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 September 30, 2002.
-------------------
[ ]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
------------- ----------
(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. Yes [X] No [ ]
Transitional Small Business Disclosure Format: [_] Yes [X] No
Indicate the number of shares outstanding for each of the issuer's classes
of common stock, as of the latest practicable date.
1,888,376 shares of common stock were outstanding at October 31, 2002.
-----------------
Webster City Federal Bancorp and Subsidiaries
Index
Page
----
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
at September 30, 2002 and December 31, 2001 1
Consolidated Statements of Operations
for the three and nine months ended September 30, 2002
and 2001 2
Consolidated Statements of Cash Flows
for the nine months ended September 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
Item 3. Controls and Procedures 6
Part II. Other Information
Other Information 9
Webster City Federal Bancorp and Subsidiaries
Consolidated Balance Sheets
September 30, December 31,
2002 2001
-------------- --------------
(Unaudited)
Assets
- ------
Cash and cash equivalents $ 1,972,090 $ 9,183,215
Time deposits in other financial institutions 7,734,000 1,399,000
Securities available-for-sale 8,514,921 10,188,900
Investment securities held-to-maturity (market value 3,126,932 4,574,354
of $3,215,454 and $4,654,121, respectively)
Loans receivable, net 76,197,325 74,492,269
Real estate owned 44,379 -
Office property and equipment, net 766,366 882,238
Federal Home Loan Bank stock, at cost 704,900 613,200
Deferred taxes on income 185,000 189,000
Accrued interest receivable 605,695 568,569
Prepaid expenses and other assets 502,749 270,618
-------------- --------------
Total assets $ 100,354,357 $ 102,361,363
============== ==============
Liabilities and Stockholders' Equity
- ------------------------------------
Deposits $ 67,144,696 $ 70,042,590
FHLB advance 9,700,000 9,700,000
Advance payments by borrowers for
taxes and insurance 100,083 338,167
Accrued interest payable 315,589 53,454
Current income taxes payable 102,957 84,414
Accrued expenses and other liabilities 839,097 794,438
-------------- --------------
Total liabilities 78,202,422 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 September 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 16,313,902 15,749,736
Unrealized gain on securities available-for-sale 62,920 23,168
Treasury stock, 262,238 shares at September 30, 2002 and December 31, 2001 (3,880,939) (3,880,939)
-------------- --------------
Total stockholders' equity 22,151,935 21,348,300
Total liabilities and stockholders' equity $ 100,354,357 $ 102,361,363
============== ==============
See notes to consolidated financial statements.
1
Webster City Federal Bancorp and Subsidiaries
Consolidated Statements of Operations
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
---------------------------------- ----------------------------------
2002 2001 2002 2001
--------------- --------------- --------------- ---------------
(Unaudited)
Income
- ------
Interest Income:
Loans receivable $ 1,450,943 $ 1,434,813 $ 4,284,261 $ 4,198,229
Mortgage-backed & related securities 51,172 79,327 174,315 272,841
Investment securities 129,681 49,563 428,448 275,300
Other interest-earning assets 39,581 95,571 133,336 310,781
--------------- --------------- --------------- ---------------
Total interest income 1,671,377 1,659,274 5,020,360 5,057,151
Interest Expense:
Deposits 518,784 772,507 1,722,165 2,325,953
FHLB advance 127,765 96,382 379,129 340,933
--------------- --------------- --------------- ---------------
Total interest expense 646,549 868,889 2,101,294 2,666,886
--------------- --------------- --------------- ---------------
Net interest income 1,024,828 790,385 2,919,066 2,390,265
Provision for losses on loans 20,000 - 20,000 -
--------------- --------------- --------------- ---------------
Net interest income after
provision for losses on loans 1,004,828 790,385 2,899,066 2,390,265
--------------- --------------- --------------- ---------------
Non-Interest Income:
Fees and service charges 85,900 90,976 216,799 196,673
Other 41,157 42,907 145,696 132,542
--------------- --------------- --------------- ---------------
Total Non-interest Income 127,057 133,883 362,495 329,215
--------------- --------------- --------------- ---------------
Expense
Noninterest Expense:
Compensation, payroll taxes,
and employees benefits 262,168 240,272 802,098 711,522
Office property and equipment 53,216 46,560 140,202 82,556
Data processing services 50,121 28,221 131,555 91,000
Federal insurance premiums 2,967 3,459 9,225 10,298
Other real estate expenses, net 4,701 4,097 23,969 5,246
Advertising 7,406 8,393 21,263 21,990
Other 99,870 162,957 342,860 456,325
--------------- --------------- --------------- ---------------
Total noninterest expense 480,449 493,959 1,471,172 1,378,937
--------------- --------------- --------------- ---------------
Earnings before taxes on income 651,436 430,309 1,790,389 1,340,543
Taxes on income 233,200 133,772 647,642 489,904
--------------- --------------- --------------- ---------------
Net earnings $ 418,236 $ 296,537 $ 1,142,747 $ 850,639
=============== =============== --------------- ---------------
Earnings per share - basic $ 0.22 $ 0.16 $ 0.61 $ 0.45
=============== =============== =============== ===============
Earnings per share - diluted $ 0.22 $ 0.16 $ 0.61 $ 0.45
=============== =============== =============== ===============
See notes to consolidated financial statements.
2
Webster City Federal Bancorp and Subsidiaries
Consolidated Statements of Cash Flows
For the Nine Months
Ended September 30,
--------------------------------------------------
2002 2001
------------------ ------------------
(Unaudited)
Cash flows from operating activities
Net earnings $ 1,142,746 $ 850,639
------------------ ------------------
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 119,064 47,665
Amortization of premiums and discounts, net 4,718 6,104
Gain on sale of investments available-for-sale - 535
Transfer of loans to Real Estate Owned 125,170 -
Change in:
Accrued interest receivable (37,126) 114,982
Prepaid expenses and other assets (156,725) 104,748
Accrued interest payable 262,135 421,672
Accrued expenses and other liabilities 155,631 181,446
Accrued current taxes on income (80,414) (90,119)
------------------ ------------------
Total adjustments 392,453 787,033
------------------ ------------------
Net cash provided by operating activities 1,535,199 1,637,672
------------------ ------------------
Cash flows from investing activities
Proceeds from the maturity of interest bearing deposits 1,796,000 9,574,123
Purchase of interest earning deposits (8,131,000) (8,000,000)
Proceeds from sales of securities available-for-sale 4,998,450 -
Purchase of securities available-for-sale (3,000,000) (1,104,000)
Principal collected on mortgage-backed and related securities 1,071,148 1,422,836
Net change in loans receivable (1,872,909) (5,292,581)
Purchase of office property and equipment (3,192) (574,804)
Purchase of FHLB Stock (91,700) -
------------------ ------------------
Net cash used in investing activities (5,233,203) (3,974,426)
------------------ ------------------
Cash flows from financing activities
Net change in deposits (2,897,894) 2,749,041
Net decrease in advance payments by borrowers
for taxes and insurance (238,084) (192,274)
Proceeds from stock options 199,717 100,981
Repurchase of common stock - (333,300)
Net change in borrowings (2,000,000)
Dividends paid (576,860) (443,387)
------------------ ------------------
Net cash used in financing activities (3,513,121) (118,939)
------------------ ------------------
Net decrease in cash and cash equivalents (7,211,125) (2,455,693)
Cash and cash equivalents at beginning of period 9,183,215 6,250,706
------------------ ------------------
Cash and cash equivalents at end of period $ 1,972,090 $ 3,795,013
================== ==================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 1,460,030 $ 1,904,281
Taxes on income 557,726 524,690
================== ==================
Transfers from loans to real estate acquired
through foreclosure $ 247,160 $ -
================== ==================
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 "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 POLICIES
------------------------------------------
The consolidated financial statements for the three and nine-month periods ended
September 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.
We believe our policies with respect to the methodology for determining the
allowance for loan losses involve a higher degree of complexity and requires
management to make subjective judgments that often require assumptions or
estimates about highly uncertain matters. These critical policies and their
application are periodically reviewed with the Audit Committee and the Board of
Directors.
4
3. EARNINGS PER SHARE COMPUTATIONS
--------------------------------
2002
- ----
Earnings per share - basic is computed using the weighted average number of
common shares outstanding of 1,888,376 and 1,879,562 for the three and nine
months ended September 30, 2002, respectively, and divided into the net earnings
of $418,236 and $1,142,747, for the three and nine months ended September 30,
2002, respectively, resulting in basic earnings per share of $.22 and $.61 for
the three and nine months ended September 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 pursuant to the Bank's stock option plan using the average price per
share for the period. Such additional shares were 3,445 and 3,283 shares for the
three and nine months ended September 30, 2002, respectively, due to the average
price per share being more than the stock option exercise price for these
periods. Net earnings for the three and nine months ended September 30, 2002
were $418,236 and $1,142,747, respectively, resulting in diluted earnings per
share of $.22 and $.61 for the three and nine months ended September 30, 2002,
respectively.
2001
- ----
Earnings per share - basic is computed using the weighted average number of
common shares outstanding of 1,867,901 and 1,880,101 for the three and nine
months ended September 30, 2001, respectively, and divided into the net earnings
of $296,537 and $850,639, for the three and nine months ended September 30,
2001, respectively, resulting in net earnings per share of $.16 and $.45 for the
three and nine months ended September 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 pursuant to the Bank's stock option plan using the average price per
share for the period. There were no additional shares assumed to be issued for
the three and nine months ended September 30, 2001, due to the average price per
share being less than the stock option exercise price for these periods. Net
earnings for the three and nine months ended September 30, 2001 were $296,537
and $850,639, respectively, resulting in net earnings per share of $.16 and $.45
for the three and nine months ended September 30, 2001, respectively.
4. DIVIDENDS
---------
On July 17, 2002 the Company declared a cash dividend on its common stock
payable on August 22, 2002 to stockholders of record as of August 6, 2002, equal
to $.25 per share or approximately $537,654. 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
$250,154.
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 September 30, 2002, the gross carrying amount was
$145,000 with accumulated amortization of $19,337. Amortization expense for the
nine months ended September 30, 2002 and 2001 was $7,254 and $10,476,
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.
5
Item 2
Webster City Federal Bancorp and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of
Operations
FINANCIAL CONDITION
- -------------------
Total assets decreased by $2.0 million, or 1.9%, from December 31, 2001 to
September 30, 2002. Cash and cash equivalents decreased $7.2 million or 78.4%
and time deposits in other financial institutions increased by $6.3 million or
450%. Loans receivable increased $1.7 million or 2.3% from December 31, 2001 to
September 30, 2002. At September 30, 2002, the Company had $44,000 in real
estate owned. Investment securities decreased $1.4 million or 30.6%, from
December 31, 2001 to September 30, 2002. Prepaid expenses and other assets
increased by $232,100 or 85.7% from December 31, 2001 to September 30, 2002,
which includes an investment of $280,000 in a local real estate property. During
the nine-month period deposits decreased $2.9 million, or 4.1%.
Total stockholders' equity increased by $803,600 to $22.2 million at September
30, 2002 from $21.3 at December 31, 2001 as earnings of $1.1 million and
additional paid in capital received from officers exercising their stock options
were offset by three quarterly dividends totaling $576,900.
CAPITAL
- -------
The Bank's total equity, increased by $695,200, to $21.3 million at September
30, 2002 from $20.6 million at December 31, 2001. The Office of Thrift
Supervision (OTS) requires that the Bank meet certain minimum capital
requirements. As of September 30, 2002 the Bank was in compliance with all
regulatory capital requirements. The Bank's required, actual and excess capital
levels as of September 30, 2002 were as follows:
Required % of Actual % of Excess
Amount Assets Amount Assets Capital
------ ------ ------ ------ -------
(Dollars in thousands)
Tier 1 (Core) Capital $3,994 4.0% $21,322 21.36% $17,328
Risk-based Capital $4,015 8.0% $21,581 43.00% $17,566
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 unchanged at $1.7 million for the
three months ended September 30, 2002 and for the three months ended September
30, 2001. This was the result of a decrease in the average yield on
interest-earning assets to 6.83% for the three months ended September 30, 2002
from 7.03% for the three months ended September 30, 2001 and an increase in the
average balance of interest earning assets of $3.5 million or 3.7% to $97.9
million for the three months ended September 30, 2002 from $94.4 million for the
three months ended September 30, 2001. Interest income remained at $5.0 million
for the nine months ended September 30, 2002 and for the nine months ended
September 30, 2001. This was the result of a decrease in the average yield on
interest-earning assets to 6.84% for the nine months ended September 30, 2002
from 7.22% for the nine months ended September 30, 2001 and an increase in the
average balance of interest earning assets of $4.5 million or 4.8% to $97.8
million for the nine months ended September 30, 2002 from $93.4 million for the
nine months ended September 30, 2001.
Interest on loans for the three months ended September 30, 2002 increased
$16,100 or 1.1% compared to the three months ended September 30, 2001. The
increase resulted primarily from an increase in total loans outstanding during
6
the period, offset by a decrease in the yields on loans receivable from 7.74%
for the nine months ended September 30, 2001 to 7.63% for the nine months ended
September 30, 2002. Interest on loans for the nine months ended September 30,
2002 increased $86,000 or 2.0% compared to the nine months ended September 30,
2001. The increase resulted primarily from an increase in total loans
outstanding for the nine months ended September 30, 2002, partly offset by a
decrease in the yields on loans receivable from 7.74% for the nine months ended
September 30, 2001 to 7.63% for the nine months ended September 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 $28,200 or 35.5% for the
three-month period ended September 30, 2002 as compared to the same period ended
September 30, 2001. The decline resulted from a decrease of $2.0 million or
42.3% in the average balance of mortgage-backed securities to $3.2 million for
the three months ended September 30, 2002 from to $4.7 million for three months
ended September 30, 2001 and a decrease of 38 basis points in the average yield
on mortgage-backed securities to 6.36% for the three months ended September 30,
2002 from 6.74% for the three months ended September 30, 2001. Interest on
mortgage-backed securities decreased $98,500 or 36.1% for the nine months ended
September 30, 2002 compared to same period ended September 30, 2001. The decline
resulted from a decrease of $1.7 million or 32.3% in the average balance of
mortgage-backed securities to $3.6 million for the nine months ended September
30, 2002 from $5.3 million for nine months ended September 30, 2001 and a
decrease of 42 basis points in the average yield on mortgage-backed securities
to 6.48% for the nine months ended September 30, 2002 from 6.90% for the nine
months ended September 30, 2001.
Interest on investment securities increased by $80,100 or 161.6% for the three
months ended September 30, 2002 compared to the same period ended September 30,
2001. This was due to an increase in the average balance of investment
securities from $3.9 million for the three months ended September 30, 2001 to
$9.5 million for the three months ended September 30, 2002 and an increase in
the average yield of 30 basis points from 5.15%, for the three months ended
September 30, 2001 to 5.45%, for the three months ended September 30, 2002.
Interest on investment securities increased by $153,100 or 55.6% for the nine
months ended September 30, 2002 as compared to the same period ended September
30, 2001. This was due to an increase in the average balance of investment
securities from $5.9 million for the nine months ended September 30, 2001 to
$10.9 million for the nine months ended September 30, 2002 offset by a decrease
in the average yield of 101 basis points from 6.21%, for the nine months ended
September 30, 2001 to 5.20%, for the nine months ended September 30, 2002.
Interest Expense. Interest expense decreased by $222,300, or 25.6%, from
$868,900 for the three months ended September 30, 2001 to $646,500 for the three
months ended September 30, 2002. Interest expense decreased by $565,600 or
21.2%, from $2.7 million for the nine months ended September 30, 2001 to $2.1
million for the nine months ended September 30, 2002. The interest expense on
the FHLB advances increased by $31,400 or 32.6% from $96,400 for the three
months ended September 30, 2001 to $127,800 for the three months ended September
30, 2002. The increase in interest on FHLB advances was more than offset by a
decrease in interest on deposits of $253,700 or 32.8% from $772,500 for the
three months ended September 30, 2001 to $518,800 for the three months ended
September 30, 2002. The interest expense on the advances increased by $38,200 or
11.2% from $340,900 for the nine months ended September 30, 2001 to $379,100 for
the nine months ended September 30, 2002. The increase in interest on FHLB
advances was more than offset by a decrease in interest on deposits of $603,800
or 26.0% from $2.3 million for the nine months ended September 30, 2001 to $1.7
million for the nine months ended September 30, 2002. Net Interest Income. Net
interest income before provision for losses on loans increased by $234,400 or
29.7% from $790,400 for the three months ended September 30, 2001 to $1.0
million for the three months ended September 30, 2002. Net interest income
increased by $528,800 or 22.1% for the nine months ended September 30, 2002
compared to the same period ended September 30, 2001. The Company's interest
rate spread for the nine months ended September 30, 2002 increased by 87 basis
points to 3.23% from 2.36% for the nine months ended September 30, 2001.
Provision for Losses on Loans. There were provisions for losses on loans of
$20,000 for the three and nine months ended September 30, 2002. The Company had
$379,300 in non-performing loans as of September 30, 2002 compared to $687,100
as of September 30, 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, reflects all known and inherent losses in the
portfolio that are both probable and reasonably estimable. 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.
7
Non-interest Income. Total non-interest income decreased by $6,800 or 5.1% for
the three-month period ended September 30, 2002 as compared to the same period
ended September 30, 2001. Non-interest income increased $33,300 or 10.1% for the
nine months ended September 30, 2002 as compared to the same period ended
September 30, 2001. The increases were related to an increase in fees and
service charges.
Non-interest Expense. Non-interest expense decreased $13,500 or 2.7% for the
three-month period ended September 30, 2002 compared to the same period ended
September 30, 2001. Non-interest expense increased $92,200 or 6.7% for the
nine-month period ended September 30, 2002 compared to the same period ended
September 30, 2001. Compensation and benefit costs increased $21,900 or 9.1%
from $240,300 for the three months ended September 30, 2001 to $262,200 for the
three-month period ended September 30, 2002. The increase in compensation was
due to the addition of one full-time staff member and the Company's contribution
to the employees defined benefit retirement plan. Data processing services
expense increased $21,900 or 77.6% for the three-month period ended September
30, 2002 compared to the same period ended September 30, 2001.The increase was
due to the Bank changing data processing centers to be able to offer its
customer's new services. Compensation and benefit costs increased by $90,600 to
$802,100 for the nine months ended September 30, 2002 from $711,500 for the nine
months ended September 30, 2001. The increase in compensation was due to the
addition of one full-time staff member and the Company's contribution to the
employees defined benefit retirement plan. The increase in compensation was due
to the addition of one full-time staff member and the Company's contribution to
the employees defined benefit retirement plan. Data processing services expense
increased $40,600 or 44.6% for the nine-month period ended September 30, 2002
compared to the same period ended September 30, 2001. The increase was due to
the Bank changing data processing centers to be able to offer its customer's new
services.
Taxes on Income. Income taxes for the three months ended September 30, 2002,
increased to $233,200 compared to $133,800 for the same period ended September
30 2001. Income taxes for the nine months ended September 30, 2002, increased
$157,800 or 32.2% to $647,700 from $489,900 for the nine-month period ended
September 30 2001. The effective income tax rate for the first nine months of
2002 was 37.8% compared to 36.6% for the first nine months of 2001.
Net Earnings. Net earnings totaled $418,200 for the three months ended September
30, 2002 compared to $296,500 for the three months ended September 30, 2001. Net
earnings increased $292,100 or 34.3% to $1.1 million for the nine-month period
ended September 30, 2002 compared to $850,600 for the same period ended
September 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 estimatable 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 1, 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.
8
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.
SFAS No. 147
- ------------
In September 2002, the FASB issued SFAS 147 Acquisitions of Certain Financial
Institutions (SFAS No. 147). SFAS No. 147 changed the special accounting for
unidentifiable intangible assets recognized under SFAS No. 72. Transition
provisions for previously recognized unidentifiable intangible assets were
effective on October 1, 2002. The effects of implementation had no impact on the
Company's financial condition or results of operations.
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.
9
Item 3
Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
Under the supervision and with participation of our management, including the
Company's Chief Executive Officer and Chief Financial Officer, the Company
evaluated the effectiveness of the design and operation of the Company
disclosure controls and procedures (as defined in Rule 13a-14(c) under the
Exchange Act) as of a date (the "Evaluation Date") within 90 days prior to the
filing date of this report. Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that, as of the Evaluation Date ,
The Company disclosure controls and procedures were effective in timely alerting
them to the material information relating to us (or our consolidated
subsidiaries) required to be included in our periodic SEC filings.
(b) Changes in internal controls.
There were no significant changes made in out internal controls during the
period covered by this report or, to our knowledge, in other factors that could
significantly affect these controls subsequent to the date of their evaluation.
10
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
99.1 Written Statement of Chief Executive Officer furnished pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350.
99.2 Written Statement of Chief Financial Officer furnished pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350.
(b) No form 8-K reports were filed during the quarter ended
September 30, 2002.
11
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: November 8, 2002
By: /s/ Phyllis A. Murphy
--------------------------------------------
Phyllis A. Murphy
President and Chief Executive Officer
Date: November 8, 2002 By: /s/ Stephen L. Mourlam
--------------------------------------------
Stephen L. Mourlam
Exec. Vice President/Chief Financial Officer
12
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Phyllis A. Murphy, President and Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Webster City
Federal Bancorp;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
/s/ Phyllis A. Murphy
- --------------------- -------------------------------------
Date Phyllis A. Murphy
President and Chief Executive Officer
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Stephen L. Mourlam, Executive Vice President and Chief Financial Officer,
certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Webster City
Federal Bancorp;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
- --------------------- -------------------------------------
Date Stephen L. Mourlam
Executive Vice President and Chief
Financial Officer