa 52353 -------------------------------------------------- (Address of principal executive offices)(Zip Code) Registrant's telephone number, including area code: (319)653-7256 Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange act of 1934 during the past 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 [ ] State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date. Common Stock, $.01 par value 581,034 shares outstanding as of February 10, 2000 Transitional Small Business Disclosure Format (check one): Yes[ ] No[X] INDEX Part I. Financial Information Item 1. Consolidated Financial Statements Consolidated Balance Sheets at December 31, 1999 (unaudited) and June 30, 1999 Unaudited Consolidated Statements of Income for the three months ended December 31, 1999 and 1998 and for the six months ended December 31, 1999 and 1998 Unaudited Consolidated Statements of Comprehensive Income for the three months ended December 31, 1999 and 1998 and for the six months ended December 31, 1999 and 1998 Unaudited Consolidated Statements of Cash Flows for the six months ended December 31, 1999 and 1998 Notes to Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Part II. Other Information Signatures Exhibits Item 1. Financial Information WASHINGTON BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION December 31, 1999 June 30, (unaudited) 1999 ------------------------------ ASSETS Cash and cash equivalents Interest-bearing .................................... $ 876,257 $ 901,346 Noninterest-bearing ................................. 2,174,167 1,656,084 Investment securities: Held to maturity .................................... 919,457 760,520 Available for sale .................................. 21,388,096 20,695,366 Fed funds, sold ....................................... 1,715,000 1,340,000 Loans receivable, net of allowance for loan losses of $496,377 in December 1999 and $472,187 in June 1999 ........................................... 77,590,218 72,779,177 Accrued interest receivable ........................... 1,318,202 1,190,600 Federal Home Loan Bank Stock .......................... 1,170,000 860,000 Foreclosed real estate ................................ 214,435 235,914 Premises and equipment, net ........................... 851,485 874,551 Goodwill, net ......................................... 1,233,245 1,280,526 Other assets .......................................... 664,511 409,996 ------------------------------ Total assets ............................. $ 110,115,073 $ 102,984,080 ============================== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Deposits Noninterest-bearing ................................. $ 3,789,944 $ 2,596,143 Interest -bearing ................................... 71,196,496 73,093,323 ------------------------------ Total deposits ........................... 74,986,440 75,689,466 Borrowed funds ........................................ 23,176,720 15,706,290 Advances from borrowers for taxes and insurance ....... 204,615 223,033 Accrued expenses and other liabilities ................ 620,889 464,638 ------------------------------ Total liabilities ........................ 98,988,665 92,083,427 ------------------------------ Redeemable common stock held by ESOP .................. 230,129 189,972 ------------------------------ Stockholders' Equity Common Stock Common Stock ........................................ 6,511 6,511 Additional Paid-in Capital .......................... 6,163,870 6,150,310 Retained Earnings ..................................... 6,818,943 6,384,863 Unrealized loss on securities ......................... (451,278) (235,778) Treasury shares ....................................... (1,020,841) (946,435) Deferred Compensation ................................. (33,617) (79,098) Maximum cash obligation ESOP .......................... (230,129) (189,972) Unearned ESOP shares .................................. (357,180) (379,720) ------------------------------ Total stockholder's equity ............... 10,896,278 10,710,681 ------------------------------ Total liabilities and stockholder's equity $ 110,115,073 $ 102,984,080 ==============================
See Notes to Consolidated Financial Statements. WASHINGTON BANCORP AND SUBISIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF INCOME Three Months Ended Six Months Ended December 31, December 31, ----------------------- ----------------------- 1999 1998 1999 1998 ----------------------- ----------------------- Interest income: Loans receivable: First mortgage loans ............. $1,069,910 $ 992,927 $2,093,701 $2,010,178 Consumer and other loans ......... 578,617 497,253 1,140,791 976,412 Investment securities: Taxable .......................... 373,611 377,876 709,830 686,366 Non-taxable ...................... 15,880 21,803 31,068 41,447 ------------------------------------------------- Total interest income ..... 2,038,018 1,889,859 3,975,390 3,714,403 ------------------------------------------------- Interest expense: Deposits ........................... 839,824 905,353 1,684,540 1,706,485 Borrowed funds ..................... 302,407 226,578 543,805 455,354 ------------------------------------------------- Total interest expense .... 1,142,231 1,131,931 2,228,345 2,161,839 ------------------------------------------------- Net interest income ....... 895,787 757,928 1,747,045 1,552,564 Provision for loan losses ............ 18,000 34,000 39,500 56,000 ------------------------------------------------- Net interest income after provision for loan losses 877,787 723,928 1,707,545 1,496,564 ------------------------------------------------- Noninterest income: Securities gains, net .............. 0 11,354 0 11,354 Loan origination and commitment fees 2,166 2,763 4,016 3,363 Service charges and fees ........... 96,939 59,502 184,918 145,024 Insurance commissions .............. 22,457 14,293 37,089 21,772 Other .............................. 19,970 9,239 18,580 10,224 ------------------------------------------------- Total noninterest income .. 141,532 97,151 244,603 191,737 ------------------------------------------------- Noninterest expense: Compensation and benefits .......... 254,021 289,628 584,246 580,119 Occupancy and equipment ............ 51,905 60,089 112,160 113,553 SAIF/BIF deposit insurance premium . 16,323 14,985 30,506 29,181 Data processing .................... 20,228 19,680 48,294 42,816 Goodwill ........................... 23,640 23,640 47,281 47,281 Other .............................. 180,751 158,253 301,285 285,323 ------------------------------------------------- Total noninterest expense . 546,868 566,275 1,123,772 1,098,273 ------------------------------------------------- Income before income taxes. 472,451 254,804 828,376 590,028 Income tax expense ................... 193,940 82,379 327,100 222,440 ------------------------------------------------- Net income ................ $ 278,511 $ 172,425 $ 501,276 $ 367,588 ================================================= Earnings per common share: Basic .............................. $ 0.50 $ 0.31 $ 0.89 $ 0.65 ================================================= Diluted ............................ $ 0.49 $ 0.30 $ 0.88 $ 0.63 ================================================= Tangible earnings per common share ... $ 0.53 $ 0.34 $ 0.96 $ 0.71 ================================================= Dividends per common share ........... $ 0.00 $ 0.12 $ 0.12 $ 0.24 ================================================= Weighted average common shares for: Basic earnings per share ........... 560,326 557,258 561,068 565,595 ================================================= Diluted earnings per share ......... 568,062 573,081 570,493 582,112 =================================================
See Notes to Consolidated Financial Statements. Washington Bancorp and Subsidiaries Unaudited Consolidated Statements of Comprehensive Income Three Months Ended Six Months Ended December 31, December 31, ---------------------- ---------------------- 1999 1998 1999 1998 ---------------------- ---------------------- Net income .......................... $ 278,511 $ 172,425 $ 501,276 $ 367,588 Gross unrealized gains (losses) on securities available for sale .. (192,180) (75,181) (344,899) 40,772 Less reclassification adjustments for gains included in net income ... 0 (10,922) 0 (10,922) Income tax expense related to items of other comprehensive income .. 72,193 32,039 129,399 (11,443) ------------------------------------------------ Comprehensive income ................ $ 158,524 $ 118,361 $ 285,776 $ 385,995 ================================================
See Notes to Consolidated Financial Statements. WASHINGTON BANCORP AND SUBISIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended December 31, 1999 and 1998 1999 1998 ------------------------------ Cash Flows from Operating Activities: Net Income ................................................ $ 501,276 $ 367,588 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of premiums and discounts on debt securities 13,435 (47,490) Amortization of goodwill ................................ 47,281 47,281 Provision for loan losses ............................... 39,500 56,000 (Gain) on sale of investments ........................... 0 (10,922) (Gain) on sale of foreclosed real estate ................ (7,606) (9,562) Depreciaton ............................................ 44,808 35,806 Compensation under stock awards ........................ 16,312 31,813 ESOP contribution expense .............................. 31,738 37,342 (Increase) in accrued interest receivable .............. (127,602) (143,266) Decrease in other assets ............................... 16,253 14,091 Increase (decrease) in accrued expenses and other liabilities .......................................... 14,884 (117,595) ------------------------------ Net cash provided by operating activities ... 590,279 261,086 ------------------------------ Cash Flows from Investing Activities: Held to maturity securities: Purchases ............................................... (160,000) 0 Available for sale securities: Sales ................................................... 0 1,000,000 Maturities and calls .................................... 850,000 10,450,432 Purchases ............................................... (1,900,000) (14,910,000) Federal funds sold, net ................................... (375,000) (2,150,765) Purchase of Federal Home Loan Bank stock .................. (310,000) (47,600) Loans made to customers, net .............................. (4,821,456) (2,689,555) Sale of premises and equipment ............................ 16,410 0 Purchase of premises and equipment ........................ (38,153) (102,117) ------------------------------ Net cash (used in) investing activities ..... (6,738,199) (8,449,605) ------------------------------ Cash Flows from Financing Activities: Net increase in deposits .................................. (703,026) 9,189,654 Proceeds from Federal Home Loan Bank advances ............. 108,950,000 6,250,000 Principal payments on Federal Home Loan Bank advances ..... (101,479,570) (6,891,997) Net increase (decrease) in advances from borrowers for taxes and insurance ................................. (18,418) (31,792) Acquisition of common stock ............................... (40,875) (684,125) Dividends paid ............................................ (67,197) (137,306) ------------------------------ Net cash provided by financing activities ... 6,640,914 7,694,434 ------------------------------ Net increase(decrease) in cash and cash equivalents ............................... 492,994 (494,085) Cash and Cash Equivalents: Beginning ................................................. 2,557,430 3,306,374 ------------------------------ Ending .................................................... $ 3,050,424 $ 2,812,289 ============================== Supplemental Disclosures of Cash Flow Information: Cash payments for: Interest paid to depositors ............................. $ 1,287,597 $ 1,695,481 Interest paid on other obligations ...................... 534,131 455,354 Income taxes, net of refunds ............................ 286,800 301,100 Supplemental Schedule of Noncash Investing and Financing Activities: Transfers from loans to foreclosed real estate ............ $ 59,415 $ 163,967 Contract sales of foreclosed real estate .................. 75,250 129,733
Washington Bancorp and Subsidiary Notes to Consolidated Financial Statements Principles of consolidation. The accompanying consolidated financial statements include the accounts of Washington Bancorp, Washington Federal Savings Bank ("Washington Federal"), WFSB's wholly-owned subsidiary, Washington Financial Services, Inc., which is a discount brokerage firm, and Rubio Savings Bank of Brighton, Iowa ("Rubio Savings Bank"). All significant intercompany balances and transactions have been eliminated in consolidation. Basis of presentation. Interim Financial Information (unaudited): The financial statements and notes related thereto for the three month period ended December 31, 1999 and for the six month period ended December 31, 1999, are unaudited, but in the opinion of management include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial position and results of operations. The operating results for the interim periods are not indicative of the operating results to be expected for a full year or for other interim periods. Not all disclosures required by generally accepted accounting principles necessary for a complete presentation have been included. It is recommended that these consolidated condensed financial statements be read in conjunction with the Annual Report on Form 10-KSB for the year ended June 30, 1999 and all related amendments and exhibits (including all financial statements and notes therein), filed by the Company with the Securities and Exchange Commission. Goodwill. Goodwill resulting from the Company's acquisition of Rubio Savings Bank is being amortized by the straight-line method over 15 years. Goodwill is periodically reviewed for impairment based upon an assessment of future operations to ensure that it is appropriately valued. Foreclosed real estate. Real estate properties acquired through loan foreclosure are initially recorded at the lower of cost or fair value less estimated selling expenses at the date of foreclosure. Costs relating to development and improvement of property are capitalized, whereas costs relating to holding property are expensed. Earnings per common share. Basic per share amounts are computed by dividing net income by the weighted-average number of common shares outstanding. Diluted per share amounts assume the conversion, exercise or issuance of all potential common stock instruments unless the effect is to reduce a loss or increase the income per common share from continuing operations. In accordance with Statement of Position 93-6, shares owned by the Company's Employee Stock Ownership Plan (the "ESOP") that have not been committed to be released are not considered outstanding for the purpose of computing earnings per share. In addition to the earnings per share ("EPS") information typically disclosed, the Company provided "tangible" EPS as an alternative measure for evaluating the Company's ability to grow its tangible capital. The Company's tangible EPS is calculated by dividing the total of goodwill expense plus net income by the weighted average number of diluted common shares outstanding. Unearned ESOP shares and expense. The receivable from the Company's ESOP has been treated as a reduction of equity. This amount is reduced as the ESOP shares are allocated. Compensation expense for the ESOP is based upon the fair value of shares allocated to participants. Stock awards. Expense for common stock to be issued under the Company's recognition and retention plan is based upon the fair value of the shares at the date of grant, allocated over the period of vesting. The Company adopted the recognition and retention plan in October 1996 whereby 26,300 shares of common stock have been reserved for issuance to certain executive officers and directors. During the years ended June 30, 1999, 1998 and 1997, awards were granted for 2,192 shares, 2,127 shares and 19,914 shares, respectively, with a fair value of $16.63, $18.94 and $11.25 per share at the date of the grant, respectively. In November 1999, 1,754 shares were forfeited. Redeemable common stock held by ESOP. The Company's maximum cash obligation related to these shares is classified outside stockholders' equity because the shares are not readily traded and could be put to the Company for cash. The maximum cash obligation represents the approximate market value of the allocated ESOP shares at the end of the reporting period. Comprehensive Income. In 1997, the Financial Accounting Standards Board issued Statement No. 130, "Reporting Comprehensive Income." Statement No. 130 establishes standards for reporting and display of comprehensive income and its components (revenue, expenses, gains, and losses) in a full set of general-purpose financial statements. The Company initially applied Statement No. 130 for the three months ended September 30, 1998 and the statement of comprehensive income has been added to the accompanying financial statements. Regulatory capital requirements. Pursuant to the Financial Information Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), savings institutions must meet three separate minimum capital-to-asset requirements. The following table summarizes, as of December 31, 1999 the capital requirements of Washington Federal under FIRREA and its actual capital ratios. As of December 31, 1999 Washington Federal exceeded all current regulatory capital requirement standards. At December 31, 1999 ----------------------- Amount Percent ----------------------- (Dollars in thousands) (unaudited) Tangible Capital: Capital Level ............................... $7,089 8.26% Requirement ................................. 1,287 1.50% ----------------------- Excess ...................................... $5,802 6.76% ======================= Core Capital: Capital Level ............................... $7,089 8.26% Requirement ................................. 3,432 4.00% ----------------------- Excess ...................................... $3,657 4.26% ======================= Risk-Based Capital: Capital Level ............................... $7,447 12.45% Requirement ................................. 4,785 8.00% ----------------------- Excess ...................................... $2,662 4.45% ======================= The following table summarizes the capital requirements of Rubio Savings Bank of Brighton. As of December 31, 1999 Rubio Savings Bank substantially exceeded all current regulatory capital requirement standards. At December 31, 1999 ----------------------- Amount Percent ----------------------- (Dollars in thousands) (unaudited) Tier 1 or Leverage Capital: Capital Level ................................ $2,792 11.85% Requirement .................................. 707 3.00% ---------------------- Excess ....................................... $2,085 8.85% ====================== Tier 1 Risk-based Capital: Capital Level ................................ $2,792 20.39% Requirement .................................. 548 4.00% ---------------------- Excess ....................................... $2,244 16.39% ====================== Risk-Based Capital: Capital Level ................................ $2,910 21.25% Requirement .................................. 1,096 8.00% ---------------------- Excess ....................................... $1,814 13.25% ====================== Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements When used in this Form 10-QSB or future filings by Washington Bancorp with the Securities and Exchange Commission, in Washington Bancorp's press releases or other public or shareholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "believe," or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Washington Bancorp wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and to advise readers that various factors, including regional and national economic conditions, changes in levels of market interest rates, credit risks of lending activities, and competitive and regulatory factors, could affect Washington Bancorp's financial performance and could cause Washington Bancorp's actual results for future periods to differ materially from those anticipated or projected. Washington Bancorp does not undertake, and specifically disclaims any obligations, to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. General Washington Bancorp is an Iowa corporation which was organized in October 1995 by Washington Federal Savings Bank for the purpose of becoming a savings and loan holding company. Washington Federal is a federally chartered savings bank headquartered in Washington, Iowa. Originally chartered in 1934, Washington Federal converted to a federal savings bank in 1994. Its deposits are insured up to the applicable limits by the FDIC. In March 1996, Washington Federal converted to the stock form of organization through the sale and issuance of its common stock to Washington Bancorp. On June 24, 1997, Washington Bancorp entered into a merger agreement to acquire Rubio Savings Bank of Brighton, Iowa. Rubio Savings Bank is held as a separate subsidiary of Washington Bancorp. In January 1998, Washington Bancorp became a bank holding company upon the completion of its acquisition of Rubio Savings Bank. In December 1998, Wellman Federal Savings, a full-service branch of Washington Federal was opened in Wellman, Iowa. In July 1999, Washington Federal formed a collaborative relationship with Eagle One Financial Services, LLC, to provide financial planning services and the sale of annuities, mutual funds, stocks and bonds. The principal assets of Washington Bancorp are Washington Federal and Rubio Savings Bank. Washington Bancorp presently has no separate operations and its business consists primarily of the business of the Banks. All references to Washington Bancorp, unless otherwise indicated at or before March 11, 1996 refer to Washington Federal. Washington Federal attracts deposits from the general public in its local market area and uses such deposits primarily to invest in owner occupied one- to -four family residential loans secured by owner occupied properties and non-residential properties, as well as construction loans on such properties. Washington Federal also invests in federal agency bonds, corporate bonds, agricultural loans, commercial loans, consumer loans, and automobile loans. Washington Federal filed an application with the Office of Thrift Supervision (the "OTS") on August 19, 1998 to branch into Richland, Iowa, a small rural community of 500, which currently has a branch of a large regional bank. The branch application approval has been extended by the OTS until October 1, 2000. Washington Federal plans to open the branch office before that date. Rubio Savings Bank attracts deposits from the general public in its local market area and the businesses in the Brighton area. The deposits are primarily invested in federal agency bonds, corporate bonds, agricultural operating loans, commercial loans, one- to- four family residential real estate loans, and farm real estate loans. Rubio Savings Bank also makes commercial real estate loans, automobile loans and consumer loans. The executive office of the Company is located at 102 East Main Street, Washington, Iowa 52353, telephone (319)653-7256. Financial Condition Total assets. Total consolidated assets increased $7.1 million from $103.0 million at June 30, 1999 to $110.1 million at December 31, 1999. The increase was primarily due to a $4.8 million increase in loans receivable, a $852,000 increase in investment securities, a $493,000 increase in cash and cash equivalents, a $375,000 increase in federal funds sold, a $310,000 increase in Federal Home Loan Bank stock, a $255,000 increase in other assets, and a $128,000 increase in accrued interest receivable partially offset by a $47,000 decrease in goodwill, net, a $23,000 decrease in premises and equipment and a $21,000 decrease in foreclosed real estate. The increase was primarily funded by a $7.5 million increase in borrowed funds partially offset by a $703,000 decrease in deposits. Loans receivable. Loans receivable, net, increased $4.8 million from $72.8 million at June 30, 1999 to $77.6 million at December 31, 1999. This increase is primarily due to increased loan demand in Washington Bancorp's market area. Washington Bancorp's non-performing assets were $420,000 or 0.38% of total assets at December 31, 1999 as compared to $326,000 or 0.32% of total assets at June 30, 1999. Investment securities. Investment securities available-for-sale increased $693,000 from $20.7 million at June 30, 1999 to $21.4 million at December 31, 1999. Securities classified as held to maturity increased $158,000 from $761,000 at June 30, 1999 to $919,000 at December 31, 1999. The portfolio of available-for-sale securities is comprised primarily of investment securities carrying fixed interest rates. The fair value of these securities is subject to changes in interest rates. The fair value of these securities was less on December 31, 1999 than their carrying value due to an increase in market rates of interest since the purchase date of the securities. Therefore, the total balance of available for sale securities includes the gross effect of the unrealized loss. Accrued interest receivable. Accrued interest receivable increased $128,000 from $1.2 million at June 30, 1999 to $1.3 million at December 31, 1999. The increase is primarily due to the increase in loans receivable with annual payments and the level of accrued interest on available-for-sale securities with semi-annual interest payments. Deposits. Deposits decreased $703,000 from $75.7 million at June 30, 1999 to $75.0 million at December 31, 1999. This decrease is primarily due to the competitive pricing of certificate of deposit products and other investment products available in our market area. Transaction and savings deposits increased as a percentage of total deposits from $25.7 million or 34.0% at June 30, 1999 to $26.1 million or 34.8% at December 31, 1999. Certificates of deposit decreased as a percentage of total deposits from $50.0 million or 66.0% at June 30, 1999 to $48.9 million or 65.2% at December 31, 1999. FHLB Borrowings. The total principal balance of advances from the Federal Home Loan Bank of Des Moines (FHLB) increased $7.5 million from $15.7 million at June 30, 1999 to $23.2 million at December 31, 1999. The increase is primarily due to the increased need to borrow to fund loan growth activity and investment activity. Washington Federal has utilized the FHLB advances for this growth in an effort to control cost of funds and interest rate risk. The portfolio of borrowings contains both long and short term borrowings. Advances from borrowers for taxes and insurance. The total balance in advances from borrowers for taxes and insurance decreased $18,000 from $223,000 at June 30, 1999 to $205,000 at December 31, 1999 primarily due to the payment of semi-annual credit life and disability insurance premiums and the annual escrow analysis performed each December. Escrow overages in excess of $50.00 are sent directly to the customer. Escrow shortages are spread out over a twelve-month period and added to the regular monthly escrow payment. Total stockholders' equity. Total stockholders' equity increased $186,000 from $10.7 million at June 30, 1999 to $10.9 million at December 31, 1999. The increase is primarily due to net income of $501,000, the allocation of shares in the ESOP of $32,000, and the amortization of deferred compensation under the Recognition and Retention Plan of $16,000, partially offset by the net unrealized loss in available- for- sale securities of $216,000, dividends paid of $67,000, the purchase of 3,000 shares of the Company's common stock at a total cost of $41,000, and the change in redeemable common stock held by the ESOP of $40,000, Results of Operations - Three Months Ended December 31, 1999 As Compared To The Three Months Ended December 31, 1998 Performance summary. Net earnings increased $106,000 to $278,000 for the three months ended December 31, 1999 from $172,000 for the three months ended December 31, 1998. The increase is primarily due to an increase in interest income of $148,000, an increase in noninterest income of $44,000, a decrease in noninterest expense of $19,000, and a decrease in provision for loan losses of $16,000 which was partially offset by an increase in interest expense of $10,000, and increase in income tax expense of $111,000. For the three months ended December 31, 1999, the annualized return on average assets was 1.02% as compared to 0.68% for the three months ended December 31, 1998. The annualized return on average equity was 10.28% for the three months ended December 31, 1999, as compared to 6.53% for the three months ended December 31, 1998. Net interest income. Net interest income increased $138,000 to $896,000 for the three months ended December 31, 1999 from $758,000 for the three months ended December 31, 1998. The increase is primarily due to the increase of $148,000 in interest income to $2.0 million for the three months ended December 31, 1999 from $1.9 million for the three months ended December 31, 1998, which was partially offset by an increase in interest expense of $10,000. For the three months ended December 31, 1999, the average yield on interest earning assets was 7.85% compared to 7.82% for the three months ended December 31, 1998. The average cost of interest-bearing liabilities was 4.84% for the three months ended December 31, 1999 compared to 5.18% for the three months ended December 31, 1998. The average balance of interest earning assets increased $6.3 million to $103.0 million for the three months ended December 31, 1999 from $96.7 million for the three months ended December 31, 1998. During this same period, the average balance of interest-bearing liabilities increased $6.2 million to $93.7 million for the three months ended December 31, 1999 from $87.5 million for the three months ended December 31, 1998. Due to the increase in yield on the interest-earning assets and the decrease in rates paid on the interest-bearing liabilities, the average interest rate spread was 3.01% for the three months ended December 31, 1999 compared to 2.64% for the three months ended December 31, 1998. The average net interest margin was 3.45% for the three months ended December 31, 1999 compared to 3.14% for the three months ended December 31, 1998. Provision for loan loss. Provision for loan loss decreased for the three months ended December 31, 1999 compared to the three months ended December 31, 1998. Washington Bancorp's loan portfolio consists primarily of residential mortgage loans and it has experienced a minimal amount of charge-offs in the past three years. The allowance for loan losses was $496,000 or .64% of loans receivable, net at December 31, 1999 compared to $440,000 or .64% of loans receivable, net at December 31, 1998. The allowance for loan loss as a percentage of non-performing assets was 118.07% at December 31, 1999, as compared to 94.99% at December 31, 1998. Noninterest income. Noninterest income increased $44,000 to $141,000 for the three months ended December 31, 1999 from $97,000 for the three months ended December 31, 1998. The increase is primarily due to an increase in bank service charges and fees of $37,000, an increase in other fee income of $11,000, and an increase in insurance commissions of $8,000 which was partially offset by a decrease in security gains, net of $11,000 and a decrease in loan origination and commitment fees of $1,000. Bank service charges and fees increased $37,000 to $97,000 for the three months ended December 31, 1999 from $60,000 for the three months ended December 31, 1998 primarily due to an increase in overdraft fee income and to continued efforts in restructuring fee schedules. Other fee income increased $11,000 to $20,000 for the three months ended December 31, 1999 from $9,000 for the three months ended December 31, 1998 primarily due to an increase in the gain on real estate property sold and an increase in the penalty for early withdrawal on certificates of deposit. Insurance commissions increased $8,000 to $22,000 for the three months ended December 31, 1999 from $14,000 for the three months ended December 31, 1998 primarily due to fluctuations in the volume of sales of credit life and disability products. Noninterest expense. Noninterest expense decreased $19,000 to $547,000 for the three months ended December 31, 1999 from $566,000 for the three months ended December 31, 1998. The decrease is primarily due to a $36,000 decrease in compensation and benefits, and an $8,000 decrease in occupancy and equipment expense which was partially offset by a $22,000 increase in other noninterest expense, a $1,000 increase in deposit insurance premiums and a $1,000 increase in data processing expense. The $36,000 decrease in compensation and benefits to $254,000 for the three months ended December 31, 1999 from $290,000 was primarily due to a short-term reduction of fulltime-equivalent employees and an adjustment for the capitalized cost of closing loans. The $8,000 decrease in occupancy and equipment to $52,000 for the three months ended December 31, 1999 from $60,000 for the three months ended December 31, 1998 was primarily due to the timing of payment on a primary maintenance contract at Rubio Savings Bank. The increase in other noninterest expense was primarily due to an increase in advertising and postage expense associated with the promotion of the investment brokerage service and the increase in expenses incurred on bad debt. Results of Operations - Six Months Ended December 31, 1999 As Compared To The Six Months Ended December 31, 1998 Performance summary. Net earnings increased $134,000 to $501,000 for the six months ended December 31, 1999 from $367,000 for the six months ended December 31, 1998. The increase is primarily due to an increase in interest income of $261,000, an increase in noninterest income of $53,000, and a decrease in provision for loan losses of $17,000 which was partially offset by an increase in interest expense of $66,000, an increase in income tax expense of $105,000 and an increase in noninterest expense of $26,000. For the six months ended December 31, 1999, the annualized return on average assets was 0.94% as compared to 0.75% for the six months ended December 31, 1998. The annualized return on average equity was 9.32% for the six months ended December 31, 1999, as compared to 6.87% for the six months ended December 31, 1998. Net interest income. Net interest income increased $194,000 to $1.7 million for the six months ended December 31, 1999 from $1.5 million for the six months ended December 31, 1998. The increase is primarily due to the increase of $261,000 in interest income to $4.0 million for the six months ended December 31, 1999 from $3.7 million for the six months ended December 31, 1998, which was partially offset by an increase in interest expense of $67,000. For the six months ended December 31, 1999, the average yield on interest earning assets was 7.92% compared to 7.92% for the six months ended December 31, 1998. The average cost of interest-bearing liabilities was 4.90% for the six months ended December 31, 1999 compared to 4.97% for the six months ended December 31, 1998. The average balance of interest earning assets increased $6.9 million to $100.6 million for the six months ended December 31, 1999 from $93.7 million for the six months ended December 31, 1998. During this same period, the average balance of interest-bearing liabilities increased $4.2 million to $91.3 million for the six months ended December 31, 1999 from $87.1 million for the six months ended December 31, 1998. Due to the decrease in rates paid on the interest-bearing liabilities, the average interest rate spread was 3.02% for the six months ended December 31, 1999 compared to 2.95% for the six months ended December 31, 1998. The average net interest margin was 3.48% for the six months ended December 31, 1999 compared to 3.31% for the six months ended December 31, 1998. Provision for loan loss. Provision for loan loss decreased for the six months ended December 31, 1999 compared to the six months ended December 31, 1998. Washington Bancorp's loan portfolio consists primarily of residential mortgage loans and it has experienced a minimal amount of charge-offs in the past three years. The allowance for loan losses was $496,000 or .64% of loans receivable, net at December 31, 1999 compared to $440,000 or .64% of loans receivable, net at December 31, 1998. The allowance for loan loss as a percentage of non-performing assets was 118.07% at December 31, 1999, as compared to 94.99% at December 31, 1998. Noninterest income. Noninterest income increased $53,000 to $245,000 for the six months ended December 31, 1999 from $192,000 for the six months ended December 31, 1998. The increase is primarily due to an increase in bank service charges and fees of $40,000, an increase in insurance commissions of $15,000, an increase in other fee income of $8,000, and an increase in loan origination and commitment fees of $1,000 which was partially offset by a decrease in security gains, net of $11,000. Bank service charges and fees increased $40,000 to $185,000 for the six months ended December 31, 1999 from $145,000 for the six months ended December 31, 1998 primarily due to an increase in overdraft fee income and to continued efforts to restructure fee schedules. Insurance commissions increased $15,000 to $37,000 for the six months ended December 31, 1999 from $22,000 for the six months ended December 31, 1998 primarily due to the fluctuations in the volume of sales of credit life and disability products, Other fee income increased $8,000 to $18,000 for the six months ended December 31, 1999 from $10,000 for the six months ended December 31, 1998 primarily due to an increase in the gain and income on real estate property and an increase in the penalty for early withdrawal on certificates of deposit. Noninterest expense. Noninterest expense increased $26,000 to $1.1 million for the six months ended December 31, 1999 from $1.1 million for the six months ended December 31, 1998. The increase is primarily due to a $16,000 increase in other noninterest expense, a $5,000 increase in data processing, a $4,000 increase in compensation and benefits, and a $1,000 increase in deposit insurance premiums which was partially offset by a $1,000 decrease in occupancy and equipment expense. Other noninterest expense increased $15,000 to $301,000 for the six months ended December 31, 1999 from $285,000 for the six months ended December 31, 1998 primarily due to an increase in advertising and postage expense associated with the promotion of the investment brokerage service and the increase in expenses incurred on real estate owned. Data processing increased $5,000 to $48,000 for the six months ended December 31, 1999 from $43,000 for the six months ended December 31, 1998 primarily due to a change in communication technology to frame relay from satellite. Compensation and benefits increase $4,000 to $584,000 for the six months ended December 31, 1999 from $580,000 for the six months ended December 31, 1998 primarily due to the expansion of Washington Federal's service area through the opening of a branch in Wellman, Iowa which was partially offset by a short-term reduction of fulltime-equivalent employees and an adjustment for the capitalized cost of closing loans. Liquidity and capital resources. The Banks' principal sources of funds are deposits, amortization and prepayment of loan principal, borrowings, and the sale and maturity of investment securities. While scheduled loan repayments and maturing investments are relatively predictable, deposit flows and early loan repayments are more influenced by interest rates, general economic conditions, and competition, and, most recently, the restructuring of the thrift industry. The Banks generally manage the pricing of the deposits to maintain a steady deposit balance, but have from time to time decided not to pay deposit rates that are as high as those of the competition, and when necessary, to supplement deposits with alternative sources of funds. Federal regulations historically have required Washington Federal to maintain minimum levels of liquid assets. The required percentage has varied from time to time based upon economic conditions and savings flows and is currently 4% of net withdrawable savings deposits and borrowings payable upon demand or in one year or less during the proceeding calendar month. Liquid assets for the purpose of this ratio include cash, certain time deposits, U.S. Government, other governmental agency, and corporate securities and other obligations generally having remaining maturities of less than five years. Washington Federal has historically maintained its liquidity ratio at levels in excess of those required. At December 31, 1999, Washington Federal's liquidity ratio was 18.39%. Liquidity management is both a daily and long-term responsibility of management. The Banks adjust their investments in liquid assets based upon management's assessment of (i) expected loan demand, (ii) expected deposit flows, (iii) yields available on interest-bearing deposits, and (iv) the objective of its asset/liability management program. Excess liquidity is invested generally in interest-bearing overnight deposits and other short-term government and agency obligations. If Washington Federal requires funds beyond its ability to generate them internally, it has additional borrowing capacity with the FHLB of Des Moines and collateral eligible for reverse repurchase agreements. The Banks anticipate that they will have sufficient funds available to meet current loan commitments. At December 31, 1999, Washington Federal had outstanding commitments to extend credit which amounted to $3.2 million and Rubio Savings Bank had outstanding commitments to extend credit which amounted to $830,000. Part II - Other Information Item 1. Legal Proceedings. None Item 2. Changes in Securities. 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 11 Computation of Earnings Per Share 27 Financial Data Schedule (b) Reports on Form 8-K No reports in Form 8-K have been filed during the quarter ended December 31, 1999 Signatures In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Washington Bancorp (Registrant) Date February 10, 2000 /s/ Stan Carlson ------------------------------------- Stan Carlson, President and Chief Executive Officer Date February 10, 2000 /s/ Leisha A. Linge ------------------------------------- Leisha A. Linge, Vice President and Treasurer EX-11 2 Washington Bancorp Computation of Earnings per Common Share Exhibit 11 For the three months ended December 31, For the six months ended December 31, ---------------------------------------- ------------------------------------------ 1999 1998 1999 1998 1999 1998 1999 1998 Basic Basic Diluted Diluted Basic Basic Diluted Diluted EPS EPS EPS EPS EPS EPS EPS EPS ---------------------------------------- ------------------------------------------- Computation of weighted average number of common shares outstanding: Common shares outstanding at the beginning of the period ....... 651,133 651,133 651,133 651,133 651,133 651,133 651,133 651,133 Unreleased common shares held by the Employee Stock Ownership Plan (ESOP) at the beginning of the period ........................ (36,845) (41,270) (36,845) (41,270) (37,972) (42,313) (37,972) (42,313) Weighted average common shares released by the ESOP during the period ........................... 564 522 564 522 1,127 1,044 1,127 1,044 Weighted average common shares outstanding - Stock Option Plan ...... 0 0 7,736 15,823 0 0 9,425 16,517 Weighted average common shares into treasury ........................ (54,526) (53,127) (54,526) (53,127) (53,220) (44,269) (53,220) (44,269) ---------------------------------------------------------------------------------------- Total average shares outstanding ....... 560,326 557,258 568,062 573,081 561,068 565,595 570,493 582,112 ======================================================================================== Net income ............................. $ 278,511 $ 172,425 $ 278,511 $ 172,425 $ 501,276 $ 367,588 $ 501,276 $ 367,588 ========================================================================================= Net income per share ................... $ 0.50 $ 0.31 $ 0.49 $ 0.30 $ 0.89 $ 0.65 $ 0.88 $ 0.63
EX-27 3
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM THE DECEMBER 31, 1999 FORM 10-QSB OF WASHINGTON BANCORP AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 6-MOS JUN-30-2000 DEC-31-1999 2,174 876 1,715 0 21,388 919 919 77,590 496 110,115 74,986 17,677 825 5,500 230 0 7 10,889 110,115 3,234 741 0 3,975 1,685 2,228 1,747 40 0 1,124 828 501 0 0 501 .89 .88 3.48 0 420 0 0 472 22 6 496 496 0 0
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