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, 2000
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 513,526 shares outstanding as of February 12, 2001
Transitional Small Business Disclosure Format (check one): Yes[ ] No[X]
INDEX
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Statements of Financial Condition
at December 31, 2000 (unaudited) and June 30, 2000
Unaudited Consolidated Statements of Income for the
three months ended December 31, 2000 and 1999
Unaudited Consolidated Statements of Comprehensive Income for
the three months ended December 31, 2000 and 1999
Unaudited Consolidated Statements of Cash Flows for the three
months ended December 31, 2000 and 1999
Notes to Financial Statements
Item 2. Management's Discussion and Analysis
Part II. Other Information
Items 1 through 6
Signatures
Exhibits
Part 1. Financial Information
Item 1. Consolidated Financial Statements
WASHINGTON BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, June 30,
2000 2000 *
---- ------
ASSETS (unaudited)
Cash and cash equivalents
Interest-bearing $ 1,827,749 $ 1,859,278
Noninterest-bearing 1,048,203 990,107
Investment securities:
Held to maturity 773,523 774,629
Available for sale 20,841,777 21,602,351
Federal funds, sold 925,000 110,000
Loans receivable, net of allowance for loan losses
of $626,144 in December 2000 and $647,605 84,684,269 83,988,473
in June 2000
Accrued interest receivable 1,612,575 1,463,838
Federal Home Loan Bank Stock 1,756,200 1,729,600
Foreclosed real estate 149,965 271,302
Premises and equipment, net 919,122 818,228
Goodwill, net 1,138,683 1,185,964
Other assets 235,632 628,668
---------------------------------------
Total assets $ 115,912,698 $ 115,422,438
=======================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing $ 4,184,583 $ 4,145,248
Interest -bearing 69,369,223 69,151,849
---------------------------------------
Total deposits 73,553,806 73,297,097
Borrowed funds 30,205,762 30,193,250
Advances from borrowers for taxes and insurance 203,521 249,683
Accrued expenses and other liabilities 817,835 632,003
---------------------------------------
Total liabilities 104,780,924 104,372,033
---------------------------------------
Redeemable common stock held by ESOP 279,615 228,947
---------------------------------------
Stockholders' Equity
Common Stock
Common Stock 6,511 6,511
Additional Paid-in Capital 6,178,280 6,169,796
Retained Earnings 7,585,158 7,333,909
Accumulated other comprehensive loss (266,362) (447,899)
Treasury shares (2,052,098) (1,658,017)
Deferred compensation (11,225) (21,060)
Maximum cash obligation related to ESOP shares (279,615) (228,947)
Unearned ESOP shares (308,490) (332,835)
---------------------------------------
Total stockholders' equity 10,852,159 10,821,458
---------------------------------------
Total liabilities and stockholders' equity $ 115,912,698 $ 115,422,438
=======================================
*Condensed from audited financial statements
See Notes to Financial Statements.
Washington Bancorp and Subsidiaries
Unaudited Consolidated Statements of Income Three Months Ended Six Months Ended
December 31, December 31,
2000 1999 2000 1999
--------------------------- ----------------------------
Interest and dividend income:
Loans, including fees:
First mortgage loans $ 1,175,109 $ 1,069,910 $ 2,327,200 $ 2,093,701
Consumer and other loans 683,215 578,617 1,373,568 1,140,791
Investment securities:
Taxable 371,685 356,114 727,139 678,281
Nontaxable 17,256 15,880 32,973 31,068
Federal Home Loan Bank stock 32,946 17,497 59,621 31,549
--------------------------- ---------------------------
Total interest income 2,280,211 2,038,018 4,520,501 3,975,390
--------------------------- ---------------------------
Interest expense:
Deposits 890,685 839,824 1,736,209 1,684,540
Borrowed funds 484,128 302,407 995,688 543,805
--------------------------- ---------------------------
Total interest expense 1,374,813 1,142,231 2,731,897 2,228,345
--------------------------- ---------------------------
Net interest income 905,398 895,787 1,788,604 1,747,045
Provision for loan losses 30,000 18,000 64,000 39,500
--------------------------- ---------------------------
Net interest income after provision
for loan losses 875,398 877,787 1,724,604 1,707,545
--------------------------- ---------------------------
Noninterest income:
Service charges and fees 113,136 99,105 226,457 188,934
Insurance commissions 12,051 22,457 27,244 37,089
Investment commissions 6,551 - 17,306 -
Other 13,572 19,970 27,048 18,580
--------------------------- ---------------------------
Total noninterest income 145,310 141,532 298,055 244,603
--------------------------- ---------------------------
Noninterest expense:
Compensation and benefits 295,285 254,021 604,596 584,246
Occupancy and equipment 79,044 51,905 141,529 112,160
FDIC deposit insurance premium 8,653 16,323 19,967 30,506
Data processing 29,456 20,228 50,076 48,294
Goodwill amortization 23,640 23,640 47,281 47,281
Other 155,014 180,751 296,067 301,285
--------------------------- ---------------------------
Total noninterest expense 591,092 546,868 1,159,516 1,123,772
--------------------------- ---------------------------
Income before taxes 429,616 472,451 863,143 828,376
Income tax expense 188,106 193,940 359,737 327,100
--------------------------- ---------------------------
Net income $ 241,510 $ 278,511 $ 503,406 $ 501,276
=========================== ===========================
Earnings per common share
Basic $ 0.48 $ 0.50 $ 1.00 $ 0.89
Diluted $ 0.48 $ 0.49 $ 0.98 $ 0.88
Dividends per common share $ - $ - $ 0.50 $ 0.12
Weighted average common shares for:
Basic earnings per share 499,714 560,326 504,204 561,068
Diluted earnings per share 506,933 568,062 511,506 570,493
See Notes to Financial Statements
Washington Bancorp and Subsidiaries
Unaudited Consolidated Statements of
Comprehensive Income
Three Months Ended Six Months Ended
December 31, December 31,
2000 1999 2000 1999
-------------------------- ----------------------------
Net Income $ 241,510 $ 278,511 $ 503,406 $ 501,276
Other comprehensive income(loss),
net of income taxes:
Unrealized holding gains (losses) arising during
the period, net of income taxes 71,221 (119,987) 181,537 (215,500)
-------------------------- ----------------------------
Comprehensive income $ 312,731 $ 158,524 $ 684,943 $ 285,776
========================== ============================
See Notes to Financial Statements
Washington Bancorp and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
Six Months Ended December 31, 2000 and 1999
2000 1999
------------------------------------
Cash Flows from Operating Activities
Net income $ 503,406 $ 501,276
Adjustments to reconcile net income to net cash
Provided by operating activities:
Amortization of premiums and discounts on
debt securities 9,282 13,435
Amortization of goodwill 47,281 47,281
Provision for loan losses 64,000 39,500
(Gain)loss on sale of foreclosed real estate 21,218 (7,606)
Depreciation 51,238 44,808
Compensation under stock awards 9,835 16,312
ESOP contribution expense 32,829 31,738
(Increase) in accrued interest receivable (148,737) (127,602)
Decrease in other assets 276,971 16,253
Increase accrued expenses and other liabilities 185,832 14,884
------------------------------------
Net cash provided by operating activities 1,053,155 590,279
------------------------------------
Cash Flows from Investing Activities
Held-to-maturity securities:
Purchases - (160,000)
Available-for-sale securities:
Maturities and calls 1,050,000 850,000
Purchases - (1,900,000)
Federal funds sold, net (815,000) (375,000)
Purchase of Federal Home Loan Bank stock (26,600) (310,000)
Loans made to customers, net (659,677) (4,821,456)
Sale of premises and equipment - 16,410
Purchase of premises and equipment (152,132) (38,153)
------------------------------------
Net cash (used in) investing activities (603,409) (6,738,199)
------------------------------------
Cash Flows from Financing Activities
Net increase (decrease) in deposits 256,710 (703,026)
Proceeds from Federal Home Loan Bank advances 248,350,000 108,950,000
Principal payments on Federal Home Loan Bank advances (248,337,488) (101,479,570)
Net (decrease) in advances from borrowers for taxes
and insurance (46,162) (18,418)
Acquisition of common stock for the treasury (394,081) (40,875)
Dividends paid (252,158) (67,197)
------------------------------------
Net cash provided by (used in)financing activities (423,179) 6,640,914
------------------------------------
Net increase in cash and cash equivalents 26,567 492,994
Cash and cash equivalents:
Beginning 2,849,385 2,557,430
------------------------------------
Ending $ 2,875,952 $ 3,050,424
====================================
Washington Bancorp and Subsidiaries
Unaudited Consolidated Statements of Cash Flows 2000 1999
Six Months Ended December 31, 2000 and 1999 --------------------------------------
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest paid to depositors $ 1,190,749 $ 1,287,597
Interest paid on other obligations $ 988,875 $ 534,131
Income taxes, net of refunds $ 364,800 $ 286,800
Supplemental Schedule of Noncash Investing and
Financing Activities
Transfers from loans to foreclosed real estate $ 271,681 $ 59,415
Contract sales of foreclosed real estate $ 371,800 $ 75,250
See Notes to Financial Statements.
Washington Bancorp and Subsidiaries
Notes to 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 six month period ended December 31,
2000, 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, 2000 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.
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.
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, 2000 the capital requirements of Washington
Federal under FIRREA and its actual capital ratios. As of December 31, 2000
Washington Federal exceeded all current regulatory capital requirement
standards.
At December 31, 2000
-----------------------
Amount Percent
-----------------------
(Dollars in thousands)
Tangible Capital:
Capital Level $ 7,637 8.26%
Requirement 1,387 1.50%
----------------------
Excess $ 6,250 6.76%
======================
Core Capital:
Capital Level $ 7,637 8.26%
Requirement 3,699 4.00%
----------------------
Excess $ 3,938 4.26%
=======================
Risk-Based Capital:
Capital Level $ 8,070 12.67%
Requirement 5,097 8.00%
----------------------
Excess $ 2,973 4.67%
=======================
The following table summarizes the capital requirements of Rubio Savings Bank of
Brighton. As of December 31, 2000 Rubio exceeded all current regulatory capital
requirement standards.
At December 31, 2000
----------------------
Amount Percent
----------------------
(Dollars in thousands)
Tier 1 or Leverage Capital:
Capital Level $ 2,513 11.04%
Requirement 683 3.00%
----------------------
Excess $ 1,830 8.04%
======================
Tier 1 Risk-based Capital:
Capital Level $ 2,513 16.26%
Requirement 618 4.00%
----------------------
Excess $ 1,895 12.26%
=======================
Risk-Based Capital:
Capital Level $ 2,684 17.37%
Requirement 1,236 8.00%
----------------------
Excess $ 1,448 9.37%
=======================
Item 2. Management's Discussion and Analysis
Forward-Looking Statements
When used in this Form 10-QSB or future filings by the Company with the
Securities and Exchange Commission, in the Company'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. The Company 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 the Company's financial performance and could cause the Company's
actual results for future periods to differ materially from those anticipated or
projected.
The Company 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 Federal Deposit Insurance Corporation
("FDIC").
In March 1996, Washington Federal converted to the stock form of
organization through the sale and issuance of its common stock to the Company.
On June 24, 1997, Washington 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, Washington Federal opened a branch office, Wellman
Federal Savings, in Wellman, Iowa. In September 2000, Washington Federal opened
a branch office, Richland Federal Savings, in Richland, Iowa. The principal
assets of Washington Bancorp are Washington Federal and Rubio Savings Bank
(collectively, the "Banks"). 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 Bancorp is investigating the possibility of de-registering
with the SEC in an effort to reduce expenses. De-registering will result in
de-listing with Nasdaq. In order to de-register, Washington Bancorp must first
have fewer than 300 record holders. Washington Bancorp's shares trade
infrequently and are widely held in the local area of Washington, Iowa.
Therefore the negative impact for the liquidity of the shares is expected to be
minimal.
Washington Federal attracts deposits from the general public in its
local market area and uses such deposits primarily to invest in 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.
Rubio 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, agricultural operating loans, commercial
loans, one- to- four family residential real estate loans, and farm real estate
loans. Rubio 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 $490,000 from $115.4 million
at June 30, 2000 to $115.9 million at December 31, 2000. The increase was
primarily due to an $815,000 increase in federal funds sold, a $696,000 increase
in loans receivable, net, a $149,000 increase in accrued interest receivable,
and a $101,000 increase in premises and equipment, partially offset by a
$761,000 decrease in available- for- sale investment securities, a $393,000
decrease in other assets, and a $121,000 decrease in foreclosed real estate.
Loans receivable. Loans receivable, net increased $696,000 from $84.0 million at
June 30, 2000 to $84.7 million at December 31, 2000. This increase is primarily
due to increased loan demand in the Company's market area. The Company's
non-performing assets were $801,000 or 0.69 % of total assets at December 31,
2000 as compared to $648,000 or 0.57% of total assets at June 30, 2000.
Non-performing assets have increased primarily due the 90 days past due status
on a nonresidential real estate loan and a government guaranteed commercial
loan. The Company is in the process of liquidating the assets and no losses are
expected.
Investment securities. Available- for- sale investment securities decreased
$761,000 from $21.6 million at June 30, 2000 to $20.8 million at December 31,
2000 primarily due to the call of a federal agency bond of $750,000, the
maturity of a US Treasury Note of $300,000, and the net amortization of premiums
paid for the securities of $7,000 partially offset by an increase in the market
value of the portfolio of $298,000. The portfolio of available- for- sale
securities is comprised primarily of investment securities carrying fixed
interest rates. The aggregate fair value of these securities was less on
December 31, 2000 than their carrying value.
Deposits. Deposits increased $257,000 from $73.3 million at June 30, 2000 to
$73.6 million at December 31, 2000. Transaction and savings deposits decreased
as a percentage of total deposits from $26.6 million or 36.3% at June 30, 2000
to $26.2 million or 35.6% at December 31, 2000. Certificates of deposit
increased as a percentage of total deposits from $46.7 million or 63.7% at June
30, 2000 to $47.4 million or 64.4% at December 31, 2000.
Total stockholders' equity. Total stockholders' equity increased $31,000 from
$10.8 million at June 30, 2000 to $10.9 million at December 31, 2000. The
increase is primarily due to net income of $503,000, the change in net
unrealized loss in the available for sale securities of $182,000, the allocation
of ESOP shares of $33,000, and the amortization of deferred compensation of
$10,000 partially offset by $394,000 in payments for the repurchase of 29,108
shares of the Company's common stock, the dividends paid to shareholders of
$252,000, and the change in the maximum cash obligation on allocated ESOP shares
of $51,000.
Results of Operations - Three Months Ended December 31, 2000 As Compared To The
Three Months Ended December 31, 1999
Performance summary. Net earnings decreased $37,000 to $242,000 for the three
months ended December 31, 2000 from $279,000 for the three months ended December
31, 1999. The decrease is primarily due to an increase in interest expense of
$233,000, an increase in noninterest expense of $44,000, and an increase in
provision for loan loss of $12,000 partially offset by an increase in interest
income of $242,000, a decrease in income tax expense of $6,000, and an increase
in noninterest income of $4,000. For the three months ended December 31, 2000
the annualized return on average assets was 0.83% compared to 1.02% for the
three months ended December 31, 1999, while the annualized return on average
equity was 9.00% for the three months ended December 31, 2000 compared to 10.28%
for the three months ended December 31, 1999.
Net interest income. Net interest income increased $9,000 to $905,000 for the
three months ended December 31, 2000 from $896,000 for the three months ended
December 31, 1999. The increase is primarily due to the increase of $242,000 in
interest income to $2.3 million for the three months ended December 31, 2000
from $2.0 million for the three months ended December 31, 1999 offset by an
increase in interest expense of $233,000 to $1.4 million for the three months
ended December 31, 2000 from $1.1 million for the three months ended December
31, 1999.
For the three months ended December 31, 2000 the average yield on
interest-earning assets was 8.18% compared to 7.85% for the three months ended
December 31, 1999. The average cost of interest-bearing liabilities was 5.46%
for the three months ended December 31, 2000 compared to 4.84% for the three
months ended December 31, 1999. The average balance of interest earning assets
increased $8.4 million to $111.4 million for the three months ended December 31,
2000 from $103.0 million for the three months ended December 31, 1999. During
this same period, the average balance of interest-bearing liabilities increased
$7.1 million to $100.8 million for the three months ended December 31, 2000 from
$93.7 million for the three months ended December 31, 1999.
Due to an increase in rates paid on the interest-bearing liabilities to remain
competitive locally, the average interest rate spread was 2.72% for the three
months ended December 31, 2000 compared to 3.01% for the three months ended
December 31, 1999. The average net interest margin was 3.24% for the three
months ended December 31, 2000 compared to 3.45% for the three months ended
December 31, 1999.
Provision for loan loss. Provision for loan loss increased $12,000 to $30,000
for the three months ended December 31, 2000 from $18,000 for the three months
ended December 31, 1999. The primary reason for the increase in the provision
was the increased size of the loan portfolio, particularly in nonresidential
real estate, commercial, and agriculture loans which are considered to carry a
higher risk of default than residential loans. Despite this increase, the
Company's loan portfolio remains primarily residential mortgage loans and has
experienced a minimal amount of charge-offs in the past three years. The
allowance for loan losses was $626,000 or 0.74% of loans receivable, net at
December 31, 2000 compared to $496,000 or 0.64% of loans receivable, net at
December 31, 1999. The allowance for loan loss as a percentage of non-performing
assets was 78.17% at December 31, 2000, compared to 118.07% at December 31,
1999.
Noninterest income. Noninterest income increased $4,000 to $145,000 for the
three months ended December 31, 2000 from $141,000 for the three months ended
December 31, 1999. The increase is primarily due an increase in service charges
and fees of $14,000 and an increase in investment commissions of $6,000
partially offset by a decrease in insurance commissions of $10,000, and a
decrease in other noninterest income of $6,000.
Service charges and fees increased $14,000 to $113,000 for the three months
ended December 31, 2000 from $99,000 for the three months ended December 31,
1999 primarily due to an $8,000 increase in overdraft fee income, a $2,000 in
loan fees and charges, a $2,000 increase in checking account service charges and
stop payments, and a $2,000 increase in credit card fees. The investment center
generated $7,000 for the three months ended December 31, 2000. Insurance
commissions decreased $10,000 to $12,000 for the three months ended December 31,
2000 from $22,000 for the three months ended December 31, 1999 primarily due to
an decrease in the volume of credit life and disability sales. Other noninterest
income decreased $6,000 to $14,000 for the three months ended December 31, 2000
from $20,000 for the three months ended December 31, 1999 primarily due to a
decrease in gains realized in the sale of foreclosed property and an decrease in
the penalty for early withdrawal of a certificate of deposit.
Noninterest expense. Noninterest expense increased $44,000 to $591,000 for the
three months ended December 31, 2000 from $547,000 for the three months ended
December 31, 1999. The increase is primarily due to a $41,000 increase in
compensation and benefits, a $27,000 increase in occupancy and equipment, and a
$9,000 increase in data processing, partially offset by a $25,000 decrease in
other noninterest expense and an $8,000 decrease in FDIC insurance premium.
Compensation and benefits increased $41,000 to $295,000 for the three months
ended December 31, 2000 from $254,000 for the three months ended December 31,
1999 primarily due to the increase in salaries and in the cost of retirement
benefits due to an increase in staff. Occupancy and equipment increased $27,000
to $79,000 for the three months ended December 31, 2000 from $52,000 for the
three months ended December 31, 1999 primarily due to the costs associated with
opening the Richland, Iowa branch in September 2000. Data processing increased
$9,000 to $29,000 for the three months ended December 31, 2000 from $20,000 for
the three months ended December 31, 1999 primarily due to non-repetitive
training costs.
Other noninterest expense decreased $26,000 to $155,000 for the three months
ended December 31, 2000 from $181,000 for the three months ended December 31,
1999 primarily due to a decrease in the cost of collections on bad debt and real
estate foreclosure expenses, a decrease in the cost associated with preparing
for Y2K and a decrease in postage and delivery charges. FDIC insurance premiums
decreased $8,000 to $9,000 for the three months ended December 31, 2000 from
$16,000 for the three months ended December 31, 1999 primarily due to the
decrease in Washington Federal's regulatory premium rate.
Results of Operations - Six Months Ended December 31, 2000 As Compared To The
Six Months Ended December 31, 1999
Performance summary. Net income increased $2,000 to $503,000 for the six months
ended December 31, 2000 from $501,000 for the six months ended December 31,
1999. The increase is primarily due to an increase in interest income of
$545,000, an increase in noninterest income of $53,000, partially offset by an
increase in interest expense of $503,000, an increase in noninterest expense of
$36,000, an increase in income tax expense of $33,000 and an increase in
provision for loan losses of $24,000. For the six months ended December 31,
2000, the annualized return on average assets was 0.86% as compared to 0.94% for
the six months ended December 31, 1999. The annualized return on average equity
was 9.23% for the six months ended December 31, 2000, as compared to 9.32% for
the six months ended December 31, 1999.
Net interest income. Net interest income increased $42,000 to $2.7 million for
the six months ended December 31, 2000 from $2.2 million for the six months
ended December 31, 1999. The increase is primarily due to the increase of
$545,000 in interest income to $4.5 million for the six months ended December
31, 2000 from $4.0 million for the six months ended December 31, 1999, which was
partially offset by an increase in interest expense of $504,000 to $2.7 million
of the six months ended December 31, 2000 from $2.2 million for the six months
ended December 31, 1999.
For the six months ended December 31, 2000, the average yield on
interest-earning assets was 8.16% compared to 7.92% for the six months ended
December 31, 1999. The average cost of interest-bearing liabilities was 5.43%
for the six months ended December 31, 2000 compared to 4.90% for the six months
ended December 31, 1999. The average balance of interest-earning assets
increased $10.2 million to $110.8 million for the six months ended December 31,
2000 from $100.6 million for the six months ended December 31, 1999. During this
same period, the average balance of interest-bearing liabilities increased $9.3
million to $100.6 million for the six months ended December 31, 2000 from $91.3
million for the six months ended December 31, 1999.
The average interest rate spread was 2.73% for the six months ended December 31,
2000 compared to 3.02% for the six months ended December 31, 1999. The average
net interest margin was 3.23% for the six months ended December 31, 2000
compared to 3.48% for the six months ended December 31, 1999.
Provision for loan loss. Provision for loan loss increased $24,000 to $64,000
for the three months ended December 31, 2000 from $40,000 for the three months
ended December 31, 1999. The primary reason for the increase in the provision
was the increased size of the loan portfolio, particularly in nonresidential
real estate, commercial, and agriculture loans which are considered to carry a
higher risk of default than residential loans. Despite this increase, the
Company's loan portfolio remains primarily residential mortgage loans and has
experienced a minimal amount of charge-offs in the past three years. The
allowance for loan losses was $626,000 or 0.74% of loans receivable, net at
December 31, 2000 compared to $496,000 or 0.64% of loans receivable, net at
December 31, 1999. The allowance for loan loss as a percentage of non-performing
assets was 78.17% at December 31, 2000, compared to 118.07% at December 31,
1999.
Noninterest income. Noninterest income increased $53,000 to $298,000 for the six
months ended December 31, 2000 from $245,000 for the six months ended December
31, 1999. The increase is primarily due to an increase in bank service charges
and fees of $38,000, an increase in investment commission income of $17,000, and
an increase in other noninterest income of $8,000 partially offset by a decrease
in insurance commissions of $10,000. Bank service charges and fees increased
$38,000 to $226,000 for the six months ended December 31, 2000 from $189,000 for
the six months ended December 31, 1999 primarily due to an increase in overdraft
fee income, loan fee income, and continued efforts to restructure deposit
account fee schedules. Investment commission income was $17,000. Other fee
income increased $8,000 to $27,000 for the six months ended December 31, 2000
from $19,000 for the six months ended December 31, 1999 primarily due to an
increase in rental income on real estate property. Insurance commissions
decreased $10,000 to $27,000 for the six months ended December 31, 2000 from
$37,000 for the six months ended December 31, 1999 primarily due to the
fluctuations in the volume of sales of credit life and disability products.
Noninterest expense. Noninterest expense increased $36,000 to $1.2 million for
the six months ended December 31, 2000 from $1.1 million for the six months
ended December 31, 1999. The increase is primarily due to a $29,000 increase in
occupancy and equipment, a $20,000 increase in compensation and benefits and a
$2,000 increase in data processing partially offset by an $11,000 decrease in
FDIC insurance premium and a $5,000 decrease in other noninterest expense.
Occupancy and equipment expense increased $29,000 to $142,000 for the six months
ended December 31, 2000 from $112,000 for the six months ended December 31, 1999
primarily due to the cost of opening the Richland, Iowa branch in September
2000. Compensation and benefits increased $20,000 to $604,000 for the six months
ended December 31, 2000 from $584,000 for the six months ended December 31, 1999
primarily due to the increase in salaries and in the cost of retirement benefits
due to an increase in staff.
FDIC insurance premiums decreased $11,000 to $20,000 for the six months ended
December 31, 2000 from $31,000 for the six months ended December 31, 1999
primarily due to the decrease in Washington Federal's regulatory premium rate.
Other noninterest expense decreased $5,000 to $296,000 for the six months ended
December 31, 2000 from $301,000 for the six months ended December 31, 1999
primarily due to a decrease in the cost of collections on bad debt and a
decrease in the cost of real estate foreclosures.
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. The Banks generally manage the pricing of the deposits to
maintain a steady deposit balance, but has 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, government
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, 2000, the Washington Federal's liquidity ratio was
15.24%.
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 the Banks require funds beyond their ability to generate them
internally, they have 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, 2000, Washington Federal had
outstanding commitments to extend credit which amounted to $3.4 million and
Rubio Savings Bank had outstanding commitments to extend credit which amounted
to $1.4 million.
Part II - Other Information
Item 1. Legal Proceedings.
None
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.
At the annual meeting on October 17, 2000 the stockholders of
Washington Bancorp re-elected three directors and ratified the appointment of
McGladrey and Pullen, LLP as the auditor for the fiscal year ending June 30,
2001. Total voting by proxy was 451,252 of the 540,034 shares outstanding.
Director Stan Carlson received 449,002 "for" votes and 2,250
"withhold" votes. Director Myron L. Graber received 430,422 "for" votes and
20,830 "withhold" votes. Director Rick R. Hofer received 443,252 "for" votes and
8,000 "withhold" votes. McGladrey and Pullen, LLP received 450,726 "for" votes,
100 "against" votes and 426 "abstain" votes.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits (listed by numbers corresponding to
the Exhibit Table of Item 601 on Regulation S-B)
11 Computation of Earnings Per Common Share
(b) Reports on Form 8-K
No reports in Form 8-K have been filed during the quarter for
which this report was filed.
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 12, 2000 /s/ Stan Carlson
----------------- ---------------------------------
Stan Carlson, President and Chief
Executive Officer
Date February 12, 2000 /s/ Leisha A. Linge
----------------- ---------------------------------
Leisha A. Linge, Executive Vice
President