LAW OFFICES OF
KELLER ROHRBACK L.L.P.
- --------------------------------------------------------------------------------
LAURIE B. ASHTON + P > C
IAN S. BIRK
STEPHEN R. BOATWRIGHT + > C
KAREN E. BOXX C
JOHN H. BRIGHT
GRETCHEN FREEMAN CAPPIO
JASON P. CHUKAS
T. DAVID COPLEY #
ALICIA M. CORBETT + > C
CLAIRE CORDON
SHANE P. CRAMER # C
ROB J. CRICHTON -
CHLOETHIEL W. DEWEESE
MAUREEN M. FALECKI !
JULI FARRIS ! /
RAYMOND J. FARROW
DANIEL S. FRIEDBERG < C
GLEN P. GARRISON S
LAURA R. GERBER
GARY A. GOTTO + > C
MARK A. GRIFFIN
AMY N.L. HANSON <
IRENE M. HECHT
SCOTT C. HENDERSON
TOBIAS J. KAMMER
RON KILGARD + > C
BENJAMIN J. LANTZ
HEIDI LANTZ
CARI CAMPEN LAUFENBERG
ELIZABETH A. LELAND
TANA LIN ? ** /
DEREK W. LOESER
DAVID R. MAJOR
JOHN MELLEN ?
ROBERT S. OVER * /
AMY PHILLIPS
LORRAINE LEWIS PHILLIPS
ERIN M. RILEY <
PAUL M. ROSNER
DAVID J. RUSSELL
MARK D. SAMSON + > C
LYNN LINCOLN SARKO / <
FREDERICK W. SCHOEPFLIN
WILLIAM C. SMART
THOMAS A. STERKEN
BRITT L. TINGLUM <
LAURENCE R. WEATHERLY
MARGARET E. WETHERALD -
AMY WILLIAMS-DERRY
MICHAEL WOERNER
BENSON D. WONG
+ ADMITTED IN ARIZONA
# ALSO ADMITTED IN ARIZONA
! ALSO ADMITTED IN CALIFORNIA
P ALSO ADMITTED IN COLORADO
S ALSO ADMITTED IN IDAHO
? ALSO ADMITTED IN ILLINOIS
* ALSO ADMITTED IN MARYLAND
** ALSO ADMITTED MICHIGAN
" ALSO ADMITTED IN NEW YORK
- - ALSO ADMITTED IN OREGON
/ ALSO ADMITTED IN WASHINGTON, D.C.
< ALSO ADMITTED IN WISCONSIN
> NOT ADMITTED IN WASHINGTON
C OF COUNSEL
October 31, 2006
Mr. Todd K. Schiffman
U.S. Securities and Exchange Commission
Division of Corporate Finance, #7 Financial Services
100 F Street NE
Washington, DC 20549
Re: WSB Financial Group, Inc.
Amendment No. 2 to Registration Statement on Form S-1
File No. 333-137038
Dear Mr. Schiffman:
This letter accompanies the above-referenced filing and responds to your
letters, dated October 18 and October 27, 2006, to David K. Johnson, President
and Chief Executive Officer of WSB Financial Group, Inc., relating to the
Registration Statement on Form S-1, File No. 333-137038. The accounting comments
in the October 18 letter are in order of their appearance in Amendment No. 2.
Comments 1, 2, 3, 4, 5 and 6 in the October 18 letter are renumbered in this
response as 19, 20, 22, 25, 26 and 27, respectively.
WSB Financial Group, Inc., page 1
1. As we requested in comment 6 of our letter to you dated September
27, 2006, please revise this section as follows:
o revise the first paragraph to supplement your disclosure of
net loans to disclose the percentage of your net loans that
are related to real estate and that all of the real estate is
located in the west Puget Sound area of Washington state;
- --------------------------------------------------------------------------------
REPLY TO: 1201 THIRD AVENUE SUITE 3200 SEATTLE, WASHINGTON 98101-3052
TELEPHONE: (206) 623-1900 FAX: (206) 623-3384
WWW.KELLERROHRBACK.COM
AFFILIATED OFFICE: KELLER ROHRBACK PLC 3101 N. CENTRAL AVENUE, SUITE 900
PHOENIX, ARIZONA 85012 (602) 248-0088 FAX (602) 248-2822
Mr. Todd K. Schiffman KELLER ROHRBACK L.L.P.
October 31, 2006
Page 2
Response: We have included the requested disclosures in page 1 of the
Amendment in the first and second paragraphs, respectively.
o disclose the percentage of shares that will be beneficially owned by
directors and executive officers and the effective control that they
will have over the company; and
Response: We have included the requested disclosure in page 1 of the
Amendment.
o revise the third paragraph to disclose the total growth from 2001 to
2006 or the growth each year rather than the compound annual growth
rate.
Response: We have deleted the CAGR information on page 1 of the Amendment.
2. Please disclose that an independent valuation of your shares as of
July 31, 2006, determined that the value of each share was $13.15.
Disclose that this valuation was conducted in connection with a
stock split in August 2006 that increased the number of shares owned
by the shareholders at that time by 5.1 per share. If this value
differs from the offering price, please explain the reasons for the
difference in valuation.
Response: We have included the requested disclosure on page 1 of the
Amendment.
3. Please provide an overview of your loan portfolio including the fact
that 54 percent of your loans are interest only and that most of
these are for construction and land development in your local area.
Response: We have included the requested disclosures in page 1 of the
Amendment.
4. Thank you for providing the information we requested in comment 6 of
our letter to you dated September 27, 2006. Please provide us with a
copy of the CRA Performance Evaluation.
Response: We have attached a copy of the CRA Performance Report, which is
available to the public, as requested.
Mr. Todd K. Schiffman KELLER ROHRBACK L.L.P.
October 31, 2006
Page 3
Risk Factors, page 8
5. We note your response, on pages 9 and 10, to comment 10 of our
letter to you dated September 27, 2006. Please revise the risk
factor addressing the risk from almost all of your loans being real
estate related as follows:
o revise in the caption, the characterization of your loans to
real estate as "a large percentage" to state that over 93
percent of your loans are for construction and development
projects and for residential and commercial real estate;
o discuss the fact that a downturn in the real estate market
would increase delinquencies, defaults and foreclosures on
loans;
o as we requested, discuss the risk that many of your loans,
particularly the 52 percent of your loans that are
construction and development loans, may default and require
foreclosure if there is a significant decline in the real
estate market and/or an increase in interest rates; and
o discuss the risks of your lack of diversification of your loan
portfolio in that almost all of your loans are in real estate
and all are concentrated in your local area and that therefore
a downturn in the local real estate market could have severe
consequences for both your ability to make a profit and your
financial viability.
Response: We have included the requested disclosures at pages 8 and
9 of the Amendment. We inserted a new risk factor on page 9 to
address the last bullet point.
6. We note your response, on pages 9 and 10, to comment 10 of our
letter to you dated September 27, 2006. Please revise the risk
factor addressing the risk from more than half of your loans being
for real estate construction and development as follows:
o revise in the caption, the characterization of your loans to
real estate construction and development projects as "a
significant percentage" to state that over half of your loans
are for these purposes;
Response: We have made this change in page in page 8 of the
Amendment.
o disclose that all of these loans relate to real estate in the
west Puget Sound area; and
Response: We have made this change in page 8 of the Amendment.
o discuss the extent to which these loans are not traditional
and therefore carry higher risks of default.
Mr. Todd K. Schiffman KELLER ROHRBACK L.L.P.
October 31, 2006
Page 4
Response: All the company's loans, including interest-only loans are
"traditional" banking products with terms and conditions customary
in the industry. Bank lines of credit, HELOCs and construction and
development loans are normally made on an interest-only basis. Risks
with respect to the company's concentrations in interest-only loans
and real estate loans are addressed at pages 9, 10 and 43 of the
Amendment, and we have inserted additional disclosure about
interest-only terms in the risk factor for construction and
development loans on page 10.. The company does not have any option
ARMs, negative amortization or other "exotic" loan products.
7. We note your response, on page 11, to comment 11 of our letter to
you dated September 27, 2006. Please discuss the risks of your lack
of geographical diversification if for instance there is a downturn
in the local economy or in the real estate market.
Response: We have included this discussion in the new risk factor on page
9, also referenced in the response to comment 5 above.
8. We note the risk factor on page 11 relating to managing your growth.
Please discuss the risks associated with not maintaining effective
controls, including controls on extending credit, making adequate
allowances for losses and compliance with regulatory accounting
requirements, as you grow.
Response: We have included this additional information in this risk factor
on page 10, as requested.
9. We note your response, on page 12, to comment 12 of our letter to
you dated September 27, 2006. Please revise as follows:
o revise the caption to state that the FDIC found that you
committed violations of various banking laws and the FDIC
penalized you and required that your board enter into the MOU;
o clarify, on the seventh line, that the FDIC imposed the
penalties on you for violations that they characterized as
"significant" and repeated; and
o clarify in the eighth line that the FDIC required your Board
enter into the MOU to correct both the violations of law and
the deficiencies in internal controls.
Response: We have made all the requested changes in this risk factor on
page 11 of the Amendment.
10. We note your response, on pages 13, to comment 13 of our letter to
you dated September 27, 2006. Please revise to disclose the
following:
Mr. Todd K. Schiffman KELLER ROHRBACK L.L.P.
October 31, 2006
Page 5
o the percentage of your loans that are non traditional loans
such as interest only loans and payment option ARMS;
o disclose the extent to which your loans are prime or subprime;
and
o the particular risks, types and magnitude, to you associated
with these loans given recent increases in interest rates and
possible additional increases as well as declines in values of
homes.
Please revise the caption to more accurately reflect the risks described
in the text.
Response: We have revised the caption of the interest rate risk factor in
page 11 of the Amendment and inserted a sentence describing our typical interest
terms in page 12, to address this comment. As discussed in response to comment 6
above, the company does not have any non-traditional or unusual loans (including
subprime or option ARMs) and risks related to interest-only and real estate
concentrations are already discussed at pages 8, 9 and 43 of the Amendment.
Management's Discussion and Analysis of Financial Condition and Results of
Operations, page 22
Overview, page 22
11. We note your response, on page 22, to comments 18 and 19 of our
letter to you dated September 27, 2006. Please revise the third
paragraph as follows:
o revise the fourth sentence regarding building permits to
disclose that it declined by 8.8 percent and your statement
regarding sales activity to disclose that it declined by 2.4
percent compared to the second quarter of 2005; and
o disclose, before the last sentence, that the FDIC report on
Washington state (which you quote from extensively) states
that "recent declines in permit and sales activity [in
Washington state] point to slower residential construction
activity in the months ahead with possible adverse
implications for overall job growth and the demand for
construction financing."
Response: We have included the requested changes in page 22 of the
Amendment.
12. As we requested in comment 20 of our letter to you dated September
27, 2006, please revise your statement in the second sentence of the
third paragraph that you "provide a variety of loans to our
customers" to reflect that almost all of your loans are for the
purchase and development of real estate.
Response: We have made this change in page 22, as requested.
Mr. Todd K. Schiffman KELLER ROHRBACK L.L.P.
October 31, 2006
Page 6
13. We note your response, in the first paragraph on page 23, to
comments 18 and 19 of our letter to you dated September 27, 2006.
Please discuss how the recent increase in interest rates could
affect you given that over half of your loans are ARMs. Discuss the
various types of non traditional loans you have issued and the
percentage of your loan portfolio for each. Provide analysis of how
each type of loan will be affected by recent increases in interest
rates and decreases in real estate values including the effect on
your interest income and defaults.
Response: We have addressed the risks of higher interest rates as a result
of our levels of interest only and variable rate loans on page 21, as
requested.
14. We note your response, in the third and fourth paragraph on page 23,
to comment 19 of our letter to you dated September 27, 2006. As we
requested, please include in this section analysis of the
anticipated impact of the costs of being a public company including
estimates of those costs and the extent that they will affect you.
Response; We have added estimates of the company's additional compliance
costs in page 22 of the Amendment, to the discussion of these costs and
their anticipated impact in the S-1.
Regulatory Compliance, page 27
15. Please revise the caption of this section to reflect the fact that
you were not in compliance with laws and regulations and that the
FDIC found in 2006 that you had committed numerous violations of the
law for which you were penalized and found numerous deficiencies in
your internal controls.
Response: We have revised the caption as requested, in page 26 of the
Amendment.
16. Please revise the first paragraph as follows:
o revise the first sentence to disclose that you committed
violations of various banking laws that the FDIC characterized
as "significant violations" and required that you pay a
penalty for the violations and required that your board enter
into the MOU;
o disclose that these violations included your submitting to the
Federal Reserve Board what the FDIC characterized as a "high
level of inaccurate data" relating to your loans;
o disclose that you failed to cure these violations despite
their being repeatedly cited by the FDIC in their examination
reports; and
Mr. Todd K. Schiffman KELLER ROHRBACK L.L.P.
October 31, 2006
Page 7
o revise the last sentence to replace the word "deficiencies"
with the word "violations."
o Response: We have made all the requested changes in page 26 of
the Amendment.
17. Please describe the findings by the Federal Deposit Insurance
Corporation in January 2006 that you suffer from the following
problems:
o weak oversight of the compliance function;
o lack of adequate compliance procedures;
o deficient compliance training;
o insufficient monitoring procedures for all regulations; and
o weak audit program.
Response: We have included this information in page 26 of the Amendment.
18. Please revise the second paragraph as follows:
o revise the first sentence to describe in detail, using bullet
points, each of the seven provisions of the agreement with the
FDIC noting that each of the provisions requires your Board of
Directors to take action; and
o revise your description of the reports to state that your
Board of Directors is required to submit such reports.
Response: We have included all requested revisions at pages 26 and 27 of the
Amendment.
Loans, page 40
19. Please refer to prior comment 22. Your revisions have not disclosed
how you monitor interest-only loans for collectibility and have not
disclosed the terms of these loans, including option ARMs, and
negative amortization features. Please revise to include the
disclosures previously requested. Additionally, if you have no
option ARMs or negative amortizing loans, please disclose that fact.
Response: We have included the additional disclosures at page 42 of the
Amendment. The company does not have any option ARMs or negative amortizing
loans.
20. Please refer to prior comment 22. Please revise the tables on pages
41 and 42 to further disaggregate each loan type into the categories
of interest-only loans versus principal and interest loans.
Mr. Todd K. Schiffman KELLER ROHRBACK L.L.P.
October 31, 2006
Page 8
Response: We have added a new table on page 43 of the Amendment, which
provides the requested breakdown of our loan categories into interest-only and
principal and interest loans as of September 30, 2006 and December 31, 2005.
Information for prior years when the company did not have the current loan
reporting system in place would difficult to compile without considerable time
and expense, and we respectfully submit, would not provide useful additional
information to investors.
Concentrations, page 42
21. We note your response, on page 42, to comment 22 of our letter to
you dated September 27, 2006. Please revise your statement that
"loans within this concentration have no more than normal risk of
collectability" to reflect the risks inherent in interest only
loans. Moreover, address the risks to you that over half of your
loans are interest only during a period of rising interest rates and
declining real estate values.
Response: We have made this change and included the requested information
in page 43 of the Amendment.
Allowance for Loan Losses, page 43
22. Please refer to prior comment 23. In light of the significance and
growth of your unallocated portion of the allowance both in dollars
and percentage of the whole allowance, please revise to further
describe in detail the changes in the factors affecting the
unallocated portion of the allowance and how these changes
contributed to the increasing unallocated portion of the allowance
during recent periods. Discuss the trends you have experienced that
led to these changes in the balance of the unallocated allowance.
Response: We have provided further description of the factors affecting
the unallocated portion of the company's allowance and other requested
information at page 46 of the Amendment.
Director Compensation, page 79
23. We note your response on page 82, to comment 27 of our letter to you
dated September 27, 2006. As we requested, please explain, in this
section, why you paid the directors with stock in 2006 for services
they rendered as early as 2003. Please disclose the nature and
source of the valuation.
Response: The payment made in August 2006 was for director compensation
accrued from January 1, 2006 through June 30. 2006. We have inserted
clarifying language in page 83 of the Amendment, as well as the nature and
source of the valuation.
Mr. Todd K. Schiffman KELLER ROHRBACK L.L.P.
October 31, 2006
Page 9
Recent Sales of Unregistered Securities, page II-1
24. We note your response, on page II-2, to comment 29 of our letter to
you dated September 27, 2006. Please disclose the respective values
per share calculated on a post stock split basis. Please clarify
whether you issued the stock to the directors each year or in the
aggregate in July 2006.
Response: We have made these disclosures of shares and per share
consideration on a post-split basis in page II-2, as requested, and made
other corrections to the information provided in the S-1. As explained in
response to comment 23 above, stock was issued each year to the directors
each year for director fees and not just in August 2006.
Loans and Allowances for Loan Losses, page F-23
25. Please refer to prior comment 33. Your accounting policy for the
estimated losses associated with off-balance sheet commitments is
not consistent with GAAP. If you continue to believe the amounts
involved are not material, please revise your disclosure to comply
with the requirements of SOP 01-6 and provide us with your analysis
of the qualitative and quantitative factors considered to determine
that the recognition of a separate liability for the off-balance
sheet commitments is not material. Refer to SAB 99. Otherwise,
please revise your balances accordingly.
Response: As of September 30, 2006, the estimated liability related to
off-balance sheet loan commitments was $97,183. This liability has been
reclassified from the allowance for loan losses to other liabilities in
accordance with SOP 01-6, paragraph 8(e), which states that "an accrual for
credit loss on a financial instrument with off-balance-sheet risk should be
recorded separate from a valuation account related to a recognized financial
instrument . . ."
As of December 31, 2005 and 2004, the estimated liability related to
off-balance sheet loan commitments was $55,683 and $35,175, respectively. These
amounts are considered to be immaterial, both quantitatively and qualitatively,
in consideration of SAB 99. Accordingly, no reclassification from the allowance
for loan losses to other liabilities was made. SAB 99 states that "...a fact is
material if there is a substantial likelihood that the fact would have been
viewed by the reasonable investor as having significantly altered the "total
mix" of information made available." The following factors were considered in
the determination of the immateriality of these amounts:
o the estimated liability related to off-balance sheet loan
commitments as a percentage of total reported assets was
approximately 0.02% for both 2005 and 2004; total assets for
2005 would change from approximately $249,943,000 to
approximately $249,999,000; total assets for 2004 would change
from approximately $137,380,000 to approximately $137,415,000
Mr. Todd K. Schiffman KELLER ROHRBACK L.L.P.
October 31, 2006
Page 10
o there is no impact to reported net income, earnings per share,
or stockholder's equity
o the amounts do not result in a change in incentive
compensation
o no trends are masked
For the years ended December 31, 2005 and 2004, we consider the disclosure
of the accounting policies related to the allowance for loan losses and the
estimated liability for off-balance sheet loan commitments to comply with SOP
01-6.
Note 11: Employee Benefits, page F-35
26. Please refer to prior comment 31. In your revision you disclose that
you have relied upon a third party valuation expert to determine the
valuation of your stock issuances. Please revise to identify the
valuation expert you have relied upon in these instances. Please
revise your section labeled "Experts" to discuss the reliance upon
the valuation experts and file with your next amendment consent from
the valuation expert to refer to them in your Form S-1. Refer to
Item 509 of Regulation S-K.
Response: We have identified the valuation expert the company has relied
upon to determine the valuation of its previous stock issuances under "Experts"
on page 98 of the Amendment and revised Note 11 at page F-35 to include a
cross-reference. The consent of LC Financial Advisors, LLC is attached to
Amendment No. 2, as Exhibit 23.4, and updated consents will be included in
subsequent pre-effective amendments. Mr. Childress and his firm were not
employed for such purpose on a contingent basis, nor is there any other conflict
of interest required to be disclosed by Item 509, Regulation S-K.
Note 12: Fair Value of Financial Instruments, page F-35
27. Please refer to prior comment 36. Please revise to disclose when and
if quoted market prices are utilized and when the matrix pricing
model is utilized to determine the fair market value of your
securities. If quoted market prices are not utilized, when
available, please revise to disclose that fact and how you
determined this policy complies with the guidance of paragraph 11 of
SFAS 107.
Response: We have revised Note 12 at page F-35 of the Amendment to include
the requested information.
We are filing Amendment No. 2 tonight on Edgar in response to these
comments. Four marked copies of Amendment No. 2 are enclosed to expedite your
review. The company's financial statements as of and for the third quarter and
as of and for the nine months ended September 30, 2006 are reflected in this
Amendment.
Mr. Todd K. Schiffman KELLER ROHRBACK L.L.P.
October 31, 2006
Page 11
The updated consents of Moss Adams LLP and Ball & Treger, LLP are attached
to Amendment No. 2 as Exhibits 23.1 and 23.2, respectively, and the additional
consent of LC Financial Advisors, LLC is attached to Amendment No. 2 as Exhibit
23.4, and updated consents will be included in subsequent pre-effective
amendments.
The required statement from the company acknowledging its responsibility
for disclosures in the filing and the status of staff comments, is also
enclosed.
Please call the undersigned at (206) 224-7585 (direct) with any questions.
Very truly yours,
/s/ Thomas A. Sterken
---------------------
Thomas A. Sterken
TAS:sjm
Encs: Company Acknowledgement
Marked copy of Amendment No. 2
cc w/encs.: Jonathan E. Gottlieb
Margaret B. Fitzgerald
cc: w/o encs.: David K. Johnson
C.J. Voss
PUBLIC DISCLOSURE
JANUARY 31, 2006
COMMUNITY REINVESTMENT ACT
PERFORMANCE EVALUATION
WESTSOUND BANK
CERTIFICATE NUMBER: 34843
190 PACIFIC AVENUE
BREMERTON, WASHINGTON 98337
FEDERAL DEPOSIT INSURANCE CORPORATION
25 JESSIE STREET AT ECKER SQUARE
SAN FRANCISCO, CALIFORNIA 94105
NOTE: THIS EVALUATION IS NOT, NOR SHOULD IT BE CONSTRUED AS, AN ASSESSMENT
OF THE FINANCIAL CONDITION OF THIS INSTITUTION. THE RATING ASSIGNED
TO THIS INSTITUTION DOES NOT REPRESENT AN ANALYSIS, CONCLUSION OR
OPINION OF THE FEDERAL FINANCIAL SUPERVISORY AGENCY CONCERNING THE
SAFETY AND SOUNDNESS OF THIS FINANCIAL INSTITUTION.
TABLE OF CONTENTS
I. General Information.....................................................1
II. Institution Rating......................................................2
III. Description of Institution..............................................3
IV. Description of Assessment Area..........................................4
V. Conclusions.............................................................7
GENERAL INFORMATION
The Community Reinvestment Act (CRA) requires each federal financial supervisory
agency to use its authority when examining financial institutions subject to its
supervision, to assess the institution's record of meeting the credit needs of
its entire community, including low- and moderate-income neighborhoods,
consistent with safe and sound operation of the institution. Upon conclusion of
such examination, the agency must prepare a written evaluation of the
institution's record of meeting the credit needs of its community.
This document is an evaluation of the Community Reinvestment Act (CRA)
performance of WESTSOUND BANK prepared by the FEDERAL DEPOSIT INSURANCE
CORPORATION, the institution's supervisory agency, as of JANUARY 31, 2006. The
agency rates the CRA performance of an institution consistent with the
provisions set forth in Appendix A to 12 CFR Part 345.
INSTITUTION RATING
INSTITUTION'S CRA RATING: This institution is rated Satisfactory.
Westsound Bank's CRA performance depicts a fully satisfactory practice of
providing for the credit needs of its assessment areas. This rating is supported
by the following:
- - The bank's net loan-to-deposit ratio is reasonable given the institution's
size, financial conditions, and assessment area credit needs.
- - The bank originated a majority of its loans within the assessment areas.
- - The distribution of borrowers reflects a reasonable penetration among
individuals of different income levels.
- - The geographic distribution of loans reflects reasonable dispersion
throughout the assessment rates.
- - The bank has not received any CRA-related complaints since the previous
evaluation and was not evaluated under this factor.
2
DESCRIPTION OF INSTITUTION
Westsound Bank (WSB) is an independently owned bank headquartered in Bremerton,
Washington. The bank officially opened its doors on March 12, 1999, as a
community-based bank to primarily serve business customers. In January of 2004,
the bank added a mortgage division, and is now a primarily mortgage-lending
focused financial institution.
In addition to its main office located in a low-income geography in Bremerton,
WSB operates five full-service branches that offer customers a variety of
business and personal banking products and services. The five branches are
located in the cities of Gig Harbor, Port Angeles, Port Orchard, Sequim, and
Silverdale; all of these branches are in middle-income geographies. During the
evaluation period, the bank had automated teller machines (ATMs) located at the
main office, the Silverdale, and Port Angeles branches. In addition, the bank
maintains a website with online banking services, and offers a courier service
to business customers in portions of Kitsap, Clallam and Mason counties.
As of September 30, 2005, WSB reported total assets of $224,126,000 and total
loans of $183,512,000. The bank's total assets reflect growth of approximately
1,025 percent since the December 31, 2000, reported figure of $19,919,000, as
noted in the prior CRA performance evaluation. During the same time period,
total loans have grown approximately 1,432 percent from $11,971,000. WSB's loan
portfolio composition is reflected in Table 1.
TABLE 1 -- LOAN DISTRIBUTION AS OF SEPTEMBER 30, 2005
LOAN TYPE DOLLAR AMOUNT (000S) PERCENTAGE OF TOTAL LOANS (%)
- ----------------------------------------------------------------------------------------------
Construction and Land Development 87,388 47.6%
- ----------------------------------------------------------------------------------------------
Secured by Farmland 444 0.2%
- ----------------------------------------------------------------------------------------------
1-4 Family Residential 29,188 15.9%
- ----------------------------------------------------------------------------------------------
Multifamily Residential 6,748 3.7%
- ----------------------------------------------------------------------------------------------
Commercial Real Estate 44,246 24.1%
- ----------------------------------------------------------------------------------------------
TOTAL REAL ESTATE LOANS 168,014
- ----------------------------------------------------------------------------------------------
Commercial and Industrial 13,412 7.3%
- ----------------------------------------------------------------------------------------------
Agricultural Production 0 0.0%
- ----------------------------------------------------------------------------------------------
Consumer Closed-end 1,524 0.8%
- ----------------------------------------------------------------------------------------------
Consumer Open-end 818 0.5%
- ----------------------------------------------------------------------------------------------
Other 9 0.0%
- ----------------------------------------------------------------------------------------------
Less Unearned Income (265) (0.1%)
- ----------------------------------------------------------------------------------------------
TOTAL LOANS 183,512 100.0%
- ----------------------------------------------------------------------------------------------
Source: Consolidated Report of Condition
The figures in Table 1 suggest construction and land development as WSB's
foremost lending product at 47.6 percent of the institution's portfolio,
followed by commercial real estate lending at 24.1 percent. However, portfolio
figures do not provide an accurate portrayal of the bank's actual lending
activity. WSB's mortgage department originates a significant amount of
residential loans that subsequently are sold in the secondary market and not
included in the portfolio figures.
In 2004, WSB originated a total of $80,128,000 in Home Mortgage Disclosure Act
(HMDA) reportable loans and sold $67,309,108 in the secondary market. In 2005,
the bank originated $301,506,000 in HMDA reportable loans and sold $154,373,061
in the secondary market. These figures identify mortgage lending as the bank's
primary product. The sale of mortgages on the secondary market provides the
bank with increased liquidity and the capacity to fund additional loans.
During the evaluation period there were no legal or financial impediments that
prohibited the bank from meeting the credit needs of management's defined
assessment areas.
DESCRIPTION OF ASSESSMENT AREAS
The Community Reinvestment Act requires an institution to identify one or more
assessment areas within which regulatory agencies will evaluate the
institution's performance. Management of Westsound Bank has selected five
assessment areas to include Kitsap County, Pierce County, Clallam County, Mason
County, and the city of Auburn in King County. The bank's assessment areas meet
regulatory guidelines, do not reflect illegal discrimination, and do not
arbitrarily exclude any low or moderate-income areas.
The bank's primary lending occurs within the Kitsap County Assessment Area.
Over 74 percent, in both number and dollar volume, of the bank's total 2004
HMDA reportable loan originations in the assessment area were originated within
Kitsap County. In 2005, the bank originated over 61 percent of such loans
within the Kitsap County Assessment Area.
Because the majority of the bank's mortgage lending occurs within the Kitsap
County Assessment Area, this performance evaluation will include a full-scope
review of the bank's lending performance within the Kitsap Assessment Area and
limited-scope reviews of the Pierce County and Clallam County Assessment Areas.
Lending performance within the Mason County and City of Auburn Assessment
Areas will be included in the discussion of the bank's overall lending
performance. These two assessment areas will not be discussed separately, as
lending volumes are not as significant and do not greatly impact the bank's
overall performance. The City of Auburn Assessment Area was added only
recently, when the bank opened a loan production office in Federal Way on
June 1, 2005.
Kitsap County
According to the 2000 U.S. Census, Kitsap County consists of 51 census tracts
(2 low-, 9 moderate-, 32 middle-, and 8 upper-income). Located on the Kitsap
Peninsula, the county is bordered to the east by the Puget Sound, the Hood
Canal on the west, and Mason and Pierce Counties to the south.
Kitsap County's economy is closely tied to the Puget Sound Naval Shipyard,
located in Bremerton, the county's largest city. The county's extensive
military base provides for a stable economy with future expansion potential.
Economic growth in Bremerton has continually
4
outperformed that of Washington State, with unemployment rates for 2004 and
2005 at 5.4 percent and 5.1 percent, respectively. Top employers in Kitsap
County include the Naval Base Kitsap, the Naval Station Bremerton, and the
Harrison Memorial Hospital. Kitsap County is close in proximity to the
metropolitan city of Seattle and offers relatively affordable living. The HUD
estimated median family income for 2005 is $62,000 for Kitsap County.
WSB has many competitors lending in the Kitsap County Assessment Area. These
include national bank, larger financial institutions, and credit unions. The
bank ranks number 20 of 330 mortgage lenders in Kitsap County with 1.2 percent
market share in number and dollar volume of the county's mortgage lending
activity.
PIERCE COUNTY
Pierce County consists of 158 census tracts (5 low-, 30 moderate-, 90
middle-, 32 upper, and 1 NA-income, according to the 2000 U.S. Census. The 2005
HUD estimated Median Family Income for Pierce County is $59,750. Pierce
County's close proximity to Pacific Rim trade considerably contributes to the
county's position as a major regional trade and service center. Also
influencing and stabilizing the local economy are three major military
establishments: Fort Lewis, McChord Air Force Base, and the Madigan Army
Medical Center.
Employment growth in Pierce County has declined, but still remains higher than
that of the entire state. In 2004 employment growth for Pierce County was 4.5
percent and at the third quarter of 2005, employment growth dropped to 3.3
percent. Although employment has slowed, the county's total unemployment rate
decreased from 6.3 percent at the end of 2004, to 5.9 percent at the end of the
third quarter of 2005.
CLALLAM COUNTY
Located between the Strait of Juan de Fuca and the Olympic Mountains, Clallam
County runs along the northern Pacific coastline and is the gateway to the
Olympic National Park. The county is home to the cities of Port Angeles,
Sequim, Forks, Clallam Bay, Neah Bay, Sekiuy, and La Push. According to the
2000 U.S. Census, the county is comprised of 21 census tracts (2 moderate-, 18
middle-, and 1 upper-income). There are no low-income geographies in Clallam
County.
MASON COUNTY
Mason County is comprised of four census tracts (1 moderate-, 2 middle-, and 1
upper-income), according to the 2000 U.S. Census. Surrounded by the Olympic
Mountains on the west and located along the southern Puget Sound on the Kitsap
Peninsula, Mason County is a recreational and scenic destination easily
accessible off of Interstate 5. The town of Shelton is Mason County's only
incorporated city. Unincorporated rural communities include Belfair, Allyn,
Hoodsport, Union, Tahuya, Lilliwaup, Grapeview, Matlock, and Elma.
CITY OF AUBURN
The 2000 U.S. Census has divided the city of Auburn into 31 geographies (1
low-, 13 moderate-, 15 middle-, and 2 upper-income). Centrally located in the
Green River Valley, between the cities of Seattle and Tacoma, Auburn offers an
abundance of industrial land. The City of Auburn has developed a comprehensive
land use plan that designated specific areas for industrial, commercial, and
residential development to preserve and enhance the community's quality of
living. The city's unemployment rate of 6.9 percent and 5.0 percent at the end
of the third quarter of 2004 and 2005, respectively, remains somewhat higher
than the statewide total unemployment rates.
COMMUNITY CONTACTS
A recent community contact conducted in Kitsap County was reviewed as a part of
this evaluation. The contact indicated that the local community is in need of
more affordable housing and accessible loans. A need for more multi-lingual
individuals in the financial industry was also expressed.
6
OVERALL PERFORMANCE CRITERIA CONCLUSIONS
LOAN-TO-DEPOSIT RATIO
Westsound Bank's loan-to-deposit ratio is reasonable, considering seasonal
variations, the institution's size and operations, and economic and competitive
factors in the assessment area.
Examiners use the loan-to-deposit ratio to evaluate an institution's level of
lending relative to its net deposited funds. The prior 19-quarter average since
Westsound Bank's previous CRA evaluation equals 88 percent. Within that
timeframe, the low was 79.8 percent as of March 31, 2001, and the high was 97.6
percent as of March 31, 2005. The bank's loan-to-deposit is not reflective of
the fact that the bank sells a large portion of their mortgage loans on the
secondary market, which increases its capacity to lend additional funds to its
customers. Overall, the bank's loan-to-deposit ratio indicates responsiveness to
area credit needs.
There are no similarly situated banks that are equivalent to Westsound Bank in
size, product mix, and assessment areas, to reasonably compare loan-to-deposit
ratios.
LENDING IN THE ASSESSMENT AREAS
Because Westound Bank's primary business focus is mortgage lending, examiners
concentrated on mortgage loan originations for the years 2004 and 2005 in
assessing the bank's lending performance within its assessment areas. 2004
information was taken from the bank's reported HMDA LAR, and 2005 information
was taken from loan data supplied by the bank. The percentages presented
throughout the evaluation will primarily be based on quantity unless dollar
volumes warrant additional discussion. Table 2 details the number and dollar
volume of mortgage loans the bank originated inside and outside all assessment
areas during the prior two years.
TABLE 2 - DISTRIBUTION OF LOANS INSIDE AND OUTSIDE OF THE ASSESSMENT AREAS
Number of Loans Dollars in Loans (000s)
-------------------------------------------- --------------------------------------------------
INSIDE OUTSIDE TOTAL INSIDE OUTSIDE TOTAL
----------------- ------------- ------ ------------------ ------------------- -------
LOAN TYPE # % # % $ % $ %
- --------- ------- ------ ---- ------ -------- ------ -------- ------
2004 HMDA 450 93.8% 30 6.3% 480 75,415 94.1% 4,713 5.9% 80,128
2005 HMDA 1,002 72.5% 381 27.6% 1,383 219,016 72.6% 82,490 27.4% 301,506
TOTAL 1,452 77.9% 411 22.1% 1,863 294,431 77.2% 87,203 22.8% 381,634
SOURCE: 2004 HMDA LAR, BANK RECORDS
Westsound Bank originated a majority of loans within its identified assessment
areas in both 2004 and 2005.
BORROWER PROFILE
WSB's distribution of borrowers reflects reasonable penetration among
individuals of different income levels (including low- and moderate-income).
Borrower profile refers to the evaluation of lending to individuals and families
of varying income levels, particularly low- and moderate-income borrowers. Table
3 illustrates WSB's distribution of originated 2004 and 2005 HMDA reportable
loans to borrowers of different income levels within all assessment areas.
Because of significant income reporting errors in WSB's 2004 HMDA data,
examiners reviewed a sample consisting of 42 randomly selected HMDA-reportable
loan originations for 2004. WSB borrower income percentages shown in Table 3 for
2004 reflect a breakdown of that sample.
TABLE 3 -- DISTRIBUTION OF HMDA LOANS BY BORROWER INCOME
<Table>
<Caption>
2004
AGGREGATE 2004 2005 Total
LENDING % OF ------------ -------------- --------------
BORROWER INCOME LEVEL (% OF #) FAMILIES # % # % # %
- --------------------- --------- -------- --- ------ ----- ------ ----- ------
Low............................. 4.4% 19.1% 1 2.4% 47 4.7% 82 5.7%
Moderate........................ 19.5% 19.1% 11 26.2% 160 16.0% 257 17.7%
Middle.......................... 30.7% 23.9% 8 19.0% 259 25.8% 392 27.0%
Upper........................... 39.5% 37.9% 21 50.0% 491 49.0% 661 45.5%
NA.............................. 5.9% 0.0% 1 2.4% 45 4.5% 60 4.1%
Total........................... 100.0% 100.0% 42 100.0% 1,002 100.0% 1,452 100.0%
</Table>
- ---------------
Source: 2000 U.S. Census, 2004 HMDA LAR, 2004 HMDA Aggregate Data, Bank Records
In the 2004 sample, WSB's lending percentage was below the aggregate percentage
for lending to low-income borrowers; however, the bank's moderate-income
percentage significantly exceeded the 2004 aggregate percentage. For 2005, FSB
appears slightly above aggregate in the low-income category, and dropped below
aggregate in the moderate-income category. Setting the sample aside and looking
at actual originations, the bank's overall lending activity increased by
approximately 81 percent in 2005, most of which were to middle- and upper-income
borrowers. Management indicated that the apparent decline in the moderate-income
category most likely resulted from the bank's significant growth and general
increase in mortgage activity in 2005.
During that time period, median home prices increased in the bank's assessment
areas and decreased housing affordability for low- and moderate-income
borrowers. According to the Washington Center for Real Estate Research, the
median home price in Kitsap County increased 23.3 percent from $215,000 in 2004
to $264,800 in 2005. From 2004 to 2005, the median home
8
price also increased by 19.8 percent in Pierce County and 23.5 percent in
Clallam County. These changes reduced opportunities for low- and
moderate-income individuals to purchase homes.
The first-time housing affordability index for Kitsap County dropped from 76.3
in 2004 to 63.4 in 2005, meaning that the average first-time homebuyer made
only 63.4 percent of the median household income required to qualify for a
mortgage on a median price home. The 2005 first-time affordability indexes for
Pierce County and Clallam County decreased comparably to 65.3 and 60.9,
respectively.
The first-time housing affordability buyer index is derived following a model
developed by the National Association of REALTORS(R) and uses the effective
mortgage rate on loans closed during the quarter (increased by one-quarter
point to include mortgage insurance), the median home price, and 70 percent of
the median household income, assuming a 10 percent down payment and a 30-year
loan term. First-time home buyers are typically younger individuals who are not
yet established in their careers and do not have the financial means for large
down payments.
Due to changes in market forces over time, the bank's 2005 lending performance
cannot be directly compared to 2004 aggregate data with any degree of certainty
regarding conclusions. Until 2005 aggregate data is made available, comparisons
are not sufficient to place significant weight on analysis of the bank's 2005
lending activity. WSB's overall lending to low- and moderate- income
individuals is reasonable, relative to the 2004 aggregate data, the percentage
of families reported in the 2000 U.S. Census, and the identified need for more
affordable housing by the community contact.
GEOGRAPHIC DISTRIBUTION OF LOANS
WSB's geographic distribution of loans reflects reasonable dispersion throughout
the assessment areas.
Examiners reviewed the bank's geographic distribution of 2004 and 2005 HMDA
reportable loan originations to determine if WSB is serving the needs of its
assessment areas, including low- and moderate-income geographies. Table 4
details the bank's distribution of mortgage loans throughout all assessment
areas by income category of the census tract.
TABLE 4 - DISTRIBUTION OF HMDA LOANS BY INCOME CATEGORY OF THE CENSUS TRACT
<Table>
<Caption>
AGGREGATE
TRACT LENDING IN % OF OWNER 2004 2005 TOTAL
INCOME 2004 OCCUPIED ------------ ------------ ------------
LEVEL (% OF #) HOUSING UNITS # % # % # %
- ------- ---------- ------------- ----- ----- ----- ----- ----- -----
LOW 0.9% 0.7% 29 6.5% 36 3.6% 65 4.5%
MODERATE 13.9% 13.1% 77 17.1% 104 10.4% 181 12.5%
MIDDLE 63.8% 65.3% 275 61.1% 658 65.6% 933 64.2%
</Table>
9
<Table>
<Caption>
<s> <c>
- --------------------------------------------------------------------------------------
Upper 21.3% 20.9% 69 15.3% 204 20.4% 273 18.8%
- --------------------------------------------------------------------------------------
N/A 0.1% 0.0%
- --------------------------------------------------------------------------------------
Total 100.0% 100.0% 450 100.0% 1,002 100.0% 1,452 100.0%
- --------------------------------------------------------------------------------------
</Table>
Source: 2000 U.S. Census, 2004 HMDA LAR, 2004 HMDA Aggregate Data, Bank Records
In 2004, WSB penetrated low-income census tracts at a rate of 6.5 percent,
exceeding the aggregate lending rate of 0.9 percent. Lending in moderate-income
census tracts was at 17.1 percent, also exceeding aggregate lending at 13.9
percent.
In 2005, the bank originated 3.6 percent of all mortgage loans in low-income
tracts, and 10.4 percent in moderate-income tracts. As similarly noted in the
borrower profile discussion, although percentages have decreased in low- and
moderate-income tracts, actual number volumes have increased. WSB's 2005
lending in low-income census tracts exceeds the 2000 U.S. Census reported
percentage of owner occupied housing units in low-income tracts, and is
slightly lower than the reported owner occupied housing units in
moderate-income geographies.
The bank's overall lending distribution is concentrated within middle-income
geographies, which is consistent with the 2000 U.S. Census reported percentages
of middle-income geographies and owner occupied housing units in middle-income
geographies of the bank's assessment areas.
RESPONSE TO COMPLAINTS
Since the previous evaluation, Westsound Bank has not received any complaints
relating to the Community Reinvestment Act.
COMPLIANCE WITH ANTIDISCRIMINATION LAWS
No evidence of discriminatory or other illegal credit practices were identified
during this evaluation period.
INVESTMENT AND SERVICES
Management requested that investments and services be reviewed as a part of the
CRA evaluation. Examiners reviewed documentation provided by the bank on two
investments and multiple donations to a variety of community organizations.
Although documentation provided by the bank indicated that WSB participated in
two investments and made donations to various community organizations that
benefited its assessment areas, examiners did not identify any specific
investments to organizations whose primary purposes were "community
development," as defined under the Community Reinvestment Act (CRA).
WSB's President and CEO, David Johnson, also donates his time and financial
expertise to various community groups, two of which are CRA qualified.
President Johnson serves as an advisor for an organization that provides
entrepreneurial business assistance, training, and lending services to
low-income women, immigrants, and people with disabilities. Mr. Johnson also
serves on the Bremerton Economic Roundtable, whose mission is to revitalize
government designated "blighted" areas by creating wage earning jobs and
affordable residential redevelopment.
Westsound Bank has three full-service branches in Kitsap County, one in Pierce
County, and two in Clallam County. The branches are all fairly accessible by
low- and moderate-income tracts. In addition, the bank offers a courier service
that serves businesses in portions of Kitsap, Clallam and Mason counties.
During the review period the bank had five ATM machines that customers could
conduct transactions on after business hours. The bank also offers internet
banking for account transfers and bill paying options.
On April 1, 2004, WSB opened a loan production office in Gig Harbor. On
June 20, 2005, a new Gig Harbor branch was opened and was merged together with
the loan production office. On June 1, 2005, a new loan production office was
opened in the city of Federal Way. The loan production office primarily
originates mortgages; however, will accommodate borrowers who wish to obtain
other types of loans.
11
KITSAP COUNTY FULL SCOPE EVALUATION
WSB operates out of three locations in the Kitsap County Assessment Area. The
bank's main office is located in Bremerton, while two additional full-service
branches are located in Silverdale and Port Orchard.
The Kitsap County Assessment Area consists of all census tracts in Kitsap
County, Washington, which includes the cities of Bremerton, Kingston, Port
Orchard, Poulsbo, and Winslow. Table 5 details the percentage of census tracts,
households, businesses, farms, and housing units by census tract income level,
as reported by the 2000 U.S. Census and D & B.
TABLE 5 - 2005 ASSESSMENT AREA CENSUS TRACT DETAIL
<Table>
INCOME LEVEL # OF TRACTS % OF TRACTS POPULATION % OF BUSINESS
LOW-INCOME 2 3.9% 3.1% 3.5%
MODERATE-INCOME 9 17.6% 16.4% 11.9%
MIDDLE-INCOME 32 62.8% 63.8% 63.3%
UPPER-INCOME 8 15.7% 16.7% 21.3%
TOTALS 51 100% 100% 100%
</Table>
Source: 2000 U.S. Census, D&B
The Kitsap County Assessment Area provides for WSB's primary lending area. In
2004, the bank originated 76.4 percent of its total HMDA reportable loans within
the Kitsap County Assessment Area. In 2005, the bank originated 62.2 percent of
its HMDA of its reportable loans within the assessment area.
BORROWER PROFILE
WSB's distribution of borrowers reflects reasonable penetration among
individuals of different income levels within the assessment area.
Table 6 details the bank's distribution of 2004 and 2005 HMDA reportable loans
to borrowers of different incomes within Kitsap County. Limitations of the
random sample used in the overall analysis did not permit a meaningful breakdown
of loans within Kitsap County. WSB borrower profile information for 2004
presented in Table 6 is based on the bank's HMDA LAR.
TABLE 6 - DISTRIBUTION OF HMDA LOANS BY BORROWER INCOME
<Table>
2004 2005 TOTAL
------ ------ -----
BORROWER 2004
INCOME AGGREGATE % OF
LEVEL LENDING FAMILIES # % # % # %
(% OF #)
LOW 4.7% 17.5% 31 9.0% 39 6.3% 70 7.2%
MODERATE 18.0% 19.0% 74 21.5% 110 17.6% 184 19.0%
MIDDLE 30.1% 24.5% 108 31.4% 180 28.9% 288 29.8%
UPPER 40.5% 39.0% 118 34.3% 254 40.8% 372 38.5%
NA 6.7% 0.0% 13 3.8% 40 6.4% 53 5.5%
------ ------ --- ------ --- ------ --- ------
TOTAL 100.0% 100.0% 344 100.0% 623 100.0% 967 100.0%
------ ------ --- ------ --- ------ --- ------
</Table>
Source: 2000 U.S. Census, 2004 HMDA LAR, 2004 HMDA Aggregate Data, Bank Records
WSB originated 9 percent of all mortgage loans within the assessment area to
low-income borrowers and 21.5 percent to moderate-income borrowers in 2004. The
bank's lending percentages exceeded that of aggregate percentages to low- and
moderate-income borrowers of 4.7 percent and 18 percent, respectively. However,
due to income reporting errors in the bank's 2004 HMDA data, it is likely that
the low-income percentage is overstated. Nevertheless, because WSB's most
significant lending volume occurs in Kitsap County, the bank's percentages for
lending to low- and moderate-income borrowers in Kitsap County are anticipated
to be reasonably consistent with the bank's overall performance for all
assessment areas combined. Refer to the Overall Borrower Profile section for
further discussion on the bank's
13
lending performance to borrowers of different incomes. Since the majority of
WSB's lending occurs within Kitsap County, lending performance within the Kitsap
County Assessment Area strongly drives the bank's overall performance.
GEOGRAPHIC DISTRIBUTION
WSB's geographic distribution of lending reflects reasonable dispersion
throughout the Kitsap County assessment area.
The bank's 2004 and 2005 distribution of HMDA loans by census tract income level
within the Kitsap County Assessment Area is detailed in Table 7.
TABLE 7 - DISTRIBUTION OF HMDA LOANS BY INCOME CATEGORY OF THE CENSUS TRACT
<Table>
2004 2005 TOTAL
------ ------ -----
TRACT 2004 % OF OWNER
INCOME AGGREGATE OCCUPIED
LEVEL LENDING HOUSING UNITS # % # % # %
(% OF #)
LOW 2.5% 1.8% 28 8.1% 34 5.5% 62 6.4%
MODERATE 10.9% 9.3% 73 21.2% 91 14.6% 164 17.0%
MIDDLE 69.1% 69.6% 211 61.4% 435 69.8% 646 66.8%
UPPER 17.5% 19.3% 32 9.3% 63 10.1% 95 9.8%
------ ------ --- ------ --- ------ --- ------
TOTAL 100.0% 100.0% 344 100.0% 623 100.0% 967 100.0%
------ ------ --- ------ --- ------ --- ------
</Table>
Source: 2000 U.S. Census, 2004 HMDA LAR, 2004 HMDA Aggregate Data, Bank Records
WSB's 2004 lending penetration exceeded that of aggregate percentages in both
low- and moderate-income census tracts. The bank's lending to low-income tracts
was 8.1 percent compared with aggregate lending of 2.5 percent, and lending to
moderate-income tracts was 21.2 percent, exceeding the 10.9 percent reported by
aggregate lenders.
The bank's lending percentages in low- and moderate-income census tracts for
2005 were lower than 2004 percentages; however, number volumes increased and
exceeded the percentages of owner occupied housing units in both low- and
moderate-income census tracts.
PIERCE COUNTY LIMITED SCOPE EVALUATION
Westsound Bank operates one branch in the Pierce County Assessment Area and
provides the full range of credit and financial services offered by the bank.
The Pierce County Assessment Area accounts for the following activity.
- - 14.4 percent of residential mortgage loans originated within all assessment
areas in 2004
- - 22.9 percent of residential mortgage loans originated within all assessment
areas in 2005
The Pierce County Assessment Area consists of all census tracts in Pierce
County, Washington, which includes the city of Tacoma. Table 8 details the
percentage of census tracts, households, businesses, farms, and housing units by
census tract income level according to the 2000 census and D & B.
TABLE 8 -- 2005 ASSESSMENT AREA CENSUS TRACT DETAIL
INCOME LEVEL # OF TRACTS % OF TRACTS POPULATION % % OF BUSINESSES
- ------------ ----------- ----------- ------------ ---------------
LOW-INCOME 5 3.2% 2.7% 2.1%
MODERATE-INCOME 30 19.0% 18.1% 21.2%
MIDDLE-INCOME 90 57.0% 58.5% 55.6%
UPPER-INCOME 32 20.2% 20.5% 21.1%
N/A 1 0.6% 0.2% 0.0%
---- ----- ----- -----
TOTALS 158 100% 100% 100%
==== ===== ===== =====
Source: 2000 U.S. Census, D&B
The 2005 HUD revised median family income for the Pierce County Assessment Area
is $62,100. The assessment area contains whole geographies, does not reflect
illegal discrimination, and does not arbitrarily exclude any low or
moderate-income areas.
Data applicable to the Pierce County Assessment Area indicates performance
generally similar to the bank's overall performance. Less weight is placed on
lending performance in this assessment area because the overall impact is not as
significant.
15
CLALLAM COUNTY LIMITED SCOPE EVALUATION
Westsound Bank operates two branches in the Clallam County Assessment Area
providing the full range of credit and financial services offered by the bank.
The Clallam County Assessment Area accounts for, in total, the following items.
- - 3.6 percent of residential mortgage loans originated within all assessment
areas in 2004
- - 6.5 percent of residential mortgage loans originated within all assessment
areas in 2005
The Clallam County Assessment Area consists of all census tracts in Clallam
County, Washington, which includes the cities of Forks, Port Angeles, and
Sequim. Table 9 details the percentage of census tracts, households, businesses,
farms, and housing units by census tract income level according to the 2000
census and D & B.
TABLE 9 -- 2005 ASSESSMENT AREA CENSUS TRACT DETAIL
INCOME LEVEL # OF TRACTS % of TRACTS POPULATION % % OF BUSINESSES
- ------------ ----------- ----------- ------------ ---------------
LOW-INCOME 0 0.0% 0.0% 0.0%
MODERATE-INCOME 2 9.5% 6.8% 11.2%
MIDDLE-INCOME 18 85.7% 87.2% 84.2%
UPPER-INCOME 1 4.8% 6.1% 4.6%
---- ----- ----- -----
TOTALS 21 100% 100% 100%
==== ==== ==== ====
Source: 2000 U.S. Census, D&B
The 2005 HUD revised median family income for the Clallam County Assessment Area
is $51,200. The assessment area contains whole geographies, does not reflect
illegal discrimination, and does not arbitrarily exclude any low or
moderate-income areas.
Data applicable to the Clallam County Assessment Area indicates performance
generally similar to WSB's overall performance. Less weight is placed on lending
performance in this assessment area because the overall impact is not as
significant.
16