SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001.
[_] 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: 0-26577
Webster City Federal Bancorp
(Exact name of registrant as specified in its charter)
United States 42-1491186
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
820 Des Moines Street, Webster City, Iowa 50595-0638
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 515-832-3071
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(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. X Yes __ No
Indicate the number of shares outstanding for each of the issuer's classes
of common stock, as of the latest practicable date.
1,877,751 shares of common stock were outstanding at April 30, 2001.
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Webster City Federal Bancorp and Subsidiaries
Index
Page
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Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
at March 31, 2001 and December 31, 2000 1
Consolidated Statements of Operations
for the three months ended March 31, 2001
and 2000 2
Consolidated Statements of Cash Flows
for the three months ended March 31, 2001
and 2000 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
Part II. Other Information
Other Information 8
Webster City Federal Savings Bancorp and Subsidiaries
Consolidated Balance Sheets
March 31, December 31,
2001 2000
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Assets (Unaudited)
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Cash and cash equivalents $ 11,618,983 $ 6,250,706
Securities available-for-sale 6,087,710 11,517,920
Investment securities held-to-maturity (market value 6,082,759 6,393,740
of $6,112,187 and $6,397,578, respectively)
Loans receivable, net 69,873,442 69,104,213
Office property and equipment, net 765,924 494,804
Federal Home Loan Bank stock, at cost 613,200 613,200
Deferred taxes on income 185,000 203,000
Accrued interest receivable 575,951 670,379
Prepaid expenses and other assets 46,974 181,649
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Total assets $ 95,849,943 $ 95,429,611
================ =================
Liabilities and Stockholders' Equity
- ------------------------------------
Deposits $ 64,945,288 $ 65,145,809
FHLB advance 8,200,000 8,200,000
Advance payments by borrowers for
taxes and insurance 156,125 316,766
Accrued interest payable 473,503 50,855
Current income taxes payable - 90,119
Accrued expenses and other liabilities 1,028,307 721,158
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Total liabilities 74,803,223 74,524,707
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Stockholders' Equity
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Common stock, $.10 par value 212,539 212,222
Additional paid-in capital 9,133,782 9,093,681
Retained earnings, substantially restricted 15,317,738 15,181,410
Unrealized gain (loss) on securities available-for-sale 24,212 (34,833)
Treasury stock, 247,638 shares and 239,138 shares, respectively (3,641,551) (3,547,576)
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Total stockholders' equity 21,046,720 20,904,904
Total liabilities and stockholders' equity $ 95,849,943 $ 95,429,611
================ =================
See accompanying notes to consolidated financial statements.
1
Webster City Federal Bancorp and Subsidiaries
Consolidated Statements of Cash Flows
For the Three Months
Ended March 31,
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2001 2000
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(Unaudited)
Cash flows from operating activities
Net earnings $ 288,911 $ 319,849
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Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 13,240 11,962
Amortization of premiums and discounts, net (328) 2,364
Change in:
Accrued interest receivable 94,428 116,338
Prepaid expenses and other assets (18,183) (56,208)
Accrued interest payable 422,648 342,709
Accrued expenses and other liabilities 307,149 224,061
Accrued current taxes on income (90,119) (27,458)
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Total adjustments 728,835 613,768
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Net cash provided by operating activities 1,017,746 933,617
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Cash flows from investing activities
Proceeds from the maturity of interest bearing deposits - 820,000
Proceeds from sales of securities available-for-sale 5,520,753 -
Principal collected on mortgage-backed and related securities 310,255 530,542
Net change in loans receivable (768,175) (2,093,169)
Purchase of office property and equipment (145,000) (37,353)
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Net cash provided by (used in) investing activities 4,917,833 (779,980)
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Cash flows from financing activities
Net change in savings deposits (200,521) (1,555,023)
Net decrease in advance payments by borrowers
for taxes and insurance (160,641) (138,500)
Proceeds on stock options 40,418 -
Treasury stock purchase (93,975) (1,311,538)
Dividends paid (152,583) (170,888)
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Net cash used in financing activities (567,302) (3,175,949)
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Net increase (decrease) in cash and cash equivalents 5,368,277 (3,022,312)
Cash and cash equivalents at beginning of period 6,250,706 4,986,099
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Cash and cash equivalents at end of period $ 11,618,983 $ 1,963,787
============== =============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 355,300 $ 391,106
Taxes on income - -
============== =============
See notes to consolidated financial statements.
2
Webster City Federal Savings Bancorp and Subsidiaries
Consolidated Statements of Operations
For the Three Months
Ended March 31,
------------------------------------
2001 2000
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(Unaudited)
Income
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Interest income:
Loans receivable $1,378,475 $1,233,031
Mortgage-backed & related securities 106,914 123,026
Investment securities 166,397 221,819
Other interest-earning assets 85,288 83,808
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Total interest income 1,737,074 1,661,684
Interest expense:
Deposits 777,948 733,815
FHLB advance 121,600 44,893
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Total interest expense 899,548 778,708
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Net interest income 837,526 882,976
Provision for losses on loans -- --
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Net interest income after
provision for losses on loans 837,526 882,976
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Non-interest income:
Fees and service charges 44,538 38,745
Other 45,208 30,961
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Total non-interest income 89,746 69,706
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Expense
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Non-interest expense:
Compensation, payroll taxes
and employee benefits 241,345 203,159
Office property and equipment 16,158 27,735
Data processing services 32,132 34,892
Federal insurance premiums 3,380 3,555
Other real estate expenses, net 845 770
Advertising 6,407 6,865
Other 154,194 151,351
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Total non-interest expense 454,461 428,327
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Earnings before taxes on income 472,811 524,355
Taxes on income 183,900 204,506
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Net earnings $ 288,911 $ 319,849
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Earnings per share - basic $ 0.15 $ 0.16
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Earnings per share - diluted $ 0.15 $ 0.16
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See notes to consolidated financial statements
3
Webster City Federal Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1. DESCRIPTION OF BUSINESS
-----------------------
Webster City Federal Bancorp (the "Registrant", the "Company" or "Bancorp") and
its subsidiaries, Webster City Federal Savings Bank, a federal stock savings
bank (the "Bank"), and Security Title and Abstract, Inc., conduct operations in
Webster City, Iowa, a community of approximately 8,000 people. The Bank is
primarily engaged in the business of attracting deposits from the general public
in its market area and investing such deposits in mortgage loans secured by
one-to-four family residential real estate. The Bank's primary area of lending
and other financial services consists of Hamilton County, Iowa, and the
surrounding contiguous counties. Security Title and Abstract, Inc. is engaged in
the business of providing abstracting and titles services for properties located
in Hamilton County, Iowa.
Webster City Federal Bancorp was formed as the holding company for the Bank on
July 1, 1999 pursuant to a plan of reorganization adopted by the Bank and its
stockholders. Pursuant to the reorganization, each share of Webster City Federal
Savings Bank stock held by existing stockholders of the Bank was exchanged for a
share of common stock of Webster City Federal Bancorp. The reorganization had no
financial statement impact and is reflected for all prior periods presented.
Approximately 60% of the Company's common stock is owned by WCF Financial
M.H.C., a mutual holding company (the "Holding Company"). The remaining 40% of
the Company's common stock is owned by the general public including the Bank's
Employee Stock Ownership Plan.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
-----------------------------------------
The consolidated financial statements for the three-month periods ended March
31, 2001 and 2000 are unaudited. In the opinion of management of Webster City
Federal Bancorp, these financial statements reflect all adjustments, consisting
only of normal recurring accruals necessary to present fairly these consolidated
financial statements. The results of operations for the interim periods are not
necessarily indicative of results that may be expected for an entire year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted.
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of Webster City
Federal Bancorp, Security Title and Abstract, Inc., Webster City Federal Savings
Bank and its wholly owned subsidiary, WCF Service Corporation, which is engaged
in the sales of mortgage life and credit life insurance to the Bank's loan
customers. All material inter-company accounts and transactions have been
eliminated.
The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the Unites States of America. In
preparing such financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the balance
sheet and revenues and expenses for the period. Actual results could differ
significantly from those estimates. Material estimates that are particularly
susceptible to significant change relate to the determination of the allowance
for loan losses.
Safe Harbor Statement
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This report contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Bancorp intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Reform Act of
1995, and is including this statement for the purposes of these safe harbor
provisions. Forward-looking statements, which are based on certain assumptions
and describe future plans, strategies and expectations of the Bancorp, are
generally identifiable by use of the words "believe," "expect," "intend,"
"anticipate," "estimate," "project," or similar expressions. The Bancorp's
ability to predict results or the actual effect of future plans or strategies is
4
inherently uncertain. Factors which could have a material adverse effect on the
operations and future prospects of the Bancorp and its subsidiaries include, but
are not limited to, changes in: interest rates, general economic conditions,
legislative/regulatory changes, monetary and fiscal polices of the U.S.
Government, including polices of the U.S. Treasury and the Federal Reserve
Board, the quality or composition of the loan or investment portfolios, demand
for loan products, deposit flows, competition, demand for financial services in
the Bancorp's market area and accounting principles, polices and guidelines.
These risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such statements.
3. EARNINGS PER SHARE COMPUTATIONS
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2001
- ----
Earnings per share - basic is computed using the weighted average number of
common shares outstanding of 1,883,150 for the three months ended March 31,
2001, divided into the net earnings of $288,911 for the three months ended March
31, 2001, resulting in earnings per share of $.15 compared to $.16 for the three
months ended March 31, 2000.
Earnings per share - diluted is computed using the weighted average number of
common shares outstanding after giving effect to additional shares assumed to be
issued in relation to the Company's stock option plan using the average price
per share for the period. Such additional shares were 3,170 for the three months
ended March 31, 2001. Earnings for the three months ended March 31, 2001 were
$288,911, resulting in earnings per share of $.15 compared to $.16 for the three
months ended March 31, 2000.
2000
- ----
Earnings per share - basic is computed using the weighted average number of
common shares outstanding of 1,976,245 for the three months ended March 31,
2000, divided into the net earnings of $319,849 or the three months ended March
31, 2000, resulting in earnings per share of $.16.
Earnings per share - diluted is computed using the weighted average number of
common shares outstanding after giving effect to additional shares assumed to be
issued in relation to the Company's stock option plan using the average price
per share for the period. Such additional shares were 2,696 for the three months
ended March 31, 2000. Earnings for the three months ended March 31, 2000 were
$319,849, resulting in earnings per share of $.16.
4. DIVIDENDS
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On January 17, 2001 the Bancorp declared a cash dividend on its common stock
payable on February 21, 2001 to stockholders of record as of February 6, 2001,
equal to $.20 per share or approximately $425,078. Of this amount, the payment
of approximately $230,000 (representing the dividend payable on 1,150,000 shares
owned by WCF Financial, M.H.C., the Bancorp's mutual holding company) was waived
by the mutual holding company, and $47,327 (representing the dividends payable
on treasury shares owned by Webster City Federal Bancorp) was not paid resulting
in an actual dividend distribution of $152,583.
5
Webster City Federal Bancorp and Subsidiaries
Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL CONDITION
- -------------------
Total assets increased by $420,300, or .4%, from December 31, 2000 to March 31,
2001. Cash and cash equivalents increased $5.4 million or 86.4%, and Loans
receivable increased $769,200, or 1.1% during the same period. At March 31,
2001, the Company had no real estate owned. Securities available for sale
decreased by $5.4 million or 46.9% from December 31, 2000 to March 31, 2001 due
to several securities being called during the first quarter. During the
three-month period deposits decreased $200,500, or .3%.
Total stockholders' equity increased by $141,800 to $21.1 million at March 31,
2001 from $20.9 at December 31, 2000, as earnings of $288,911 were partially
offset by the repurchase of common stock totaling $94,000 and quarterly
dividends totaling $152,583.
CAPITAL
- -------
The Bancorp's total stockholders' equity increased by $141,800, to $21.1 million
at March 31, 2001 from $20.9 million at December 31, 2000. The Office of Thrift
Supervision (OTS) requires that the Bank meet certain minimum capital
requirements. As of March 31, 2001 the Bank was in compliance with all
regulatory capital requirements. The Bank's required, actual and excess capital
levels as of March 31, 2001 were as follows:
Required % of Actual % of Excess
Amount Assets Amount Assets Capital
------ ------ ------ ------ -------
(Dollars in thousands)
Tier 1 (Core) Capital $3,829 4.0% $20,703 21.63% $16,874
Risk-based Capital $3,648 8.0% $20,971 45.99% $17,323
LIQUIDITY
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OTS regulations require the Bank to maintain an average daily balance of
qualified liquid assets (cash, certain time deposits and specified United States
government, state or federal agency obligations) equal to a monthly average of
not less than 4% of its net withdrawable deposits plus short-term borrowings. At
March 31, 2001, the Bank had $18.6 in assets qualifying for liquidity compared
to $18.2 million at December 31, 2000.
RESULTS OF OPERATIONS
- ---------------------
Interest Income. Interest income increased by $75,400 for the three months ended
March 31, 2001 compared to the three months ended March 31, 2000. The increase
was due to an increase in the average yield on interest-earning assets to 7.41%
for the three months ended March 31, 2001 compared to 7.24% for the three months
ended March 31, 2000 as well as an increase in the average balance of interest
earning assets of $2.0 million or 2.2% to $93.8 million for the three months
ended March 31, 2001 from $91.8 million for the corresponding periods ended
March 31, 2000.
Interest on loans for the three months ended March 31, 2001 increased by
$145,400 or 11.8% compared to the three months ended March 31, 2000. The
increase resulted primarily from an increase in total loans outstanding during
the period, and an increase in the yields on loans receivable from 7.80% for the
three months ended March 31, 2000 to 7.94% for the three months ended March 31,
2001. The increase in the yields on loans receivable was primarily due to higher
market rates and a substantial volume of adjustable rate loans repricing at a
higher rate based on the lagging index used by the Bank.
Interest on mortgage-backed securities decreased by $16,100 or 13.1% for the
three-month period ended March 31, 2001 as compared to the same period ended
March 31, 2000. The decline resulted from a decrease of $1.6 million or 21.7% in
the average balance of mortgage-backed securities to $5.8 million for the three
months ended March 31, 2001
6
compared to $7.4 million for the three months ended March 31, 2000, partly
offset by an increase of 68 basis points in the average yield on mortgage-backed
securities to 7.5% for the three months ended March 31, 2001 from 6.67% for the
three months ended March 31, 2000, as remaining adjustable rate loans repriced
at a higher rate.
Interest Expense. Interest expense increased by $120,800, or 15.5%, from
$778,700 for the three months ended March 31, 2000 to $899,500 for the three
months ended March 31, 2001. The increase in interest expense was due to an
increase in interest expense on the FHLB advance. The interest expense on the
advance increased by $76,700 or 170.9% from $44,900 for the three months ended
March 31, 2000 to $121,600 for the three months ended March 31, 2001. This
increase was due to the Bank borrowing an additional $5,000,000 from the FHLB
during 2000. This increase was offset by a decrease in average deposits
outstanding of $2.5 million from $66.9 million for the three months ended March
31, 2000 to $64.4 million for the three months ended March 31, 2001. The average
cost of deposits increased 44 basis points from 4.39% for the three months ended
March 31, 2000 to 4.83% for the three months ended March 31, 2001.
Net Interest Income. Net interest income before provision for losses on loans
decreased by $45,500 or 5.2% from $883,000 for the three months ended March 31,
2000 to $837,500 for the three months ended March 31, 2001. The Bancorp's
interest rate spread for the three months ended March 31, 2001 changed by 35
basis points to 2.45% from 2.80% for the three months ended March 31, 2000.
Non-interest Income. Non-interest income increased by $20,000 or 28.7% for the
three-month period ended March 31, 2001 as compared to the same period ended
March 31, 2000. The increase was due to additional fees received from the
abstracting company and an increase in loan fees and service charges collected.
Non-interest Expense. Non-interest expense increased $26,100 or 6.1% for the
three-month period ended March 31, 2001 compared to the same period ended March
31, 2000. Compensation and benefit costs increased $38,200 or 18.8% from
$203,200 for the three months ended March 31, 2000 to $241,300 for the
three-month period ended March 31, 2001 due to the addition of three persons
employed at Security Title and Abstract, Inc.
Provision for Losses on Loans. There were no provisions for losses on loans for
the three months ended March 31, 2001 or March 31, 2000. The Company had no
non-performing loans as of March 31,2001.The Company had no charge-offs during
the first quarter of 2000, and total charge-offs of only $2,000 for the year and
none during the first quarter of 2001. The allowance for losses on loans is
based on management's periodic evaluation of the loan portfolio and reflects an
amount that, in management's opinion, is adequate to absorb losses in the
existing portfolio. In evaluating the portfolio, management takes into
consideration numerous factors, including current economic conditions, prior
loan loss experience, the composition of the loan portfolio, and management's
estimate of anticipated credit losses.
Taxes on Income.
- ---------------
Income taxes for the three months ended March 31, 2001, were $183,900 compared
to $204,500 for the same period ended March 31, 2000. The effective income tax
rate for the three months of 2001 was 38.9% compared to 39.0% for the first
three months of 2000.
Net Earnings. Net earnings of the Company totaled $288,900 for the three months
ended March 31, 2001 compared to $319,800 for the three months ended March 31,
2000.
IMPACT OF NEW ACCOUNTING STANDARDS
- ----------------------------------
SFAS No. 140
- ------------
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" was issued in September 2000, and replaces SFAS 125 of the same
title. SFAS 140 revises the standards for accounting for securitizations and
other transfers of financial assets and collateral and requires certain
disclosures, but it carries over most of SFAS 125's provisions without
reconsideration. The adoption of SFAS 140 is not expected to have a material
impact on the results of operations or financial condition of the Company.
7
Webster City Federal Bancorp and Subsidiaries
PART II. Other Information
Item 1. Legal Proceedings
-----------------
There are various claims and lawsuits in which the Registrant is
periodically involved incidental to the Registrant's business. In the opinion of
management, no material loss is expected from any of such pending claims or
lawsuits.
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:
None
(b) No form 8-K reports were filed during the quarter ended
March 31, 2001.
8
Webster City Federal Bancorp and Subsidiaries
Signatures
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
WEBSTER CITY FEDERAL BANCORP
Registrant
Date: May 7, 2001 By: /s/ Phyllis A. Murphy
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Phyllis A. Murphy
President and Chief Executive Officer
Date: May 7, 2001 By: /s/ Stephen L. Mourlam
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Stephen L. Mourlam
Executive Vice President/Chief
Financial Officer
9