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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section l5 (d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999
Commission File Number 000-24503
Whidbey Island Bank 401 (k) Plan
(Full title of the plan)
WASHINGTON BANKING COMPANY
1421 S.W. BARLOW STREET
Oak Harbor, Washington 98277
_______________________________________________
(Name of issuer of the securities held pursuant to the plan and
the address of its principal executive office)
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WHIDBEY ISLAND BANK 401(k) PLAN
Financial Statements and Schedule
December 31, 1999 and 1998
(With Independent Auditors' Report Thereon)
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WHIDBEY ISLAND BANK 401(k) PLAN
Table of Contents
Page
Independent Auditors' Report 1
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4
Schedule
1 Schedule of Assets Held for Investment Purposes 9
Exhibits
23.1 Consent of Independent Accountants
Signatures
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Independent Auditors' Report
Administrative Committee
Whidbey Island Bank 401(k) Plan:
We have audited the accompanying statements of net assets available for
benefits of Whidbey Island Bank 401(k) Plan (Plan) as of December 31, 1999 and
1998 and the related statements of changes in net assets available for
benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets available for benefits of the Plan as
of December 31, 1999 and 1998, and the changes in net assets available for
benefits for the years then ended in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets
held for investment purposes at December 31, 1999 is presented for the
purpose of additional analysis and is not a required part of the basic
financial statements, but is supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. This supplemental
schedule is the responsibility of the Plan's management. The supplemental
schedule has been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, are fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
Seattle, Washington
June 9, 2000
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WHIDBEY ISLAND BANK 401(k) PLAN
Statements of Net Assets Available for Benefits
December 31, 1999 and 1998
1999 1998
------------------ ------------------
Assets:
Investments, at fair value:
Money market funds $ 135,727 134,988
Mutual funds 2,264,379 1,481,956
Common stock 728,398 691,492
------------------ ------------------
3,128,504 2,308,436
------------------ ------------------
Receivables:
Sponsor -- 2,769
Participants -- 10,174
------------------ ------------------
-- 12,943
------------------ ------------------
Net assets available for benefits $ 3,128,504 2,321,379
================== ==================
See accompanying notes to financial statements.
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WHIDBEY ISLAND BANK 401(k) PLAN
Statements of Changes in Net Assets Available for Benefits
Years ended December 31, 1999 and 1998
1999 1998
------------------ ------------------
Additions to net assets available for benefits attributed to:
Investment income:
Interest and dividends $ 97,619 20,519
Net appreciation (depreciation) in fair value of investments:
Mutual funds 329,366 176,983
Common stock (12,030) (284,732)
------------------ ------------------
414,955 (87,230)
------------------ ------------------
Contributions:
Participants 310,600 241,088
Sponsor 80,219 67,440
Rollovers 78,473 66,145
------------------ ------------------
469,292 374,673
------------------ ------------------
Total additions 884,247 287,443
Deductions from net assets attributed to benefits
paid to participants
77,122 33,732
------------------ ------------------
Net increase in net assets available for benefits 807,125 253,711
Net assets available for benefits at beginning of year 2,321,379 2,067,668
------------------ ------------------
Net assets available for benefits at end of year $ 3,128,504 2,321,379
================== ==================
See accompanying notes to financial statements.
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WHIDBEY ISLAND BANK 401(k) PLAN
Notes to Financial Statements
December 31, 1999 and 1998
(1) Plan Description
The following description of the Whidbey Island Bank 401(k) Plan (Plan)
provides only general information. Participants should refer to the
Plan document for a more complete description of the Plan's provisions.
(a) General
The Plan is a defined contribution plan established for employees
of Whidbey Island Bank (Sponsor) and the Bank's subsidiary, WIB
Financial Services, Inc., who are at least 21 years of age and
have completed one year of service, as defined by the Plan
document.
The Plan is subject to provisions of the Employee Retirement
Income Security Act of 1974 (ERISA).
(b) Administration
The Sponsor is the Plan administrator and has appointed certain
designated directors of the Sponsor to serve as trustees of the
Plan. The assets of the Plan are held by Safeco Mutual Funds
(Safeco), except Sponsor common stock which is held by Security
Trust Company.
(c) Contributions and Participants' Accounts
Accounts are established for each participant and include the
participant's contributions (including those rolled over from
another qualified plan or trust),employer matching contributions,
and any discretionary contributions from the Sponsor and earnings
thereon.
Participants may contribute up to 15% of pretax annual
compensation, limited by the Internal Revenue Code to $10,000 in
1999 and 1998. The Sponsor's matching contribution is 50 cents
for each dollar contributed on the first 5% of the participant's
eligible compensation. The Sponsor may also make discretionary
contributions at the option of the Sponsor's board of directors.
There were no Sponsor discretionary contributions in 1999 or
1998. The Sponsor contributions are made in cash and allocated
to a participant's account balance in accordance with the
participant's contribution elections.
Effective March 1, 2000, employees are eligible to make
contributions on the first day of the month coincident with or
following hire date and attaining age 21. Employees are eligible
to receive matching and profit sharing contributions as of the
January 1 or July 1 coincident with or following completion of
one year of service and the attainment of age 21.
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WHIDBEY ISLAND BANK 401(k) PLAN
Notes to Financial Statements
December 31, 1999 and 1998
(d) Investment Options
Participants have the option of directing their contributions
in 1% increments into any one or more of the Plan's investment
fund options: Washington Banking Company Common Stock, Safeco
International Stock Fund, Janus Worldwide Fund, Safeco Small
Company Fund, Safeco Growth Fund, Safeco Northwest Fund,
Neuberger & Berman Equity Fund, Janus Fund, Safeco Equity Fund,
Scudder Growth & Income Fund, Safeco Income Fund, American
Century Group Value Equity Income Fund, Safeco High Yield Bond
Fund, Loomis Sayles Bond Fund, and Safeco Money Market Fund.
Participants may change their investment options at anytime.
(e) Vesting
Participants are immediately vested in their contributions,
Sponsor matching contributions and earnings thereon. Vesting of
the Sponsor's discretionary contribution and actual earnings
thereon is based on years of credited service of participants.
The following schedule sets forth the vesting schedule:
Years of vesting service Vested percent
--------------------------------------------- -------------------
Less than 2 $ 0%
---------------------------------------------
2 20
---------------------------------------------
3 40
---------------------------------------------
4 60
---------------------------------------------
5 80
---------------------------------------------
6 100
---------------------------------------------
Participants become fully vested at the age of 65, upon the
participant's death or upon permanent disability.
Forfeitures of nonvested Sponsor contributions are allocated to
remaining participants and treated as Sponsor non-elective
contributions for the Plan year. Forfeited nonvested balances
during 1999 and 1998 amounted to approximately $450 and $500,
respectively.
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WHIDBEY ISLAND BANK 401(k) PLAN
Notes to Financial Statements
December 31, 1999 and 1998
(f) Payment of Plan Benefits
Participants may elect to have payments of vested benefits paid
either in a lump sum or on an installment basis after their
retirement or termination date. With approval of the Sponsor,
early withdrawals may be paid by the Plan to those employees
experiencing a financial hardship, as defined by the Plan.
Distributions are paid in a single lump sum or, if the
account balance exceeds $5,000 and at the participant's
election, by payment in monthly, quarterly or annual installments
over a fixed, reasonable period of time not to exceed the
combined life expectancy of the participant and beneficiary.
(g) Plan Expenses
Expenses of the Plan are paid by the Sponsor and, therefore, are
not included in the accompanying financial statements of the
Plan.
(h) Plan Termination
Although it has not expressed an intent to do so, the Sponsor
has the right under the Plan to discontinue its contributions at
any time and to terminate the Plan subject to the provisions of
ERISA. Should the Plan be terminated at some future date, all
participants would become fully vested in their account balances.
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation and Accounting
The Plan financial statements are presented on the accrual basis
of accounting.
(b) Valuation of Investments
Investments are stated at fair value based on quoted market
prices.
Net appreciation or depreciation of investments includes both
realized and unrealized gains and losses. Purchases and sales of
securities are recorded on a trade-date basis.
(c) Payment of Benefits
Benefits are recorded when paid.
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WHIDBEY ISLAND BANK 401(k) PLAN
Notes to Financial Statements
December 31, 1999 and 1998
(d) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires the Plan
administrator to make estimates and assumptions that affect the
reported amounts of assets, liabilities, and changes therein, and
disclosure of contingent assets and liabilities. Actual results
could differ from those estimates.
(3) Tax Status
The Internal Revenue Service has determined and informed the Sponsor by
a letter dated October 26, 1994, that the Plan and related trust are
designed in accordance with applicable sections of the Internal Revenue
Code (IRC). The Plan has been amended since receiving the determination
letter. However, the Plan administrator believes that the Plan is
designed and is currently being operated in compliance with the
applicable requirements of the IRC.
(4) Related Party Transactions
Certain Plan assets are managed by Safeco and therefore, the related
transactions qualify as party-in-interest transactions.
(5) Investments
In September 1999, the American Institute of Certified Public
Accountants issued Statement of Position 99-3, Accounting for and
Reporting of Certain Defined Contribution Plan Investments and Other
Disclosure Matters, (SOP 99-3). SOP 99-3 simplifies the disclosure
for certain investments and is effective for plan years ending after
December 15, 1999. The Plan adopted SOP 99-3 during the Plan year
ended December 31, 1999. Accordingly, information previously required
to be disclosed about participant-directed fund investment programs
is not presented in the Plan's financial statements.
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WHIDBEY ISLAND BANK 401(k)
Notes to Financial Statements
December 31, 1999 and 1998
(6) Investments
The following table presents the assets held for investment purposes at
December 31:
1999 1998
-------------------------------- ----------------------------------
Principal Principal
amount or amount or
number of Investment number of Investment
shares value shares value
--------------- ---------------
Money market funds - Safeco Money Market
Fund 135,727 $ 135,727 134,988 $ 134,988
--------------- ----------------
Mutual funds:
Safeco International Stock Fund 213 3,602 117 1,534
Janus Worldwide Fund 5,967 456,062 4,819 228,211
Safeco Small Company Fund 12,862 163,742 10,387 115,917
Safeco Growth Fund 24,890 579,946 22,550 511,881
Safeco Northwest Fund 11,014 278,986 7,515 133,235
Neuberger & Berman Equity Fund 2,094 50,257 1,469 37,461
Janus Fund 8,782 386,874 4,376 147,247
Safeco Equity Fund 6,826 163,983 7,119 165,520
Scudder Growth & Income Fund 5,690 151,883 4,773 125,573
Safeco Income Fund 678 15,185 501 11,770
American Century Group Value Equity
Income Fund 1,247 6,986 529 3,337
Safeco High Yield Bond Fund 156 1,305 31 270
Loomis Sayles Bond Fund 483 5,568 -- --
--------------- ----------------
Total mutual funds 2,264,379 1,481,956
--------------- ----------------
Common stock -- Washington Banking Company
87,090 728,398 81,352 691,492
--------------- ----------------
Total investments $ 3,128,504 $ 2,308,436
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Schedule 1
WHIDBEY ISLAND BANK 401(k) PLAN
Schedule of Assets Held for Investment Purposes
December 31, 1999
Description of investment, including
Identity of issue, borrower, maturity date, rate of interest,
lessor, or similar party collateral, and par or maturity value Current value
- -------------------------------------------------------- ------------------------------------------------- ---------------
*Washington Banking Company Common Stock, 87,090 shares $ 728,398
*Safeco Mutual Funds International Stock Fund, 213 shares 3,602
Janus Equity Funds Janus Worldwide Fund, 5,967 shares 456,062
*Safeco Mutual Funds Small Company Fund, 12,862 shares 163,742
*Safeco Mutual Funds Growth Fund, 24,890 shares 579,946
*Safeco Mutual Funds Northwest Fund, 11,014 shares 278,986
Neuberger & Berman Funds Equity Fund, 2,094 shares 50,257
Janus Equity Funds Janus Fund, 8,782 shares 386,874
*Safeco Mutual Funds Equity Fund, 6,826 shares 163,983
Scudder Growth & Income Fund, 5,690 shares 151,883
*Safeco Mutual Funds Income Fund, 678 shares 15,185
American Century Group Value Equity Income Fund, 1,247 shares 6,986
*Safeco Mutual Funds High Yield Bond Fund, 156 shares 1,305
Loomis Sayles Loomis Sayles Bond Fund, 483 shares 5,568
*Safeco Mutual Funds Money Market Fund, 135,727 shares 135,727
*A party-in-interest, as defined by Section 3(14) of ERISA
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EXHIBITS
23.1 Consent of Independent Accountants
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustee or other persons who administer the employee benefit plan have duly
caused this annual report to be signed on its behalf by the undersigned,
hereunto duly authorized.
Date June 27, 2000
WHIDBEY ISLAND BANK 401 (k) PLAN
By: /s/ Michal D. Cann
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Michal D. Cann, Trustee