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 September 30, 2001
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
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Washington Bancorp
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(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 511,653 shares outstanding as of November12, 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 September 30, 2001 (unaudited) and June 30, 2001
Unaudited Consolidated Statements of Income for the
three months ended September 30, 2001 and 2000
Unaudited Consolidated Statements of Comprehensive Income
for the three months ended September 30, 2001 and 2000
Unaudited Consolidated Statements of Cash Flows for the three
months ended September 30, 2001 and 2000
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
September 30, June 30,
2001 2001 *
----------------------------
(unaudited)
ASSETS
Cash and cash equivalents:
Interest-bearing .................................... $ 1,924,090 $ 2,462,282
Noninterest-bearing ................................. 1,139,952 679,041
Investment securities:
Held to maturity .................................... 1,150,301 1,142,599
Available-for-sale .................................. 22,618,935 22,090,836
Federal funds sold .................................... 80,000 3,350,000
Loans receivable, net of allowance for loan losses
of $661,074 at September 30, 2001 and $607,833
at June 30, 2001 .................................... 85,208,895 84,095,349
Accrued interest receivable ........................... 1,763,737 1,517,702
Federal Home Loan Bank stock .......................... 1,756,200 1,756,200
Foreclosed real estate ................................ 156,104 145,949
Premises and equipment, net ........................... 1,027,067 986,635
Goodwill .............................................. 1,091,402 1,091,402
Other assets .......................................... 370,145 373,855
-----------------------------
Total assets .............................. $118,286,828 $119,691,850
=============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Noninterest-bearing ............................... $ 4,272,805 $ 4,107,003
Interest-bearing .................................. 71,047,130 68,797,275
-----------------------------
Total deposits ............................ 75,319,935 72,904,278
Federal funds purchased ............................... 500,000 1,500,000
Borrowed funds ........................................ 29,540,858 32,334,794
Advances from borrowers for taxes and insurance ....... 94,903 244,377
Accrued expenses and other liabilities ................ 712,301 754,975
-----------------------------
Total liabilities ......................... 106,167,997 107,738,424
-----------------------------
Redeemable common stock held by ESOP .................. 332,725 336,980
-----------------------------
Stockholders' Equity:
Common Stock ........................................ 6,511 6,511
Common Stock ........................................ 6,165,755 6,175,332
Retained Earnings ................................... 8,240,518 8,175,145
Accumulated other comprehensive gain (loss) ...... 88,592 (29,669)
Cost of common shares aquired for the treasury
(134,730 at September 30, 2001 and 134,162 at
June 30, 2001) .................................... (2,080,214) (2,070,600)
Deferred compensation .............................. (33,276) (21,093)
Maximum cash obligation related to ESOP shares .... (332,725) (336,980)
Unearned ESOP shares ................................ (269,055) (282,200)
-----------------------------
Total stockholders' equity ..................... 11,786,106 11,616,446
-----------------------------
Total liabilities and stockholders' equity ..... $118,286,828 $119,691,850
=============================
<FN>
* Condensed from audited financial statements See Notes to Financial Statements.
</FN>
Washington Bancorp and Subsidiaries
Unaudited Consolidated Statements of Income
Three Months Ended
September 30,
2001 2000
-----------------------
Interest and dividend income:
Loans, including fees:
First mortgage loans ................................... $1,125,420 $1,152,092
Consumer and other loans ............................... 760,834 690,352
Investment securities:
Taxable ................................................ 306,634 352,449
Nontaxable ............................................. 20,624 15,716
Federal Home Loan Bank stock ............................. 18,060 29,680
-----------------------
Total interest income .............................. 2,231,572 2,240,289
-----------------------
Interest expense:
Deposits ................................................. 816,278 845,524
Borrowed funds ........................................... 417,969 511,560
-----------------------
Total interest expense ............................. 1,234,247 1,357,084
-----------------------
Net interest income ................................ 997,325 883,205
Provision for loan losses .................................. 60,000 34,000
-----------------------
Net interest income after provision
for loan losses .................................... 937,325 849,205
-----------------------
Noninterest income:
Service charges and fees ................................. 132,226 113,322
Insurance commissions .................................... 12,810 15,193
Investment commissions ................................... 13,839 10,755
Other .................................................... 2,587 13,476
-----------------------
Total noninterest income ........................... 161,462 152,746
-----------------------
Noninterest expense:
Compensation and benefits ................................ 368,119 308,556
Occupancy and equipment .................................. 70,759 67,690
FDIC deposit insurance premium ........................... 9,246 11,315
Data processing .......................................... 28,105 20,619
Goodwill amortization .................................... -- 23,640
Other .................................................... 157,130 139,152
-----------------------
Total noninterest expense .......................... 633,359 570,972
-----------------------
Income before income taxes ......................... 465,428 430,979
Income tax expense ......................................... 155,578 171,631
-----------------------
Net income ........................................ $ 309,850 $ 259,348
=======================
Earnings per common share
Basic .................................................... $ 0.63 $ 0.51
Diluted .................................................. $ 0.62 $ 0.50
Dividends per common share ................................. $ 0.50 $ 0.50
Weighted average common shares for:
Basic earnings per share ................................. 491,040 508,693
Diluted earnings per share ............................... 503,624 516,159
See Notes to Financial Statements
Washington Bancorp and Subsidiaries
Unaudited Consolidated Statements of Comprehensive Income
Three Months Ended
September 30,
2001 2000
-------------------
Net income ............................................... $309,850 $259,348
Other comprehensive income(loss),
Unrealized holding gains (losses) arising during
the period, net of income taxes ...................... 118,261 110,316
-------------------
Comprehensive income ............................. $428,111 $369,664
===================
See Notes to Financial Statements
Washington Bancorp and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
Three Months Ended September 30, 2001 and 2000
2001 2000
------------------------
Cash Flows from Operating Activities
Net income ................................................................ $ 309,850 $ 259,348
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of premiums and discounts on
debt securities ....................................................... (10,964) 4,465
Amortization of goodwill ................................................ -- 23,641
Provision for loan losses ............................................. 60,000 34,000
Loss on sale of foreclosed real estate ............................... 5,205 20,743
Depreciation ............................................................ 31,535 22,498
Compensation under stock awards ......................................... 12,004 6,274
ESOP contribution expense ............................................... 22,182 16,469
(Increase) in accrued interest receivable ............................... (246,035) (182,884)
(Increase)decrease in other assets ...................................... (15,258) 51,691
Increase (decrease) in accrued expenses and other liabilities ........... (99,313) 78,928
------------------------
Net cash provided by operating activities ........................... 69,206 335,173
------------------------
Cash Flows from Investing Activities
Held-to-maturity securities:
Purchases ............................................................... (7,800) --
Available-for-sale securities:
Maturities and calls .................................................... 4,676,832 300,000
Purchases ............................................................... (5,000,000) --
Federal funds sold, net ................................................... 3,270,000 (15,000)
Purchase of Federal Home Loan Bank stock .................................. -- (26,600)
Loans made to customers, net .............................................. (1,188,906) (915,008)
Purchase of premises and equipment ........................................ (71,968) (123,711)
------------------------
Net cash provided by (used in) investing activities ................. 1,678,158 (780,319)
------------------------
Cash Flows from Financing Activities
Net increase in deposits .................................................. 2,415,657 1,078,314
Proceeds from Federal Home Loan Bank advances ............................. 2,680,000 180,800,000
Principal payments on Federal Home Loan Bank advances ..................... (5,473,936) (180,018,234)
Federal funds purchased, net .............................................. (1,000,000) --
Net (decrease) in advances from borrowers for taxes
and insurance ........................................................... (149,474) (200,083)
Acquisition of common stock ............................................... (97,775) (130,937)
Stock options exercised ................................................... 45,360 --
Dividends paid ............................................................ (244,477) (252,158)
---------------------------
Net cash provided by (used in) financing activities ................. (1,824,645) 1,276,902
---------------------------
Increase (decrease) in cash and cash equivalents ................. (77,281) 831,756
Cash and cash equivalents:
Beginning ................................................................. 3,141,323 2,849,385
------------------------
Ending .................................................................... $3,064,042 $3,681,141
========================
Washington Bancorp and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
Three Months Ended September 30, 2001 and 2000
2001 2000
---------------------
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest paid to depositors ...................... $418,968 $367,685
Interest paid on other obligations ............... $391,507 $490,379
Income taxes, net of refunds ..................... $203,065 $193,400
Supplemental Schedule of Noncash Investing and
Financing Activities
Transfers from loans to foreclosed real estate ..... $ -- $133,969
Contract sales of foreclosed real estate ........... $ -- $ 40,000
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 three month period ended September
30, 2001, 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, 2001 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 was being amortized by the straight-line method over 15 years. Beginning
July 1, 2001, the Company adopted FASB 142 "Goodwill and Other Intangible
Assets" and as a result goodwill will no longer be amortized but will be
annually reviewed for impairment.
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. Quantitative measures established by regulation
to ensure capital adequacy require the Company and the Banks to maintain minimum
amounts and ratios (set forth in the following table) of total and Tier 1
capital (as defined in the regulations) to risk-weighted assets (as defined) and
of Tier 1 capital (as defined) to average assets (as defined). Management
believes, as of September 30, 2001 and 2000, that the Company and the Banks met
all capital adequacy requirements to which they are subject.
As of September 30, 2001, the most recent notification from the Federal Deposit
Insurance Corporation categorized the Banks as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, an institution must maintain minimum total risk-based, Tier 1
risk-based and Tier 1 leverage ratios as set forth in the following table. There
are no conditions or events since the notification that management believes have
changed the Banks' category. The Company's and the Banks' actual capital amounts
and ratios as of September 30, 2001 and 2000 are also presented in the table.
Minimum to Be
Well Capitalized
Minimum Capital Under Prompt Corrective
Actual Requirement Action Provisions
---------------- ---------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
-----------------------------------------------------------
September 30, 2001
Total capital to risk
weighted assets:
Consolidated ........................... 11,786 14.34% 6,574 8.00% N/A N/A
Washington ............................. 8,107 12.35% 5,251 8.00% 6,564 10.00%
Rubio .................................. 3,686 22.70% 1,299 8.00% 1,624 10.00%
Tier 1 capital to risk
weighted assets:
Consolidated ........................... 10,606 12.91% 3,287 4.00% N/A N/A
Washington ............................. 8,029 12.23% 2,626 4.00% 3,939 6.00%
Rubio .................................. 2,584 15.91% 649 4.00% 974 6.00%
Tier 1 capital to average assets:
Consolidated ........................... 10,606 9.13% 4,649 4.00% N/A N/A
Washington ............................. 8,029 8.62% 3,727 4.00% 4,658 5.00%
Rubio .................................. 2,584 11.12% 697 4.00% 1,162 5.00%
September 30, 2000
Total capital to risk
weighted assets:
Consolidated ........................... 10,832 13.51% 6,416 8.00% N/A N/A
Washington ............................. 7,201 11.19% 5,150 8.00% 6,438 10.00%
Rubio .................................. 3,615 22.88% 1,264 8.00% 1,580 10.00%
Tier 1 capital to risk
weighted assets:
Consolidated ........................... 10,007 12.48% 3,208 4.00% N/A N/A
Washington ............................. 7,489 11.63% 2,575 4.00% 3,863 6.00%
Rubio .................................. 2,498 15.81% 632 4.00% 948 6.00%
Tier 1 capital to average assets:
Consolidated ........................... 10,007 8.62% 4,643 4.00% N/A N/A
Washington ............................. 7,489 7.96% 3,763 4.00% 4,703 5.00%
Rubio .................................. 2,498 11.13% 673 4.00% 1,122 5.00%
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 may result in the common
stock no longer being quoted on the OTC Electronic Bulletin Board and will
reduce the expenses associated with the SEC reporting requirements. 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 United States treasury securities, mortgage-backed securities,
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
invests in United States treasury securities, 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 decreased $1.4 million from $119.7
million at June 30, 2001 to $118.3 million at September 30, 2001. The decrease
was primarily due to a $3.2 million decrease in federal funds sold, a $77,000
decrease in cash and cash equivalents, and a $4,000 decrease in other assets,
partially offset by a $1.1 million increase in loans receivable, a $536,000
increase in investment securities, a $246,000 increase in accrued interest, a
$40,000 increase in premises and equipment, and a $10,000 increase in foreclosed
real estate.
Loans receivable. Loans receivable increased $1.1 million from $84.1 million at
June 30, 2001 to $85.2 million at September 30, 2001. This increase is primarily
due to continued loan demand in the Company's market area. The Company's
non-performing assets were $1.2 million or 0.99% of total assets at September
30, 2001 as compared to $714,000 or 0.60% of total assets at June 30, 2001.
Investment securities. Investment securities increased $536,000 from $23.2
million at June 30, 2001 to $23.8 million at September 30, 2001 primarily due to
the purchase of $5.0 million in United States treasury and agency securities, an
increase in the market value of the portfolio of $194,000, and the amortization
of premiums and discounts of $11,000 partially offset by the maturity or call of
$4.7 million in United States treasury and agency securities. 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
more on September 30, 2001 than their carrying value.
Deposits. Deposits increased $2.4 million from $72.9 million at June 30, 2001 to
$75.3 million at September 30, 2001. Transaction and savings deposits increased
as a percentage of total deposits from $25.9 million or 35.5% at June 30, 2001
to $27.8 million or 36.9% at September 30, 2001 primarily due to the seasonal
fluctuation in the cash position of a local government agency. Certificates of
deposit decreased as a percentage of total deposits from $47.0 million or 64.5%
at June 30, 2001 to $47.5 million or 63.1% at September 30, 2001.
Total stockholders' equity. Total stockholders' equity increased $169,000 from
$11.6 million at June 30, 2001 to $11.8 million at September 30, 2001. The
increase is primarily due to net income of $310,000, the change from a net
unrealized loss to a net unrealized gain in the available for sale securities of
$118,000, the exercise of stock options of $45,000, the allocation of ESOP
shares of $22,000, the amortization of deferred compensation of $12,000, and the
change in the maximum cash obligation on allocated ESOP shares of $4,000,
partially offset by the dividends paid to shareholders of $244,000 and the
repurchase of 6,100 shares of the Company's common stock at a cost of $98,000.
Results of Operations - Three Months Ended September 30, 2001 As Compared To The
Three Months Ended September 30, 2000
Performance summary. Net income increased $51,000 to $310,000 for the three
months ended September 30, 2001 from $259,000 for the three months ended
September 30, 2000. The increase is primarily due an increase in net interest
income of $114,000, an increase in non-interest income of $9,000, and a decrease
in income tax expense of $156,000, partially offset by an increase in provision
for loan loss of $26,000 and an increase in non-interest expense of $62,000. For
the three months ended September 30, 2001 the annualized return on average
assets was 1.07% compared to 0.89% for the three months ended September 30,
2000, while the annualized return on average equity was 10.78% for the three
months ended September 30, 2001 compared to 9.58% for the three months ended
September 30, 2000.
Net interest income. Net interest income increased $114,000 to $997,000 for the
three months ended September 30, 2001 from $883,000 for the three months ended
September 30, 2000. The increase is primarily due to the decrease of $123,000 in
interest expense to $1.2 million for the three months ended September 30, 2001
from $1.4 million for the three months ended September 30, 2000 and an increase
in interest income of $9,000 to $2.2 million for the three months ended
September 30, 2001 from $2.2 million for the three months ended September 30,
2000.
For the three months ended September 30, 2001, the average yield on
interest-earning assets was 8.04% compared to 8.13% for the three months ended
September 30, 2000. The average cost of interest-bearing liabilities was 4.97%
for the three months ended September 30, 2001 compared to 5.41% for the three
months ended September 30, 2000. The average balance of interest earning assets
increased $800,000 to $111.0 million for the three months ended September 30,
2001 from $110.2 million for the three months ended September 30, 2000. During
this same period, the average balance of interest-bearing liabilities decreased
$1.1 million to $99.3 million for the three months ended September 30, 2001 from
$110.4 million for the three months ended September 30, 2000.
The average interest rate spread was 3.07% for the three months ended September
30, 2001 compared to 2.73% for the three months ended September 30, 2000. The
average net interest margin was 3.59% for the three months ended September 30,
2001 compared to 3.21% for the three months ended September 30, 2000. Despite
the decrease in the average yield on interest-earning assets the net interest
margin increased primarily due to the decrease in the average cost of interest
bearing liabilities and the increase in the ratio of interest-earning assets to
interest-bearing liabilities.
Provision for loan loss. Provision for loan loss increased $26,000 to $60,000
for the three months ended September 30, 2001 from $34,000 for the three months
ended September 30, 2000. 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 $661,000 or 0.78% of loans receivable, net at
September 30, 2001 compared to $657,000 or 0.78% of loans receivable, net at
September 30, 2000. The allowance for loan loss as a percentage of
non-performing assets was 56.45% at September 30, 2001, compared to 75.05% at
September 30, 2000.
Noninterest income. Noninterest income increased $9,000 to $162,000 for the
three months ended September 30, 2001 from $153,000 for the three months ended
September 30, 2000. The increase is primarily due an increase in service charges
and fees of $19,000 and an increase in investment commissions of $3,000,
partially offset by a decrease in other noninterest income of $11,000 and a
decrease in insurance commissions of $2,000. Service charges and fees increased
primarily due to an increase in loan fees and charges resulting from mortgage
loans refinancing into secondary market loan products, an increase in overdraft
fee income, and income from a new check and coupon book printing service.
Investment commissions increased primarily due to an increase in sales. Other
noninterest income decreased primarily due to a decrease in the disposition of
real estate owned. Insurance commissions decreased primarily due to a decrease
in the level of credit life and disability sales on loan products.
Noninterest expense. Noninterest expense increased $62,000 to $633,000 for the
three months ended September 30, 2001 from $571,000 for the three months ended
September 30, 2000. The increase is primarily due to a $60,000 increase in
compensation and benefits, an $18,000 increase in other noninterest expense, a
$7,000 increase in data processing, and a $3,000 increase in occupancy and
equipment, partially offset by a $23,000 decrease in the amortization of
goodwill and a $2,000 decrease in FDIC insurance premium.
Compensation and benefits increased primarily due to regular salary adjustments
and an increase in cost of retirement benefits. Other noninterest expense
increased primarily due to costs associated with the preparation of the
Company's audited annual report and the cost of supplies for the new check
printing services. Data processing increased primarily due to an increase in the
usage of services offered by Washington Federal's main data processing provider.
Occupancy and equipment increased primarily due to the costs associated with
improvements on the branch building in Wellman, Iowa. In accordance with the
Financial Accounting Standards Board Statement No. 142, goodwill will no longer
be amortized, but will be annually reviewed for impairment. FDIC insurance
premiums decreased primarily due to the decrease in Washington Federal's
regulatory premium rate.
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.
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 September 30, 2001, Washington Federal had
outstanding commitments to extend credit which amounted to $3.1 million and
Rubio Savings Bank had outstanding commitments to extend credit which amounted
to $916,000.
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.
None
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 November 13, 2001 /s/ Stan Carlson
----------------- -------------------------------------
Stan Carlson, President and Chief
Executive Officer
Date November 13, 2001 /s/ Leisha A. Linge
----------------- -------------------------------------
Leisha A. Linge, Executive Vice
President