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, 1999.
[ ] 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.
2,122,219 shares of common stock outstanding at July 31, 1999.
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Webster City Federal Bancorp and Subsidiaries
Index
Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
at June 30, 1999 and December 31, 1998 1
Consolidated Statements of Operations
for the three and six months ended June 30, 1999
and 1998 2
Consolidated Statements of Cash Flows
for the six months ended June 30, 1999
and 1998 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 11
PART I. FINANICAL INFORMATION
Item 1. Financial Statements
Webster City Federal Bancorp and Subsidiaries
Consolidated Balance Sheets
June 30, December 31,
1999 1998
---------------- ---------------
Assets (Unaduited)
Cash and cash equivalents $ 4,672,246 $ 13,186,836
Time deposits in other financial institutions 2,611,000 2,265,000
Investment securities held to maturity 25,202,216 19,886,768
Loans receivable, net 57,856,075 56,751,506
Real estate, net - 22,460
Office property and equipment, net 489,109 496,356
Federal Home Loan Bank stock, at cost 613,200 613,200
Deferred taxes on income 137,000 137,000
Accrued interest receivable 756,670 663,648
Prepaid expenses and other assets 34,157 60,954
---------------- ---------------
Total assets $ 92,371,673 $ 94,083,728
================ ===============
Liabilities and Stockholders' Equity
Deposits $ 66,765,760 $ 68,703,588
FHLB advance 1,200,000 1,200,000
Employee stock ownership plan borrowings - 159,064
Advance payments by borrowers for
taxes and insurance 243,918 219,583
Accrued interest payable 89,753 110,393
Current income taxes payable - 51,554
Accrued expenses and other liabilities 562,125 553,811
---------------- ---------------
Total liabilities 68,861,556 70,997,993
---------------- ---------------
Stockholders' Equity
Common stock, .10 par value 211,905 211,599
Additional paid-in capital 9,053,649 9,012,687
Retained earnings, substantially restricted 14,244,563 14,020,513
Unearned employee stock ownership plan shares - (159,064)
---------------- ---------------
Total stockholders' equity 23,510,117 23,085,735
---------------- ---------------
Total liabilities and stockholders' equity $ 92,371,673 $ 94,083,728
================ ===============
Webster City Federal Bancorp and Subsidiaries
Consolidated Statements of Operations
For the Three For the Six
Months Months
Ended June 30, Ended June 30,
-------------------------------------- --------------------------------------
1999 1998 1999 1998
---------------- ---------------- ----------------- ---------------
(Unaudited)
Income
Interest Income:
Loans receivable $1,102,807 $1,061,585 $2,199,851 $2,120,264
Mortgage-backed & related securities 152,791 225,343 302,994 470,157
Investment securities 238,912 238,614 455,580 528,132
Other interest earning assets 105,243 137,344 247,060 243,874
---------------- ---------------- ----------------- ---------------
Total interest income 1,599,753 1,662,886 3,205,485 3,362,427
Interest Expense:
Deposits 728,861 826,162 1,460,908 1,657,152
FHLB advance 14,530 14,530 28,900 25,387
ESOP loan 1,610 3,704 4,294 7,695
---------------- ---------------- ----------------- ---------------
Total interest expense 745,001 844,396 1,494,102 1,690,234
---------------- ---------------- ----------------- ---------------
Net interest income 854,752 818,490 1,711,383 1,672,193
Provision for losses on loans - - - -
---------------- ---------------- ----------------- ---------------
Net interest income after
provision for losses on loans 854,752 818,490 1,711,383 1,672,193
---------------- ---------------- ----------------- ---------------
Non-interest income:
Fees and service charges 26,909 61,050 68,639 102,490
Other 11,110 7,413 12,573 8,324
---------------- ---------------- ----------------- ---------------
Total non-interest income 38,019 68,463 81,212 110,814
---------------- ---------------- ----------------- ---------------
Expense
Non-interest expense:
Compensation, payroll taxes,
and employees benefits 298,944 197,900 485,892 396,853
Office property and equipment 18,181 17,267 37,682 41,141
Data processing services 26,183 23,794 57,129 50,749
Federal insurance premiums 10,200 13,934 20,400 25,105
Other real estate expenses, net 73 2,738 1,008 5,245
Advertising 7,100 5,606 12,730 12,875
Other 101,483 94,871 205,575 186,791
---------------- ---------------- ----------------- ---------------
Total non-interest expense 462,164 356,110 820,416 718,759
---------------- ---------------- ----------------- ---------------
Earnings before taxes on income 430,607 530,843 972,179 1,064,248
Taxes on income 162,464 202,466 366,003 406,049
---------------- ---------------- ----------------- ---------------
Net earnings $268,143 $328,377 $606,176 $658,199
================ ================ ----------------- ---------------
Earnings per share - basic $0.13 $0.16 $0.29 $0.31
================ ================ ================= ===============
Earnings per share - dilluted $0.13 $0.16 $0.29 $0.31
================ ================ ================= ===============
See notes to consolidated financial statements.
2
Webster City Federal Bancorp and Subsidiaries
Consolidated Statements of Cash Flows
For the Six Months Ended June 30,
----------------------------------------------
1999 1998
---------------- -----------------
(Unaudited)
Cash flows from operating activities
Net earnings $606,176 $658,199
---------------- -----------------
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 16,502 13,110
Amortization of premiums and discounts, net 2,144 6,569
Stock appreciation of allocated ESOP shares 9,060 24,357
Increase in accrued interest receivable (93,022) (3,003)
(Increase) decrease in prepaid expenses and other 26,797 (45,095)
assets
(Decrease) increase in accrued interest payable (20,640) 2,105
Increase in accrued expenses and other liabilities 8,314 64,351
Decrease in accrued current taxes on income (51,554) (61,103)
Net change in ESOP stock plan 159,064 38,795
---------------- -----------------
Total adjustments 56,665 40,086
---------------- -----------------
Net cash provided by operating activities 662,841 698,285
---------------- -----------------
Cash flows from investing activities
Proceeds from the maturity of interest bearing deposits 2,265,000 2,000,000
Purchase of interest bearing deposits (2,611,000) (6,955,000)
Proceeds from the maturity of investment securities 3,900,000 9,650,000
Proceeds from redemption of FHLB Stock - 166,300
Purchase of investment securities (9,905,818) (7,902,281)
Purchase of mortgage-backed securities (1,070,487) -
Principal collected on mortgage-backed and related securities 1,754,664 2,447,069
Proceeds on sale of real estate 22,460 59,282
Net change in loans receivable (1,100,520) (1,456,069)
Purchase of office property and equipment (9,255) -
---------------- -----------------
Net cash used in investing activities (6,754,956) (1,990,699)
---------------- -----------------
Cash flows from financing activities
Net change in savings deposits (1,937,828) 507,593
Proceeds from FHLB advance - 1,200,000
Net increase in advance payments by borrowers
for taxes and insurance 24,335 16,570
Proceeds from stock options 32,207 36,337
Payments on ESOP borrowings (159,064) (38,795)
Dividends paid (382,125) (376,418)
---------------- -----------------
Net cash (used in) provided by financing activities (2,422,475) 1,345,287
---------------- -----------------
Net (decrease) increase in cash and cash equivalents (8,514,590) 52,873
Cash and cash equivalents at beginning of period 13,186,836 5,892,852
---------------- -----------------
Cash and cash equivalents at end of period $4,672,246 $5,945,725
================ =================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $1,481,548 $1,625,883
Taxes on income 419,182 438,991
Transfers from loans to real estate acquired
through foreclosure $- $49,893
================ =================
See notes to consolidated financial statements.
3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. REORGANIZATION
The Registrant is the successor to Webster City Federal Savings Bank, a federal
stock savings bank (the "Bank") which reorganized into the holding company
structure, effective July 1, 1999 (the "Holding Company Reorganization"). In the
Holding Company Reorganization, each outstanding share of the Bank's common
stock was converted into one share of the Registrant's common stock, and each
stockholder of the Bank received the same ownership interest in the Registrant
immediately following the Holding Company Reorganization as he or she had in the
Bank immediately prior to that transaction. Because the reporting period covered
by this report ended on June 30, 1999 (the day prior to the consummation of the
Holding Company Reorganization), the consolidated financial statements presented
herein reflect the financial performance of the Bank and not the Registrant.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
The consolidated financial statements for the three and six-month periods ended
June 30, 1999 and 1998 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 the 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.
3. EARNINGS PER SHARE COMPUTATIONS - 1999
Earnings per share - basic is computed using the weighted average number of
common shares outstanding of 2,119,049 and 2,118,650 for the three and six
months ended June 30, 1999, respectively, reduced by the 13,539 weighted average
unearned ESOP shares and divided into the net earnings of $268,100 and $606,200
for the three and six months ended June 30, 1999, respectively, resulting in
earnings per share of $.13 and $.29 for the three and six months ended June 30,
1999, 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 5,172 and 7,454 for the three
and six months ended June 30, 1999, respectively. Earnings for the three and six
months ended June 30, 1999 were $268,100 and $606,200, respectively, resulting
in earnings per share of $.13 and $.29 for the three and six months ended June
30, 1999, respectively.
4
EARNINGS PER SHARE COMPUTATIONS - 1998
Earnings per share - basic is computed using the weighted average number of
common shares outstanding of 2,093,866 and 2,115,194 for the three and six
months ended June 30, 1998, respectively, reduced by the 20,127 weighted average
unearned ESOP shares and divided into the net earnings of $328,400 and $658,200
for the three and six months ended June 30, 1998, respectively, resulting in
earnings per share of $.16 and $.31 for the three and six months ended June 30,
1998, 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 21,328 and 22,409 for the
three and six months ended June 30, 1998, respectively. Earnings for the three
and six months ended June 30, 1998 were $328,400 and $658,200, respectively,
resulting in earnings per share of $.16 and $.31 for the three and six months
ended June 30, 1998, respectively
4. DIVIDENDS
On April 21, 1999 the Bank declared a cash dividend on its common stock payable
on May 21, 1999 to stockholders of record as of May 7, 1999, equal to $.20 per
share or approximately $422,393. 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 Bank's mutual holding company) was waived by the mutual
holding company, resulting in an actual dividend distribution of $192,393.
5
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
FINANCIAL CONDITION
Total assets decreased by $1.7 million, or 1.8%, from December 31, 1998 to June
30, 1999. Cash and cash equivalents decreased $8.5 million or 64.6% while time
deposits in other financial institutions increased $346,000 to $2.6 million from
$2.3 million. The increase in time deposits was due to the Bank matching
certificate of deposits of public funds with certificate of deposits at the
Federal Home Loan Bank. Loans receivable increased $1.1 million, or 1.9% during
the same period. At June 30, 1999, the Bank had no real estate owned. Investment
securities increased from December 31, 1998 to June 30, 1999 primarily due to
the Bank having some securities that matured at the end of 1998, while
reinvestment of these funds did not occur until the first quarter of 1999. When
the Bank reinvested the funds in the first quarter this caused an offsetting
decrease in cash and cash equivalents. During the six-month period deposits
decreased $1.9 million, or 2.8%.
Total stockholders' equity increased by $424,400 to $23.5 million at June 30,
1999 from $23.1 at December 31, 1998 as earnings of $606,200 were partially
offset by two quarterly dividends totaling $382,100 and amortization of the
employee stock ownership plan.
CAPITAL
The Bank's total stockholders' equity increased by $424,400, to $23.5 million at
June 30, 1999 from $23.1 million at December 31, 1998. The Office of Thrift
Supervision (OTS) requires that the Bank meet certain minimum capital
requirements. As of June 30, 1999 the Bank was in compliance with all regulatory
capital requirements. The Bank's required, actual and excess capital levels as
of June 30, 1999 were as follows:
Required % of Actual % of Excess
Amount Assets Amount Assets Capital
-------- ------- -------- --------- ---------
(Dollars in thousands)
Tier 1 (Core) Capital $3,696 4.0% $23,511 25.44% $19,815
Risk-based Capital $3,552 8.0% $23,892 53.81% $20,340
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. At
June 30, 1999, the Bank's quarterly average liquidity position was $19.2 million
or 27.7% compared to $13.8 million or 19.7% at December 31, 1998.
RESULTS OF OPERATIONS
Interest Income. Total interest income decreased $63,100 or 3.8% from $1.7
million for the three months ended June 30, 1998 compared to $1.6 million for
the three months ended June 30, 1999. Interest income totaled $3.2 million for
the six months ended June 30, 1999 compared to $3.4 million for the six months
ended June 30, 1998. This was the result of a decrease in the average yield on
interest-earning assets to 7.02% for the six months ended June 30, 1999 from
7.15% for the six months ended June 30, 1998 and a decrease in the average
balance of interest earning assets of $2.7 million or 2.9% to $91.4 million for
the six months ended June 30, 1999 from $94.1 million for the six months ended
June 30, 1998.
6
Interest on loans for the three months ended June 30, 1999 increased $41,200 or
3.9% compared to the three months ended June 30, 1998. Interest on loans for the
six months ended June 30, 1999 increased $79,600 or 3.8% compared to the six
months ended June 30, 1998. The increases resulted primarily from an increase in
total loans outstanding during the periods, offset by a decrease in the yields
on loans receivable from 7.75% for the six months ended June 30, 1998 compared
to 7.72% for the six months ended June 30, 1999. The decreases in the yields on
loans receivable were primarily due to lower market rates and a substantial
volume of adjustable rate loans repricing at a lower rate based on the lagging
index used by the Bank.
Interest on mortgage-backed securities decreased by $72,600 or 32.2% for the
three-month period ended June 30, 1999 as compared to the same period ended June
30, 1998. Interest on mortgage-backed securities decreased $167,200 or 35.6% for
the six months ended June 30, 1999 compared to same period ended June 30, 1998.
These declines resulted from a decrease of $4.1 million or 30.5% in the average
balance of mortgage-backed securities to $9.4 million for the six months ended
June 30, 1999 compared to $13.5 million for six months ended June 30, 1998 and a
decrease of 51 basis points in the average yield on mortgage-backed securities
to 6.42% for the six months ended June 30, 1999 from 6.93% for the six months
ended June 30, 1998 as higher rate mortgage-backed securities were paid off.
Interest on investment securities remained unchanged for the three months ended
June 30, 1999 compared to the same period ended June 30, 1998. Interest on
investment securities decreased by $72,600 or 13.8% for the six months ended
June 30, 1999 as compared to the same period ended June 30, 1998. This was due
to a decrease in the average balance of investment securities from $16.2 million
for the six months ended June 30, 1998 compared to $14.6 million for the six
months ended June 30, 1999 as well as a decrease in the average yield of 28
basis points from 6.51%, on June 30, 1998 to 6.23%, on June 30, 1999. The
generally lower interest rate environment during the current fiscal year
resulted in the declining yields on investment securities.
Interest Expense. Interest expense decreased by $99,400, or 11.8%, from $844,400
for the three months ended June 30, 1998 to $745,000 for the three months ended
June 30, 1999. Interest expense decreased by $196,100 or 11.6%, from $1.6
million for the six months ended June 30, 1998 to $1.5 for the six months ended
June 30, 1999. This decrease resulted from a decrease in average deposits
outstanding as average deposits decreased by $3.1 million from $69.9 million for
the six months ended June 30, 1998 to $66.8 million for the six months ended
June 30, 1999. The average cost of deposits also decreased 36 basis points from
4.74% for the six months ended June 30, 1998 compared to 4.38% for the six
months ended June 30, 1999.
Net Interest Income. Net interest income before provision for losses on loans
increased by $36,300 or 4.4% from $818,500 for the three months ended June 30,
1998 compared to $854,800 for the three months ended June 30, 1999. Net interest
income increased by $39,200 or 2.4% for the six months ended June 30, 1999
compared to the same period ended June 30, 1998. The Bank's interest rate spread
at June 30, 1999 increased by 23 basis points to 2.64% from 2.41% at June 30,
1998.
Provision for Losses on Loans. There were no provisions for losses on loans for
the three and six months ended June 30, 1999. The Bank had no non-performing
loans as of June 30, 1999 compared to $15,300 as of December 31, 1998. 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 decreased by $30,400 or 44.4% for
the three-month period ended June 30, 1999 as compared to the same period ended
June 30, 1998. Non-interest income decreased $29,600 or 26.7% for the six months
ended June 30, 1999 as compared to the same period ended June 30, 1998. The
decreases were related to a decrease in fees and service charges, due to the
repricing of service charges.
7
Non-interest Expense. Non-interest expense increased $106,100 or 29.8% for the
three-month period ended June 30, 1999 compared to the same period ended June
30, 1998. Non-interest expense increased $101,700 or 14.2% for the six-month
period ended June 30, 1999 compared to the same period ended June 30, 1998.
Compensation and benefit costs increased $101,000 or 51.0% from $197,900 for the
three months ended June 30, 1998 to $298,900 for the three month period ended
June 30, 1999. Compensation and benefit costs increased by $89,000 to $485,900
for the six months ended June 30, 1999 from $396,900 for the six months ended
June 30, 1998. The increases were primarily due to the Bank paying off the
balance of the ESOP loan of $141,800 on June 30, 1999.
Taxes on Income.
Income taxes for the three and six months ended June 30, 1999, decreased to
$162,500 and $366,000 from $202,500 and $406,000 for the same periods for 1998.
The effective income tax rate for the first six months of 1999 was 37.7%
compared to 38.2% for the first six months of 1998.
Net Earnings. Net earnings totaled $268,100 for the three months ended June 30,
1999 compared to $328,400 for the three months ended June 30, 1998. Net earnings
decreased $52,000 or 7.9% for the six-month period ended June 30, 1999 compared
to the same period ended June 30, 1998.
Impact of Year 2000 Compliance
The federal banking regulators recently issued guidelines establishing
minimum safety and soundness standards for achieving Year 2000 compliance. The
guidelines, which took effect October 15, 1998 and apply to all FDIC-insured
depository institutions, establish standards for developing and managing Year
2000 project plans, testing remediation efforts, and planning for contingencies.
The guidelines are based upon guidance previously issued by the agencies under
the auspices of the Federal Financial Institutions Examination Council (the
"FFIEC"), but are not intended to replace or supplant the FFIEC guidance which
will continue to apply to all federally insured depository institutions.
The guidelines were issued under section 39 of the Federal Deposit
Insurance Act, as amended (the "FDIA"), which requires the federal banking
regulators to establish standards for the safe and sound operation of federally
insured depository institutions. Under section 39 of the FDIA, if an institution
fails to meet any of the standards established in the guidelines, the
institution's primary federal regulator may require the institution to submit a
plan for achieving compliance. If an institution fails to submit an acceptable
compliance plan, or fails in any respect to implement a compliance plan that has
been accepted by its primary federal regulator, the regulator is required to
issue an order directing the institution to cure the deficiency. Such an order
is enforceable in court in the same manner as a cease and desist order. Until
the deficiency cited in the regulator's order is cured, the regulator may
restrict the institution's rate of growth, require the institution to increase
its capital, restrict the rates the institution pays on deposits or require the
institution to take any action the regulator deems appropriate under the
circumstances. In addition to the enforcement procedures established in section
39 of the FDIA, noncompliance with the standards established by the guidelines
may also be grounds for other enforcement action by the federal banking
regulators, including cease and desist orders and civil money penalty
assessments.
The Board of Directors is aware of potential risk that the year 2000
poses for the Bank and has assigned an individual to establish Year 2000 formal
project plans, which have been developed and adopted by the Bank. Testing and
contingency plans have also been developed and adopted by the Bank. Testing
procedures have been completed.
8
The Bank's contingency plans include two components, which are business
remediation and business resumption. The business remediation plan was developed
to mitigate the risk associated with the failure to successfully complete system
renovation, validation or implementation of the Bank's Year 2000 readiness. This
plan pertains to mission-critical systems developed in-house, by outside
software vendors, and by third-party service providers. The business resumption
plan will be designed to be implemented in the event there are system failures
at critical dates.
The Bank anticipates that it will incur internal staff costs and other
expenses related to the enhancements necessary to become Year 2000 compliant.
Based on the Bank's current knowledge, the expense related to Year 2000
compliance is not expected to have a material effect on the Bank's financial
position or results of operations. It is estimated that the costs incurred by
the Bank for Year 2000 compliance will be approximately $ 10,000.
Accurate data processing is essential to the operation of the Bank, and
a lack of accurate processing by its vendors could have a significant adverse
impact on the Bank's financial condition and results of operations.
The Bank has been assured by its data processing service bureau that
their computer services will function properly on and after January 1, 2000.
Notwithstanding the foregoing, if the Bank is unable to resolve this
potential problem in time, the Bank will likely experience significant data
processing delays, mistakes or failures. These delays, mistakes or failures
could have a significant adverse impact on the financial condition and results
of operations of the Bank.
The Bank has also tested such things as vault doors, alarms, phones,
etc. and is not aware of any significant problems with such systems.
The Bank has received year 2000 updates from most of its material
non-information system providers, and based on these updates the Bank does not
anticipate any significant year 2000 issues.
In addition to expenses related to its own computer system, the Bank
could incur losses if loan payments are delayed due to year 2000 problems
affecting any of its significant borrowers or impairing the payroll systems of
large employers in the Bank's market area. The Bank is communicating with these
companies to assess their progress in evaluating their systems and implementing
any corrective measures required by them to be prepared for the year 2000.
Impact of New Accounting Standards
SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities," and SFAS 137, an amendment to SFAS 133, will be effective for the
Bank for the year beginning January 1, 2001. Management is evaluating what
impact the adoption of SFAS 133 and SFAS 137 will have on the Bank's
consolidated financial statements. The Bank expects to adopt SFAS No. 133 and
137 when required.
9
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 Bank 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 purposes of these safe harbor
provisions. Forward-looking statements, which are based on certain assumptions
and describe future plans, strategies and expectations of the Bank, are
generally identifiable by use of the words "believe," "expect," "intend,"
"anticipate," "estimate," "project" or similar expressions. The Bank's ability
to predict results or the actual effect of future plans or strategies is
inherently uncertain.
Factors which could have a material adverse effect on the operations
and future prospects of the Bank and the subsidiaries include, but are not
limited to, changes in: interest rates, general economic conditions, the
legislative/regulatory situation, monetary and fiscal policies of the U.S.
Government, including polices of the U.S. Treasury and the Federal Reserve
Board, the quality of composition of the loan or investment portfolios, demand
for loan products, deposit flows, competition, demand for financial services in
the Bank's market area and accounting principles, policies and guidelines. These
risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such statements.
Further information concerning the Bank and its business, including
additional factors that could materially affect the Bank's financial results, is
included in the Bank's filings with the Office of Thrift Supervision.
10
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 1998 Annual Meeting of Stockholders on
April 21,1999. At the meeting the stockholders of the Registrant
considered and voted upon:
1. The election of Donald I. Newman as director for a term of three
years.
2. The ratification of the appointment of KPMG LLP as auditors of the
Registrant for the fiscal year ending December 31, 1999.
3. The establishment of Webster City Federal Bancorp as a stock holding
company parent of the Bank.
The election of Donald I. Newman as director was as approved
by a vote of 1,902,353 votes in favor, 25,680 withheld and 0
abstaining.
The ratification of the engagement of KPMG LLP as auditors was
approved by a vote of 1,925,133 votes in favor, 1,500 opposed
and 1,400 abstaining.
The establishment of Webster City Federal Bancorp as a stock
holding company parent of the Bank was approved by a vote of
1,557,233 votes in favor, 359,071 opposed and 11,729
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, 1999.
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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 10, 1999 By:/s/ Phyllis A. Murphy
__________________________________
Phyllis A. Murphy
President and Chief Executive Officer
Date: August 10, 1999 By:/s/ Stephen L. Mourlam
___________________________________
Stephen L. Mourlam
Exec. Vice President/Chief Financial Officer
12