SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------
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 June 30, 2002.
-------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934For the transition period
from__________________to_____________________
COMMISSON Number: 0-26577
-------
Webster City Federal Bancorp
(Exact name of registrant as specified in its charter)
United States 42-1491186
------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
820 Des Moines Street, Webster City, Iowa 50595-0638
- ----------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 515-832-3071
------------
-------------------------------------------------------------------------------
(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.
1,888,626 shares of common stock outstanding at July 31, 2002.
--------------
Webster City Federal Bancorp and Subsidiaries
Index
Page
----
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
at June 30, 2002 and December 31, 2001 1
Consolidated Statements of Operations
for the three and six months ended June 30, 2002
and 2001 2
Consolidated Statements of Cash Flows
for the six months ended June 30, 2002
and 2001 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 9
Webster City Federal Savings Bancorp and Subsidiaries
Consolidated Balance Sheets
June 30, December 31,
2002 2001
-------------- -------------
Assets (Unaudited)
- ------
Cash and cash equivalents $ 3,965,805 $ 9,183,215
Time deposits in other financial institutions 2,491,000 1,399,000
Securities available-for-sale 10,642,070 10,188,900
Investment securities held-to-maturity (market value 3,859,859 4,574,354
of $3,940,741 and $4,654,121, respectively)
Loans receivable, net 76,094,614 74,492,269
Real estate owned 96,755 -
Office property and equipment, net 807,376 882,238
Federal Home Loan Bank stock, at cost 704,900 613,200
Deferred taxes on income 185,000 189,000
Accrued interest receivable 676,931 568,569
Prepaid expenses and other assets 522,432 270,618
------------- -------------
Total assets $ 100,046,742 $ 102,361,363
============= =============
Liabilities and Stockholders' Equity
- ------------------------------------
Deposits $ 67,138,372 $ 70,042,590
FHLB advance 9,700,000 9,700,000
Advance payments by borrowers for
taxes and insurance 347,885 338,167
Accrued interest payable 44,901 53,454
Current income taxes payable -- 84,414
Accrued expenses and other liabilities 904,274 794,438
------------ ------------
Total liabilities 78,135,432 81,013,063
------------ ------------
Stockholders' Equity
- --------------------
Common stock, $.10 par value. 20,000,000 shares authorized: 215,061 213,339
2,150,610 issued and 1,886,126 outstanding at June 30, 2002
2,133,386 issued and 1,871,151 outstanding at December 31, 2001
Additional paid-in capital 9,440,991 9,242,996
Retained earnings, substantially restricted 16,086,227 15,749,736
Unrealized gain on securities available-for-sale 49,970 23,168
Treasury stock, 262,238 shares at June 30,2002 and December 31, 2001 (3,880,939) (3,880,939)
------------- -------------
Total stockholders' equity 21,911,310 21,348,300
Total liabilities and stockholders' equity $ 100,046,742 $ 102,361,363
============= =============
See notes to consolidated financial statements.
Webster City Federal Bancorp and Subsidiaries
Consolidated Statements of Operations
For the Three Months For the Six Months
Ended June 30, Ended June 30,
----------------------------- -----------------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
(Unaudited)
Income
- ------
Interest Income:
Loans receivable $1,411,467 $1,384,941 $2,833,318 $2,763,416
Mortgage-backed & related securities 58,098 86,600 123,143 193,514
Investment securities 144,288 59,340 298,767 225,737
Other interest earning assets 50,106 129,922 93,755 215,210
---------- ---------- ---------- ----------
Total interest income 1,663,959 1,660,803 3,348,983 3,397,877
Interest Expense:
Deposits 564,633 775,498 1,203,381 1,553,446
FHLB advance 126,376 122,951 251,364 244,551
---------- ---------- ---------- ----------
Total interest expense 691,009 898,449 1,454,745 1,797,997
---------- ---------- ---------- ----------
Net interest income 972,950 762,354 1,894,238 1,599,880
Provision for losses on loans -- -- -- --
---------- ---------- ---------- ----------
Net interest income after
provision for losses on loans 972,950 762,354 1,894,238 1,599,880
---------- ---------- ---------- ----------
Non-interest income:
Fees and service charges 64,398 61,159 130,899 105,697
Other 62,616 44,427 104,539 89,635
---------- ---------- ---------- ----------
Total non-interest income 127,014 105,586 235,438 195,332
---------- ---------- ---------- ----------
Expense
- -------
Non-interest expense:
Compensation, payroll taxes,
and employees benefits 272,100 229,905 539,930 471,250
Office property and equipment 58,233 19,838 86,986 35,996
Data processing services 39,525 30,647 81,435 62,779
Federal insurance premiums 3,129 3,459 6,258 6,839
Other real estate expenses, net 19,918 304 19,268 1,149
Advertising 8,536 7,190 13,857 13,597
Other 115,121 139,173 246,758 293,368
---------- ---------- ---------- ----------
Total non-interest expense 516,562 430,516 994,492 884,978
---------- ---------- ---------- ----------
Earnings before taxes on income 583,402 437,424 1,135,184 910,234
Taxes on income 212,800 172,232 414,442 356,132
---------- ---------- ---------- ----------
Net earnings $ 370,602 $ 265,192 $ 720,742 $ 554,102
========== ========== ---------- ----------
Earnings per share - basic $ 0.20 $ 0.14 $ 0.38 $ 0.29
========== ========== ========== ==========
Earnings per share - diluted $ 0.20 $ 0.14 $ 0.38 $ 0.29
========== ========== ========== ==========
See notes to consolidated financial statements.
Webster City Federal Bancorp and Subsidiaries
Consolidated Statements of Cash Flows
For the Six Months
Ended June 30,
----------------------------------
2002 2001
------------ ------------
(Unaudited)
Cash flows from operating activities
Net earnings $ 720,742 $ 554,102
------------ ------------
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation 74,862 31,662
Amortization of premiums and discounts, net 5,050 7,853
Gain on sale of investments available-for-sale -- (3,464)
Change in:
Accrued interest receivable (108,362) 133,130
Prepaid expenses and other assets (175,643) (97,128)
Accrued interest payable (8,553) 14,119
Accrued expenses and other liabilities 109,836 141,962
Accrued current taxes on income (72,399) (90,119)
------------ ------------
Total adjustments (175,209) 138,015
------------ ------------
Net cash provided by operating activities 545,533 692,117
------------ ------------
Cash flows from investing activities
Proceeds from the maturity of interest bearing deposits 1,001,000 --
Purchase of interest earning deposits (2,093,000) --
Proceeds from sales of securities available-for-sale 2,497,650 8,524,123
Purchase of securities available-for-sale (3,000,000) --
Principal collected on mortgage-backed and related securities 708,010 920,210
Net change in loans receivable (1,697,854) (3,579,895)
Purchase of FHLB Stock (91,700) (425,993)
------------ ------------
Net cash (used in) provided by investing activities (2,675,894) 5,438,445
------------ ------------
Cash flows from financing activities
Net change in deposits (2,904,218) 792,988
Net decrease in advance payments by borrowers
for taxes and insurance 9,718 25,341
Proceeds on exercise of stock options 199,717 100,981
Repurchase of common stock -- (310,100)
Dividends paid (392,266) (299,807)
------------ ------------
Net cash (used in) provided by financing activities (3,087,049) 309,403
------------ ------------
Net (decrease) increase in cash and cash equivalents (5,217,410) 6,439,965
Cash and cash equivalents at beginning of period 9,183,215 6,250,706
------------ ------------
Cash and cash equivalents at end of period $ 3,965,805 $ 12,690,671
============ ============
Supplemental disclosures of cash flow information: Cash paid during the year
for:
Interest $ 1,211,934 $ 1,539,327
Taxes on income 384,571 392,890
============ ============
Transfers from loans to real estate acquired
through foreclosure $ 247,160 $ --
============ ============
See notes to consolidated financial statements.
Webster City Federal Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1. DESCRIPTION OF BUSINESS
-----------------------
Webster City Federal Bancorp ( the "Company" ) 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 title 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 common 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 outstanding common stock
is owned by WCF Financial M.H.C., a mutual holding company (the "Holding
Company"). The remaining 40% of the Company's outstanding 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 and six-month periods ended
June 30, 2002 and 2001 are unaudited. In the opinion of management of the
Company, 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 in the consolidation.
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 management's determination of the
allowance for loan losses, which is a critical accounting policy of the Company.
Safe Harbor Statement
- ---------------------
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 Company 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
Company, are generally identifiable by use of the words "believe," "expect,"
"intend," "anticipate," "estimate," "project," or similar expressions. The
Company's ability to predict results or the actual effect of future plans or
strategies is inherently uncertain. Factors that could have a material adverse
effect on the operations and future prospects of the Company 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 Company'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
-------------------------------
2002
- ----
Earnings per share - basic is computed using the weighted average number of
common shares outstanding of 1,857,595 and 1,874,734 for the three and six
months ended June 30, 2002, respectively, and divided into the net earnings of
$382,500 and $720,700 for the three and six months ended June 30, 2002,
respectively, resulting in net earnings per share of $.20 and $.38 for the three
and six months ended June 30, 2002, respectively.
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 Bank's stock option plan using the average price per
share for the period. Such additional shares were 3,653 and 3,207 for the three
and six months ended June 30, 2002, respectively, due to the average price per
share being more than the stock option price. Net earnings for the three and six
months ended June 30, 2001 were $382,500 and $720,700, respectively, resulting
in net earnings per share of $.20 and $.38 for the three and six months ended
June 30, 2002, respectively. Such options were the only potential stock of the
Company as defined in Statement of Financial Accounting Standards No. 128,
Earnings per Share.
2001
- ----
Earnings per share - basic is computed using the weighted average number of
common shares outstanding of 1,874,040 and 1,878,675 for the three and six
months ended June 30, 2001, respectively, and divided into the net earnings of
$265,200 and $554,100 for the three and six months ended June 30, 2001,
respectively, resulting in net earnings per share of $.14 and $.29 for the three
and six months ended June 30, 2001, respectively.
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 Bank's stock option plan using the average price per
share for the period. There were no additional shares for the three and six
months ended June 30, 2001, respectively, due to the average price per share
being less than the stock option price. Net earnings for the three and six
months ended June 30, 2001 were $265,200 and $554,100, respectively, resulting
in net earnings per share of $.14 and $.29 for the three and six months ended
June 30, 2001, respectively. Such options were the only potential stock of the
Company as defined in Statement of Financial Accounting Standards No. 128,
Earnings per Share.
4. DIVIDENDS
---------
On April 17, 2002 the Company declared a cash dividend on its common stock
payable on May 22, 2002 to stockholders of record as of May 7, 2002, equal to
$.25 per share or approximately $534,222. Of this amount, the payment of
approximately $287,500 (representing the dividend payable on 1,150,000 shares
owned by WCF Financial, M.H.C., the Company's mutual holding company) was waived
by the mutual holding company, resulting in an actual dividend distribution of
$246,722.
5. INTANGIBLE ASSET
----------------
A company subsidiary maintains an intangible asset relating to a customer list.
It has an estimated useful life of 15 years and is being amortized using the
straight-line method. At June 30, 2002, the gross carrying amount was $145,000
with accumulated amortization of $17,725. Amortization expense fro the six
months ended June 30, 2002 and 2001 was $4,833 respectively.
The estimated amortization expense for the following five year period is as
follows:
December 31, 2003 $ 9,667.
December 31, 2004 9,667.
December 31, 2005 9,667.
December 31, 2006 9,667.
December 31, 2007 9,667.
Webster City Federal Bancorp and Subsidiaries
Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL CONDITION
- -------------------
Total assets decreased by $2.3 million, or 2.3%, from December 31, 2001 to June
30, 2002. Cash and cash equivalents decreased $5.2 million or 56.6%. Cash and
cash equivalents decreased due to these funds being used for funding new loans,
securities and the funding of the decline in deposits. Loans receivable
increased $1.6 million, or 2.2% during the same period. At June 30, 2002, the
Company had $96,800 in real estate owned. Securities available-for-sale
increased by $453,200 or 4.5% from December 31, 2001 to June 30, 2002, and
investment securities held to maturity decreased $714,500 or 15.6%, from
December 31, 2001 to June 30, 2002. The increase in securities
available-for-sale was due to the purchase of additional securities during the
first part of 2002. During the six-month period deposits decreased $2.9 million,
or 4.1% due to a decline in interest rates being paid on deposits.
Total stockholders' equity increased by $563,000 to $21.9 million at June 30,
2002 from $21.3 at December 31, 2001 as earnings of $720,700 and additional paid
in capital received from officers of the Bank exercising their stock options,
were offset by two quarterly cash dividends totaling $492,600.
CAPITAL
- -------
The Company's total stockholders' equity increased by $563,000, to $21.9 million
at June 30, 2002 from $21.3 million at December 31, 2001. The Office of Thrift
Supervision (OTS) requires that the Bank meet certain minimum capital
requirements. As of June 30, 2002 the Bank was in compliance with all regulatory
capital requirements. The Bank's required, actual and excess capital levels as
of June 30, 2002 were as follows:
Required % of Actual % of Excess
Amount Assets Amount Assets Capital
------ ------ ------ ------ -------
(Dollars in thousands)
Tier 1 (Core) Capital $3,981 4.0% $20,884 20.99% $16,903
Risk-based Capital $4,134 8.0% $21,119 40.87% $16,985
LIQUIDITY
- ---------
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.
RESULTS OF OPERATIONS
- ---------------------
Interest Income. Interest income remained the same at $1.7 million for the three
months ended June 30, 2001 and the three months ended June 30, 2002. This was
the result of a decrease in the average yield on interest-earning assets to
6.85% for the three months ended June 30, 2002 from 7.07% for the three months
ended June 30, 2001 offset by an increase in the average balance of interest
earning assets of $3.1 million or 3.3% to $97.0 million for the three months
ended June 30, 2002 from $93.9 million for the three months ended June 30, 2001.
Interest income totaled $3.3 million for the six months ended June 30, 2002
compared to $3.4 million for the six months ended June 30, 2001. This was the
result of a decrease in the average yield on interest-earning assets to 6.84%
for the six months ended June 30, 2002 from 7.30% for the six months ended June
30, 2001 partially offset by an increase in the average balance of interest
earning assets of $4.3 million or 4.6% to $97.9 million for the six months ended
June 30, 2002 from $93.6 million for the six months ended June 30, 2001.
Interest on loans for the three months ended June 30, 2002 increased $26,500 or
1.9% compared to the three months ended June 30, 2001. The increase resulted
primarily from an increase in total loans outstanding during the period,
partially offset by a decrease in the yields on loans receivable from 7.72% for
the three months ended June 30, 2001 to 7.51% for the three months ended June
30, 2002. Interest on loans for the six months ended June 30, 2002 increased
$69,900 or 2.5% compared to the six months ended June 30, 2001. The increase
resulted primarily from an increase in total loans outstanding during the
periods, partially offset by and a decrease in the yields on loans receivable
from 7.83% for the six months ended June 30, 2001 to 7.58% for the six months
ended June 30, 2002. The decrease in the yield on loans receivable was primarily
due to lower market rates and adjustable rate loans repricing at a lower rate
based on the lagging index used by the Bank.
Interest on mortgage-backed securities decreased by $28,500 or 32.9% for the
three-month period ended June 30, 2002 as compared to the same period ended June
30, 2001. The decline resulted from a decrease of $1.7 million or 32.2% in the
average balance of mortgage-backed securities to $3.6 million for the three
months ended June 30, 2002 compared to $5.3 million for three months ended June
30, 2001 and a decrease of 13 basis points in the average yield on
mortgage-backed securities to 6.43% for the three months ended June 30, 2002
from 6.56% for the three months ended June 30, 2001. Interest on mortgage-backed
securities decreased $72,400 or 37.4% for the six months ended June 30, 2002
compared to same period ended June 30, 2001. The decline resulted from a
decrease of $1.8 million or 32.4% in the average balance of mortgage-backed
securities to $3.8 million for the six months ended June 30, 2002 compared to
$5.6 million for six months ended June 30, 2001 and a decrease of 44 basis
points in the average yield on mortgage-backed securities to 6.53% for the six
months ended June 30, 2002 from 6.97% for the six months ended June 30, 2001.
Interest on investment securities increased by $82,600 or 139.2% for the three
months ended June 30, 2002 compared to the same period ended June 30, 2001. This
was due to an increase in the average balance of investment securities from $3.8
million for the three months ended June 30, 2001 to $11.3 million for the three
months ended June 30, 2002 offset by a decrease in the average yield of 124
basis points from 6.28%, for the three months ended June 30, 2001 to 5.04%, for
the three months ended June 30, 2002. Interest on investment securities
increased by $73,000 or 32.3% for the six months ended June 30, 2002 as compared
to the same period ended June 30, 2001. This was due to an increase in the
average balance of investment securities from $6.9 million for the six months
ended June 30, 2001 to $11.6 million for the six months ended June 30, 2002
offset by a decrease in the average yield of 136 basis points from 6.51%, for
the six months ended June 30, 2001 to 5.15%, for the six months ended June 30,
2002. Both the three and six month increases in the average balances of
securities was due to the Bank borrowing funds from the FHLB of Des Moines in
November of 2001 and investing those funds in higher rate securities.
Interest Expense. Interest expense decreased by $207,400, or 23.1%, from
- -----------------
$898,400 for the three months ended June 30, 2001 to $691,000 for the three
months ended June 30, 2002. Interest expense decreased by $343,300 or 19.1%,
from $1.8 million for the six months ended June 30, 2001 to $1.5 million for the
six months ended June 30, 2002. The
decrease in interest expense was due to a decrease in deposit interest expense
offset by an increase in on the FHLB advance interest expense. The interest
expense on the advance increased by $3,400 or 2.8% from $123,000 for the three
months ended June 30, 2001 to $126,400 for the three months ended June 30, 2002.
The interest expense on the advance increased by $6,800 or 2.8% from $244,600
for the six months ended June 30, 2001 to $251,400 for the six months ended June
30, 2002. The increase was due to additional borrowing from the FHLB. The
average interest rate on the advances decreased by 78 basis points from 5.96%
for the six months period ended June 30, 2001 to 5.18% for the same period ended
June 30, 2002.
Net Interest Income. Net interest income before provision for losses on loans
- -------------------
increased by $208,200 or 27.3% from $762,400 for the three months ended June 30,
2001 to $970,600 for the three months ended June 30, 2002. Net interest income
decreased by $294,400 or 18.4% for the six months ended June 30, 2002 compared
to the same period ended June 30, 2001. The Company's interest rate spread for
the six months ended June 30, 2001 increased by 75 basis points to 3.10% from
2.35% for the six months ended June 30, 2001.
Provision for Losses on Loans. There were no additional provisions for losses on
- ------------------------------
loans for the three and six months ended June 30, 2002. The Company had no
charge offs or recoveries during the three month period ended June 30, 2001 and
charge offs of $17,700 and recoveries of $18,800 during the three month period
ended June 30, 2002. The Company had no charge offs and recoveries of $74 during
the six month period ended June 30, 2001 and had charge-offs of $26,700 and
recoveries of $18,800 during the six month period ended June 30, 2002. On June
30, 2001 the Company had $330,400 in non-accrual loans compared to $471,700 on
June 30, 2002. 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 probable 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.
Non-interest Income. Total non-interest income increased by $21,400 or 20.3% for
- --------------------
the three-month period ended June 30, 2002 as compared to the same period ended
June 30, 2001. Non-interest income increased $40,100 or 20.5% for the six months
ended June 30, 2002 as compared to the same period ended June 30, 2001. The
increase was due to additional fees received from the abstracting company which
the Company acquired in September 2000, and an increase in loan fees due to an
increase in loans originated.
Non-interest Expense. Non-interest expense increased $86,000 or 19.9% for the
- ---------------------
three-month period ended June 30, 2002 compared to the same period ended June
30, 2001. Non-interest expense increased $109,500 or 12.4% for the six-month
period ended June 30, 2002 compared to the same period ended June 30, 2001.
Compensation and benefit costs increased $42,200 or 18.6% from $229,900 for the
three months ended June 30, 2001 to $272,100 for the three month period ended
June 30, 2002. Compensation and benefit costs increased by $68,700 or 14.6% from
$471,300 for the six months ended June 30, 2001 to $539,900 for the six months
ended June 30, 2002. The increases were primarily due to an increase in the
Company's contribution to it's' employee retirement plan and an increase in
compensation and addition of three people employed at Security Title and
Abstract, Inc.
Taxes on Income. Income taxes for the three and six months ended June 30, 2002,
- ---------------
increased to $212,800 and $414,400 from $172,200 and $356,000, respectively for
the same periods for 2001. The effective income tax rate for the first six
months of 2002 was 36.5% compared to 39.1% for the first six months of 2001.
Net Earnings. Net earnings totaled $382,500 for the three months ended June 30,
- -------------
2002 compared to $265,200 for the three months ended June 30, 2001. Net earnings
increased $166,600 or 30.1% to $720,700 for the six-month period ended June 30,
2002 compared to $554,100 for the same period ended June 30, 2001.
IMPACT OF NEW ACCOUNTING STANDARDS
- ----------------------------------
SFAS No. 141 & 142
- ------------------
In July 2001, the FASB issued Statement No. 141, Business Combinations, and
Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001 as well as all purchase method business
combinations completed after June 30, 2001. Statement 142 requires that goodwill
and intangible assets with indefinite useful lives no longer be amortized, but
instead tested for impairment at least annually in accordance with the
provisions of Statement 142. Statement 142 also requires that intangible assets
with estimable useful lives be amortized over their respective estimated useful
lives to their estimated residual values, and reviewed for impairment in
accordance with FAS Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The Company
adopted the provisions of SFAS No. 141 as of July 1, 2001 and SFAS No. 142 on
January 2002. The effects of implementation had no impact on the Company's
financial condition or results of operations.
SFAS No. 143 & 144
- ------------------
In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations (SFAS No. 143). SFAS No. 143 requires the Company to record the fair
value of an asset retirement obligation as a liability in the period in which it
incurs a legal obligation associated with the retirement of tangible long-lived
assets that result from the acquisition, construction, development, and/or
normal use of the assets. The Company also records a corresponding asset which
is depreciated over the life of the asset. The Company is required to adopt SFAS
No. 143 on January 1, 2003.
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (SFAS No. 144). SFAS No. 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
The Company adopted SFAS No. 144 on January 1, 2002. The effects of
implementation were immaterial on the Company's financial condition or results
of operations.
SFAS No. 145 & 146
- ------------------
SFAS No. 145 "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections" was issued April 2002. This
Statement rescinds FASB Statement No. 4, Reporting Gains and Losses from
Extinguishment of Debt, and an amendment of that Statement, FASB Statement No.
64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. This
Statement also rescinds FASB Statement No. 44, Accounting for Intangible Assets
of Motor Carriers. This Statement amends FASB Statement No. 13, Accounting for
Leases, to eliminate an inconsistency between the required accounting for
sale-leaseback transactions and the required accounting for certain lease
modifications that have economic effects that are similar to sale-leaseback
transactions. This Statement also amends other existing authoritative
pronouncements to make various technical corrections, clarify meanings, or
describe their applicability under changed conditions. The provisions of this
Statement related to the rescission of Statement 4 shall be applied in fiscal
years beginning after May 15, 2002. The provisions in paragraphs 8 and 9(c) of
this Statement related to Statement 13 shall be effective for transactions
occurring after May 15, 2002. All other provisions of this Statement shall be
effective for financial statements issued on or after May 15, 2002. The effects
of implementation are not material. SFAS No. 146 "Accounting for Costs
Associated with Exit or Disposal Activities" was issued June 2002. This
Statement addresses financial accounting and reporting for costs associated with
exit or disposal activities and nullifies Emerging Issues Task Force (EITF)
Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." The provisions of this Statement are effective for exit and
disposal activities that are initiated after December 31, 2002.
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.
----------------------------------------------------
The Registrant convened its 2002 Annual Meeting of Stockholders on
April 17, 2002. At the meeting the stockholders of the Registrant
considered and voted upon:
1. The election of Dr. Leo Moriarty and Donald I. Newman as
directors for a term of three years and Stephen L. Mourlam
and Kyle R. Swon for a term of one year.
2. The ratification of the appointment of KPMG LLP as auditors
of the Registrant for the fiscal year ending December 31,
2002.
The election of Dr. Leo Moriarty, as director was as approved by
a vote of 1,696,647 votes in favor, 500 withheld and 0
abstaining.
The election of Donald I. Newman as director was as approved by a
vote of 1,696,647 votes in favor, 500 withheld and 0 abstaining.
The election of Stephen L Mourlam as director was as approved by
a vote of 1,696,647 votes in favor, 500 withheld and 0
abstaining.
The election of Kyle R. Swon as director was as approved by a
vote of 1,696,647 votes in favor, 500 withheld and 0 abstaining.
The ratification of the engagement of KPMG LLP as auditors was
approved by a vote of 1,694,197 votes in favor, 2,000 opposed and
950 abstaining.
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
No form 8-K reports were filed during the quarter ended June 30, 2002.
Webster City Federal Bancorp and Subsidiaries
Signatures
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: August 8, 2002 By: /s/ Phyllis A. Murphy
- -------------------- ------------------------------------------------
Phyllis A. Murphy
President and Chief Executive Officer
Date: August 8, 2002 By: /s/ Stephen L. Mouriam
-------------- ------------------------------------------------
Stephen L. Mourlam
Executive Vice President/Chief Financial Officer
7 Certification of Chief Executive Officer and Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Phyllis A. Murphy, Chief Executive Officer and Stephen L. Mourlam, Chief
Financial Officer of Webster City Federal Bancorp (the "Company") each certify
in their capacity as an officer of the Company that they have reviewed the
quarterly report on Form 10-QSB for the quarter ended June 30, 2002 and that:
(1) the report fully complies with the requirements of Sections
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the report fairly presents, in
all material respects, the financial condition and results
of operations.
August 14, 2002 /s/ Phyllis A. Murphy
- --------------------------------- -----------------------
Date Phyllis A. Murphy
Chief Executive Officer
August 14, 2002 /s/ Stephen L. Mourlam
- -------------------------------- -----------------------
Date Stephen L. Mourlam
Chief Financial Officer