<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
x Quarterly Report under Section 13 or 15(D) of the Securities
----- Exchange Act of 1934
For the Quarterly Period ended June 30, 1996
-------------
----- Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
----- -----
Commission file number 0-28360
----------------------------------------------------
IBW Financial Corporation
- - - -------------------------------------------------------------------------------
(Name of Small Business Issuer in its Charter)
District of Columbia 52-1943477
- - - --------------------------------- -------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
4812 Georgia Avenue, NW, Washington, DC 20011
- - - -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(202) 722-2000
- - - -------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
N/A
- - - -------------------------------------------------------------------------------
(Former Name, Former Address, and Former Fiscal Year, If Changed Since Last
Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes x No
- - - ----- -----
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date: As of July 31, 1996, there
were 637,160 shares of the common stock $1.00 par value of IBW Financial
Corporation outstanding.
Transitional Small Business Disclosure Format (check one) Yes x No
---- ----
<PAGE>
IBW FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
- - - --------------------------------------------------------------------------------
(Unaudited)
June 30, December 31,
1996 1995
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and due from banks $11,851 $11,014
Interest bearing deposits in other banks 1,095 95
Federal funds sold 400 20,800
Commercial paper 2,491 2,977
------------- ------------
Total cash and cash equivalents 15,837 34,886
Securities available-for-sale, at fair value
(amortized cost, $107,139 and $86,419) 106,192 87,198
Loans receivable, net of allowance for loan losses
of $904 and $1,177 98,294 92,817
Other real estate owned, net 1,172 950
Bank premises and equipment, net 2,429 2,358
Other assets 4,691 4,352
------------- ------------
TOTAL $228,615 $222,561
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Demand deposits $46,880 $46,341
Time and savings deposits 161,207 157,358
------------- ------------
Total deposits 208,087 203,699
Securities sold under repurchase agreements 2,628
Other liabilities 1,110 1,307
Note payable 1,000 1,000
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Total liabilities 212,825 206,006
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SHAREHOLDERS' EQUITY
Preferred stock - $1 par value; 1,000,000 authorized;
none issued
Common stock - $1 par value;
1,000,000 shares authorized; 637,160
shares issued and outstanding 637 637
Capital surplus 4,329 4,329
Retained earnings 11,532 11,075
Unrealized gain (loss) on available-for-sale
securities, net of taxes of ($365 ) and $265 (708) 514
------------- ------------
Total shareholders' equity 15,790 16,555
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TOTAL $228,615 $222,561
============= ============
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
IBW FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
- - - ----------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
June 30, June 30,
1996 1995
---- ----
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $4,512 $4,486
U.S. treasury securities 782 1,071
Obligations of U.S. government
agencies and corporations 1,745 1,491
Obligations of states and political subdivisions 309 55
Bank balances and other securities
purchased under agreements to resell 496 320
------------- -------------
Total interest income 7,844 7,423
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INTEREST EXPENSE:
Time certificates over $100,000 328 159
Other savings and time deposits 2,331 2,308
Securities sold under repurchase agreements 5
Note payable 27 -
------------- -------------
Total interest expense 2,691 2,467
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NET INTEREST INCOME 5,153 4,956
PROVISION FOR LOAN LOSSES 150 300
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NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 5,003 4,656
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NONINTEREST INCOME:
Service charges on deposit and checking accounts 1,026 972
Gain (loss) on sale of securities 62 (16)
Other operating income 104 96
------------- -------------
Total noninterest income 1,192 1,052
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NONINTEREST EXPENSE:
Salaries and employee benefits 3,127 2,653
Occupancy 347 313
Furniture and equipment 270 221
Data processing 258 236
Other 1,315 1,436
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Total noninterest expense 5,317 4,859
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INCOME BEFORE INCOME TAXES 878 849
PROVISION FOR INCOME TAXES 230 240
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NET INCOME $648 $609
============= =============
NET INCOME PER COMMON SHARE $1.02 $1.00
============= =============
WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING 637,160 606,294
============= =============
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
IBW FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
QUARTER ENDED JUNE 30, 1996 and 1995
(Dollars in thousands, except per share data)
- - - --------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
June 30, June 30,
1996 1995
---- ----
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $2,272 $2,246
U.S. treasury securities 435 510
Obligations of U.S. government
agencies and corporations 880 784
Obligations of states and political subdivisions 160 29
Bank balances and other securities
purchased under agreements to resell 201 206
------------ ------------
Total interest income 3,948 3,775
------------ ------------
INTEREST EXPENSE:
Time certificates over $100,000 168 89
Other savings and time deposits 1,153 1,170
Securities sold under repurchase agreements 5
Note payable 14 -
------------ ------------
Total interest expense 1,340 1,259
------------ ------------
NET INTEREST INCOME 2,608 2,516
PROVISION FOR LOAN LOSSES 100 150
------------ ------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 2,508 2,366
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NONINTEREST INCOME:
Service charges on deposit and checking accounts 521 535
Gain (loss) on sale of securities 21 (5)
Other operating income 75 74
------------ ------------
Total noninterest income 617 604
------------ ------------
NONINTEREST EXPENSE:
Salaries and employee benefits 1,673 1,344
Occupancy 176 153
Furniture and equipment 140 119
Data processing 125 100
Other 682 789
------------ ------------
Total noninterest expense 2,796 2,505
------------ ------------
INCOME BEFORE INCOME TAXES 329 465
PROVISION FOR INCOME TAXES 54 120
------------ ------------
NET INCOME $275 $345
============ ============
NET INCOME PER COMMON SHARE $0.43 $0.56
============ ============
WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING 637,160 621,355
============ ============
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
IBW FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(dollars in thousands)
- - - ----------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
June 30, June 30,
1996 1995
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $648 $609
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 159 153
Amortization/accretion of premiums (discounts) 312 (84)
Gain on sale of REO - (42)
(Gain) loss on sale of securities (62) 16
Provision for losses on REO - 20
Provision for loan losses 150 300
Decrease in other assets 290 533
(Decrease) increase in accrued expenses and other liabilities (197) 16
---------- ----------
Net cash provided by operating activities 1,300 1,521
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CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in loans (5,849) 4,566
Additions to bank premises and equipment, net (230) (145)
Net proceeds on sale of other real estate owned - 726
Proceeds from sale of securities available-for-sale 14,043 13,972
Proceeds from maturities of securities available-for-sale 15,732 8,705
Purchase of securities available-for-sale (53,981) (12,314)
Principal collected on securities available-for-sale 3,111 40
---------- ----------
Net cash provided by (used in) investing activities (27,174) 15,550
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CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (191) (170)
Net increase (decrease) in deposits 4,388 (8,721)
Net increase in securities sold under repurchase agreements 2,628 -
Sale of common stock, net - 434
---------- ----------
Net cash provided by (used in) financing activities 6,825 (8,457)
---------- ----------
DECREASE IN CASH AND CASH EQUIVALENTS (19,049) 8,614
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 34,886 27,134
---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR $15,837 $35,748
========= =========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest $2,645 $2,406
========= =========
Taxes $230 $240
========= =========
Non-cash transfers of loans to other real estate owned $222 $334
========= =========
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
Notes to Unaudited Consolidated Financial Statements
June 30, 1996
Note A Basis of Presentation:
---------------------
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-QSB. Accordingly, they do not include all the information and
footnotes required for complete financial statements. In the opinion
of management, all adjustments and reclassifications considered
necessary for a fair presentation have been included. Operating
results for the three month period ended June 30, 1996, are not
necessarily indicative of the results that may be expected for the
year ending December 31, 1996. The unaudited consolidated financial
statements should be read in conjunction with the consolidated
financial statements and footnotes.
Note B Accounting Changes:
-------------------
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of," and
SFAS No. 122, "Accounting for Mortgage Servicing Rights - an Amendment
of SFAS 65." The adoption of these new accounting prouncements did
not have a material impact on the financial statements of the Company.
Note C Termination of the Retirement Plan:
-----------------------------------
On April 17, 1996, the Board of Directors of the Company resolved to
curtail the accrual of benefits under the Industrial Bank of
Washington Retirement Plan (the "Plan") as of May 2, 1996.
Additionally, the Board resolved to discontinue the Plan's
participation in the Benefit Source Retirement Trust Fund, to withdraw
the assets of the Plan from the Trust Fund, and to terminate the Plan
by the end of 1996. The effect of the curtailment is estimated to be
a $314,000 loss. The effect of the settlement is estimate to be a
$114,000 gain. The Company has paid the estimated $520,000 benefit
obligation in excess of plan assets as of June 1996.
<PAGE>
IBW FINANCIAL CORPORATION
Part I Financial Information:
---------------------
Item II Management's Discussion and Analysis of Financial Condition and
Results of Operations.
IBW Financial Corporation earnings for the second quarter of 1996
totaled $648 thousand, an increase of $39 thousand or 6.4 percent
over the second quarter of 1995. This increase is primarily
attributed to the increase in net interest income of $197 thousand,
an increase of $140 thousand in noninterest income and a decrease in
provision for loan losses of $150 thousand, offset by a increase in
noninterest expenses of $458 thousand. Return on average assets
(ROAA), and return on average shareholder's equity (ROAE) during the
second quarter of 1996 and 1995 were .59 percent and 7.82 percent
.57 percent and 8.42 percent, respectively.
Net interest income increased by $197 thousand or 4.0 percent over
last year's second quarter. Interest on federal funds sold increased
by $265 thousand or 3.7 percent reflecting the higher levels of
federal funds sold during the second quarter of 1996 compared to a
year ago. Interest expense increased by $224 thousand or 9.1 percent
reflecting higher interest rates and deposit growth.
The provision for possible loan losses was $150 thousand for the
second quarter of 1996 compared to $300 thousand for the second
quarter of 1995. Net charge-offs during the second quarter of 1996
were $208 thousand, compared to net charge-offs $24 thousand during
the second quarter of 1995. The increase in net charge-offs were
primarily attributed to two Small Business Administration (SBA)
loans of $44 thousand and $127 thousand. Substantial recovery on the
$127 thousand SBA loan was received during the 3rd quarter of 1996.
Other operating income increased by $140 thousand or 13.3 percent.
This increase included $62 thousand in security gains for the second
quarter of 1996 compared to $16 thousand in security losses for the
second quarter of 1995. Non-interest expense increased by $458
thousand or 9.4 percent to $5.3 million from $4.9 million in 1995.
Salaries and employee expenses increased by $474 thousand or 17.9
percent due primarily to the second quarter charge of $271 thousand
to terminate the defined benefit pension plan necessary to fund the
estimated unfunded portion of the pension plan. Pension cost totaled
$335 thousand at June 30, 1996 compared to $72 thousand at June 30,
1995. Final termination of the plan is not anticipated until the
fourth quarter of 1996 after IRS ratification. This increase in
pension costs was offset by decreases in insured deposit cost,
declining to $17 thousand at June 30, 1996 from $235 thousand at
June 30, 1995.
<PAGE>
Part I Financial Information: (continued)
---------------------
Part II Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Federal funds sold decreased to $400 thousand from $20.8 million at
December 31, 1995. Total securities increased $19.0 million
reflecting increases of $29.0, $5.0 and $4.2 million in mortgage
backed securities, treasuries and municipals securities
respectively since year-end 1995. U.S. Agencies securities declined
$18.3 million to $17 million from $35.3 million at December 31,
1995.
As of June 30, 1996 total deposits were $208.0 million reflecting
an increase of $4.4 million or 2.2 percent over December 31, 1995.
Savings, now and money market deposits decreased by $ 9.0 million
or 7.2 percent. Time deposits of $100 thousand or more increased
2.7 million to $29.5 million and other time deposits increased $9.7
million or 48.8 percent since year-end 1995.
Securities sold under repurchase agreements totaled $2.6 million,
compared to no repurchase agreements during the same period of
1995.
Shareholders equity decreased by $765 thousand or 4.6 percent from
December 31, 1995 to $15.8 million at June 30, 1996. This decrease
was attributed primarily to the change in net unrealized holdings
on available-for-sale securities, changing from a gain of $514
thousand at December 31, 1995 to a loss of $708 thousand at June
30, 1996. $191 and $170 thousand in dividends were paid during the
second quarter of 1996 and 1995, respectively.
<PAGE>
Part II Other Information:
-----------------
Item I Legal Proceedings
The Corporation and its subsidiary, at times and in the ordinary
course of business, are subject to legal actions. Management does not
believe the outcome of such matters will have a material adverse
effect on the financial condition of the Corporation.
Item II Changes in Securities
None.
Item III Defaults Upon Senior Securities
None.
Item IV Submission of Matters to a Vote of Security Holders
The 1996 Annual Meeting of the Stockholders of Industrial Bank of
Washington was held on April 22, 1996.
The Stockholders elected the following nominees to the Corporation's
Board of Directors to a one year term.
Clinton W. Chapman Dr. Majorie H. Parker
B. Doyle Mitchell, Jr Margaret B. Stewart
Cynthia T. Mitchell George H. Windsor, Esquire
Massie S. Fleming Dr. Emerson Williams
Benjamin L. King, CPA Dr. Robert L. White
Item V Other Information
None.
<PAGE>
ITEM VI Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30,
1996
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
IBW FINANCIAL CORPORATION
August 13, 1996 /s/ B. Doyle Mitchell, Jr.
---------------------------------
B. Doyle Mitchell, Jr., President
August 13, 1996 /s/ Thomas A. Wilson
---------------------------------
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 11,851
<INT-BEARING-DEPOSITS> 1,095
<FED-FUNDS-SOLD> 400
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 106,192
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 99,198
<ALLOWANCE> 904
<TOTAL-ASSETS> 228,615
<DEPOSITS> 208,087
<SHORT-TERM> 2,628
<LIABILITIES-OTHER> 1,110
<LONG-TERM> 1,000
0
0
<COMMON> 637
<OTHER-SE> 15,153
<TOTAL-LIABILITIES-AND-EQUITY> 228,615
<INTEREST-LOAN> 4,512
<INTEREST-INVEST> 2,836
<INTEREST-OTHER> 496
<INTEREST-TOTAL> 7,844
<INTEREST-DEPOSIT> 2,659
<INTEREST-EXPENSE> 2,691
<INTEREST-INCOME-NET> 5,153
<LOAN-LOSSES> 150
<SECURITIES-GAINS> 62
<EXPENSE-OTHER> 5,317
<INCOME-PRETAX> 878
<INCOME-PRE-EXTRAORDINARY> 878
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 648
<EPS-PRIMARY> 1.02
<EPS-DILUTED> 1.02
<YIELD-ACTUAL> 7.51
<LOANS-NON> 827
<LOANS-PAST> 1,592
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 4,783
<ALLOWANCE-OPEN> 1,177
<CHARGE-OFFS> 500
<RECOVERIES> 77
<ALLOWANCE-CLOSE> 904
<ALLOWANCE-DOMESTIC> 904
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
