SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from__________________to______________________
Commission File Number: 0-26577
Webster City Federal Bancorp
(Exact name of registrant as specified in its charter)
United States 42-1491186
------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
820 Des Moines Street, Webster City, Iowa 50595-0638
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 515-832-3071
------------
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [ X ] Yes [ ] No
Indicate the number of shares outstanding for each of the issuer's classes
of common stock, as of the latest practicable date.
1,934,814 shares of common stock were outstanding at April 30, 2000.
---------------
<PAGE>
Webster City Federal Bancorp and Subsidiaries
Index
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
at March 31, 2000 and December 31, 1999 1
Consolidated Statements of Operations
for the three months ended March 31, 2000
and 1999 2
Consolidated Statements of Cash Flows
for the three months ended March 31, 2000
and 1999 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
Part II. Other Information
Other Information 10
<PAGE>
<TABLE>
<CAPTION>
Webster City Federal Bancorp and Subsidiaries
Consolidated Balance Sheets
March 31, December 31,
2000 1999
------------ ------------
Assets (Unaudited)
- ------
<S> <C> <C>
Cash and cash equivalents $ 1,963,787 $ 4,986,099
Time deposits in other financial institutions 1,765,000 2,585,000
Investment securities held to maturity 22,217,980 22,721,595
Loans receivable, net 64,287,012 62,192,330
Office property and equipment, net 510,476 485,085
Federal Home Loan Bank stock, at cost 613,200 613,200
Deferred taxes on income 156,000 156,000
Accrued interest receivable 644,929 761,267
Prepaid expenses and other assets 49,917 24,513
------------ ------------
Total assets $ 92,208,301 $ 94,525,089
============ ============
Liabilities and Stockholders' Equity
Deposits $ 66,363,179 $ 67,918,202
FHLB advance 3,200,000 3,200,000
Advance payments by borrowers for
taxes and insurance 135,877 274,377
Accrued interest payable 464,921 122,212
Current income taxes payable -- 27,458
Accrued expenses and other liabilities 858,596 634,535
------------ ------------
Total liabilities 71,022,573 72,176,784
------------ ------------
Stockholders' Equity
Common stock, $.10 par value 212,222 212,222
Additional paid-in capital 9,093,682 9,093,681
Retained earnings, substantially restricted 14,629,888 14,518,728
Treasury Stock (2,750,064) (1,476,326)
------------ ------------
Total stockholders' equity 21,185,728 22,348,305
------------ ------------
Total liabilities and stockholders' equity $ 92,208,301 $ 94,525,089
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Webster City Federal Bancorp and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
For the Three Months
Ended March 31,
--------------------------
2000 1999
---------- ----------
<S> <C> <C>
Income
Interest Income:
Loans receivable $1,233,031 $1,097,044
Mortgage-backed & related securities 123,026 150,203
Investment securities 221,819 216,668
Other interest earning assets 83,808 141,817
---------- ----------
Total interest income 1,661,684 1,605,732
Interest Expense:
Deposits 733,815 732,047
FHLB advance 44,893 14,370
ESOP loan -- 2,684
---------- ----------
Total interest expense 778,708 749,101
---------- ----------
Net interest income 882,976 856,631
Provision for losses on loans -- --
---------- ----------
Net interest income after
provision for losses on loans 882,976 856,631
---------- ----------
Non-interest income:
Fees and service charges 38,745 41,730
Other 30,961 1,463
---------- ----------
Total non-interest income 69,706 43,193
---------- ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Expense
Non-interest expense:
Compensation, payroll taxes
and employees benefits 203,159 186,948
Office property and equipment 27,735 19,500
Data processing services 34,892 30,947
Federal insurance premiums 3,555 10,200
Other real estate expenses, net 770 935
Advertising 6,865 5,630
Other 151,351 104,092
---------- ----------
Total non-interest expense 428,327 358,252
---------- ----------
Earnings before taxes on income 524,355 541,572
Taxes on income 204,506 203,539
---------- ----------
Net earnings $ 319,849 $ 338,033
========== ==========
Earnings per share - basic $ 0.16 $ 0.16
========== ==========
Earnings per share - diluted $ 0.16 $ 0.16
========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Webster City Federal Bancorp and Subsidiaries
Consolidated Statements of Cash Flows
For the Three Months
Ended March 31,
-----------------------------
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net earnings $ 319,849 $ 338,033
------------ ------------
Adjustments to reconcile net earnings to net cash
provided by operating
activities:
Depreciation 11,962 7,912
Amortization of premiums and discounts, net 2,364 6,704
Stock appreciation of allocated ESOP shares -- 6,110
Decrease (increase) in accrued interest receivable 116,338 (100,251)
(Increase) decrease in prepaid expenses and other assets (56,208) 28,843
Increase in accrued interest payable 342,709 339,865
Increase in accrued expenses and other liabilities 224,061 32,403
(Decrease) increase in accrued current taxes on income (27,458) 139,760
Net change in ESOP stock plan -- 18,293
------------ ------------
Total adjustments 613,768 479,639
------------ ------------
Net cash provided by operating activities 933,617 817,672
------------ ------------
Cash flows from investing activities
Proceeds from the maturity of interest bearing deposits 820,000 2,900,000
Purchase of investment securities -- (9,906,458)
Principal collected on mortgage-backed and related securities 530,542 1,089,736
Proceeds on sale of real estate -- 22,460
Net change in loans receivable (2,093,169) (256,878)
Purchase of office property and equipment (37,353) --
------------ ------------
Net cash (used in) provided by investing activities (779,980) (6,151,140)
------------ ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Cash flows from financing activities
Net change in savings deposits (1,555,023) (1,684,543)
Net decrease in advance payments by borrowers
for taxes and insurance (138,500) (147,039)
Proceeds from stock options -- 32,207
Payments on ESOP borrowings -- (18,293)
Treasury stock purchase (1,311,538) --
Dividends paid (170,888) (193,730)
------------ ------------
Net cash used in financing activities (3,175,949) (2,011,398)
------------ ------------
Net decrease in cash and cash equivalents (3,022,312) (7,344,866)
Cash and cash equivalents at beginning of period 4,986,099 13,186,836
------------ ------------
Cash and cash equivalents at end of period $ 1,963,787 $ 5,841,970
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 391,106 $ 409,236
Taxes on income -- 11,782
============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Webster City Federal Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1. REORGANIZATION
--------------
Webster City Federal Bancorp (the "Registrant" or "Bancorp") is the
successor to Webster City Federal Savings Bank, a federal stock savings
bank (the "Bank") which reorganized into the holding company structure,
effective July 1, 1999 (the "Holding Company Reorganization"). In the
Holding Company Reorganization, each outstanding share of the Bank's common
stock was converted into one share of the Registrant's common stock, and
each stockholder of the Bank received the same ownership interest in the
Registrant immediately following the Holding Company Reorganization as he
or she had in the Bank immediately prior to that transaction.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
-----------------------------------------
The consolidated financial statements at and for the three-month period ended
March 31, 2000 are unaudited. In the opinion of management of Webster City
Federal Bancorp these financial statements reflect all adjustments, consisting
only of normal recurring accruals necessary to present fairly these consolidated
financial statements. The results of operations for the interim periods are not
necessarily indicative of results that may be expected for an entire year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted.
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of the Bancorp and
its wholly owned subsidiary, Webster City Federal Savings Bank, which is engaged
in banking. All material inter-company accounts and transactions have been
eliminated.
3. EARNINGS PER SHARE COMPUTATIONS
-------------------------------
2000
- ----
Earnings per share - basic is computed using the weighted average number of
common shares outstanding of 1,976,245 for the three months ended March 31,
2000, divided into the net earnings of $319,849 for the three months ended March
31, 2000, resulting in earnings per share - basic of $.16 compared to $.16 for
the three months ended March 31, 1999.
Earnings per share - diluted is computed using the weighted average number of
common shares outstanding after giving effect to additional shares assumed to be
issued in relation to the Bank's stock option plan using the average price per
share for the period. Such additional shares were 2,696 for the three months
ended March 31, 2000. Earnings for the three months ended March 31, 2000 were
$319,849, resulting in earnings per share - diluted of $.16 compared to $.16 for
the three months ended March 31, 1999.
4
<PAGE>
1999
- ----
Earnings per share - basic for the three months ended March 31, 1999 is computed
using the 2,118,246 weighted-average of common shares outstanding for the
period, reduced by the 13,539 weighted-average unearned ESOP shares and divided
into the net earnings of $338,033 resulting in earnings per share of $.16
compared to $.16 for the three months ended March 31, 1998.
Earnings per share - diluted for the three months ended March 31, 1999 is
computed using the 2,104,707 weighted-average number of common shares
outstanding and adding the dilutive effect of stock options totaling 9,735
shares and dividend into the net earnings of $338,033 resulting in earnings per
share of $.16 compared to $.16 for the three months ended March 31, 1998.
4. DIVIDENDS
---------
On January 19, 2000 the Bancorp declared a cash dividend on its common stock
payable on February 23, 2000 to stockholders of record as of February 8, 2000,
equal to $.20 per share or approximately $400,886. Of this amount, the payment
of approximately $230,000 (representing the dividend payable on 1,150,000 shares
owned by WCF Financial, M.H.C., the Bancorp's mutual holding company) was waived
by the mutual holding company, resulting in an actual dividend distribution of
$170,886.
5
<PAGE>
Webster City Federal Bancorp and Subsidiaries
Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL CONDITION
- -------------------
Total assets decreased by $2.3 million, or 2.5%, from December 31, 1999 to March
31, 2000. Cash and cash equivalents decreased $3.0 million or 60.6%, time
deposits in other financial institutions decreased $820,000 to $1.8 million from
$2.6 million. Loans receivable increased $2.1 million, or 3.4% during the same
period. At March 31, 2000, the Bank had no real estate owned. Investment
securities decreased $.5 million or 2.2% from December 31, 1999 to March 31,
2000. During the three month period deposits decreased $1.6 million, or 2.3%.
Total stockholders' equity decreased by $1.2 million to $21.2 million at March
31, 2000 from $22.3 at December 31, 1999 as earnings of $319,800 were partially
offset by the repurchase of common stock totaling $1,273,700 and quarterly
dividends totaling $170,900.
CAPITAL
- -------
The Bancorp's total stockholders' equity decreased by $1.2 million, to $21.2
million at March 31, 2000 from $22.3 million at December 31, 1999. The Office of
Thrift Supervision (OTS) requires that the Bank meet certain minimum capital
requirements. As of March 31, 2000 the Bank was in compliance with all
regulatory capital requirements. The Bank's required, actual and excess capital
levels as of March 31, 2000 were as follows:
<TABLE>
<CAPTION>
Required % of Actual % of Excess
Amount Assets Amount Assets Capital
------ ------ ------ ------ -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Tier 1 (Core) Capital $3,692 4.0% $21,055 22.81% $17,363
Risk-based Capital $3,498 8.0% $21,437 49.02% $17,939
</TABLE>
LIQUIDITY
- ---------
OTS regulations require the Bank to maintain an average daily balance of
qualified liquid assets (cash, certain time deposits and specified United States
government, state or federal agency obligations) equal to a monthly average of
not less than 4% of its net withdrawable deposits plus short-term borrowings. At
March 31, 2000, the Bank's quarterly average liquidity position of 27.2%
compared to 19.7% at December 31, 1999.
RESULTS OF OPERATIONS
- ---------------------
Interest Income. Interest income increased to $1.7 million for the three months
ended March 31, 2000 compared to $1.6 million for the three months ended March
31, 1999. The increase was the results of an increase in average yield on
<PAGE>
interest-earning assets to 7.28% for the three months ended March 31, 2000
compared to 6.98% for the three months ended March 31, 1999 offset by a decrease
in the average balance of interest earning assets of $708,000 or .77% to $91.3
million for the three months ended March 31, 2000 from $92.0 million for the
corresponding periods ended March 31, 1999.
Interest on loans for the three months ended March 31, 2000 increased $136,000
or 12.4% compared to the three months ended March 31, 1999. The increase
resulted primarily from an increase in total loans outstanding during the
period, and an increase in the yields on loans receivable from 7.75% for the
three months ended March 31, 1999 to 7.80% for the three months ended March 31,
2000. The increase in the yields on loans receivable was primarily due to higher
market rates and a substantial volume of adjustable rate loans repricing at a
slightly higher rate based on the lagging index used by the Bank.
6
<PAGE>
Interest on mortgage-backed securities decreased by $27,200 or 18.1% for the
three-month period ended March 31, 2000 as compared to the same period ended
March 31, 1999. The decline resulted from a decrease of $2.2 million or 23.1% in
the average balance of mortgage-backed securities to $7.3 million for the three
months ended March 31, 2000 compared to $9.5 million for the three months ended
March 31, 1999. Offset by an increase of 37 basis points in the average yield on
mortgage-backed securities to 6.67% for the three months ended March 31, 2000
from 6.30% for the three months ended March 31, 1999, as higher rate
mortgage-backed securities were paid off and remaining adjustable rate loans
were repricing at a higher rate.
Interest Expense. Interest expense increased by $29,600, or 4.0%, from $749,100
for the three months ended March 31, 1999 to $778,700 for the three months ended
March 31, 2000. The increase in interest expense was due to an increase in
interest expense on the FHLB advance. The interest expense on the advance
increased by $30,500 or 212.3% from $14,400 for the three months ended March 31,
1999 to $44,900 for the three months ended March 31, 2000. This increase was due
to the Bank borrowing an additional $2,000,000 from the FHLB in October of 1999.
This increase was offset by a decrease in average deposits outstanding of $1.4
million from $67.6 million for the three months ended March 31, 1999 to $66.2
million for the three months ended March 31, 2000. The average cost of deposits
increased 11 basis points from 4.33% for the three months ended March 31, 1999
compared to 4.44% for the three months ended March 31, 2000.
Net Interest Income. Net interest income before provision for losses on loans
increased by $26,300 or 3.1% from $856,600 for the three months ended March 31,
1999 compared to $883,000 for the three months ended March 31, 2000. The
Bancorp's interest rate spread at March 31, 2000 increased by 16 basis points to
2.79% from 2.63% at March 31, 1999.
Provision for Losses on Loans. There were no provisions for losses on loans for
the three months ended March 31, 2000 or March 31, 1999. The allowance for
losses on loans is based on management's periodic evaluation of the loan
portfolio and reflects an amount that, in management's opinion, is adequate to
absorb any probable losses in the existing portfolio. In evaluating the
portfolio, management takes into consideration numerous factors, including
current economic conditions, prior loan loss experience, the composition of the
loan portfolio, and management's estimate of anticipated credit losses.
Non-interest Income. Non-interest income increased by $26,500 or 61.4% for the
three-month period ended March 31, 2000 as compared to the same period ended
March 31, 1999. The increase was related to a one-time non-interest income
receipt of approximately $25,000 for a deficiency judgment filed several years
ago on a foreclosed property, offset by a decline in loan fees and service
charges collected.
Non-interest Expense. Non-interest expense increased $70,100 or 19.6% for the
three-month period ended March 31, 2000 compared to the same period ended March
31, 1999. Compensation and benefit costs increased $16,200 or 8.7% from $186,900
for the three months ended March 31, 1999 to $203,200 for the three-month period
ended March 31, 2000. Other non-interest expenses were up $47,300 in part due to
paying an assessment to the Iowa sinking fund for a loss in public funds held at
a failed Iowa Bank, fees paid by the Bank to have a facilitator at the Bank for
a planning session and other miscellaneous non-interest expenses incurred during
the first quarter of 2000.
<PAGE>
Taxes on Income.
- ---------------
Income taxes for the three months ended March 31, 2000, were $204,500 compared
to $204,000 for the same period ended March 31, 1999. The effective income tax
rate for the three months of 2000 was 39.0% compared to 37.6% for the first
three months of 1999.
Net Earnings. Net earnings of the Company totaled $319,800 for the three months
ended March 31, 2000 compared to $338,000 for the three months ended March 31,
1999.
7
<PAGE>
Impact of Year 2000 Compliance
- ------------------------------
The Board of Directors were aware of potential risk that the year 2000 posed for
the Bank and had assigned an individual, to establish Year 2000 formal project
plans, which have been developed and adopted by the Bank. Testing and
contingency plans were also developed and adopted by the Company and testing
procedures were also implemented The Company's contingency plans included two
components, business remediation and business resumption. The business
remediation plan was developed to mitigate the risk associated with the failure
to successfully complete system renovation, validation or implementation of the
Company's Year 2000 readiness. This plan pertains to mission-critical systems
developed in-house, by outside software vendors, and by third-party service
providers. The business resumption plan is designed to be implemented in the
event there are system failures at critical dates.
The Company did not feel that, with all of its planning and testing as well as
having contingency plans in place, they would experience any major Year 2000
problems at the end of the year. The Company did not experience any problems at
year-end nor have we experienced a problem on any of the critical dates
identified as potential problems during the first quarter of the year 2000.
SFAS No. 133
- ------------
"Accounting for Derivative Instruments and Hedging Activities," and SFAS 137, an
amendment to SFAS 133, will be effective for the Bancorp beginning January 1,
2001. Management is evaluating the impact the adoption of SFAS 133 and SFAS 137
will have on the Bancorp's consolidated financial statements. The Bancorp
expects to adopt SFAS 133 and 137 when required.
Safe Harbor Statement
- ---------------------
This report contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Bancorp intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Reform Act of
1995, and is including this statement for the purposes of these safe harbor
provisions. Forward-looking statements, which are based on certain assumptions
and describe future plans, strategies and expectations of the Bancorp, are
generally identifiable by use of the words "believe," "expect," "intend,"
"anticipate," "estimate," "project," or similar expressions. The Bancorp's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain. Factors which could have a material adverse effect on the
operations and future prospects of the Bancorp and its subsidiaries include, but
are not limited to, changes in: interest rates, general economic conditions,
legislative/regulatory changes, monetary and fiscal polices of the U.S.
Government, including polices of the U.S. Treasury and the Federal Reserve
Board, the quality or composition of the loan or investment portfolios, demand
for loan products, deposit flows, competition, demand for financial services in
the Bancorp's market area and accounting principles, polices and guidelines.
These risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such statements.
9
<PAGE>
Webster City Federal Bancorp and Subsidiaries
PART II. Other Information
Item 1. Legal Proceedings
-----------------
There are various claims and lawsuits in which the Registrant is
periodically involved incidental to the Registrant's business. In the opinion of
management, no material loss is expected from any of such pending claims or
lawsuits.
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
None
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits:
None
(b) No form 8-K reports were filed during the quarter ended March 31,
2000.
10
<PAGE>
Webster City Federal Bancorp and Subsidiaries
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
WEBSTER CITY FEDERAL BANCORP
Registrant
Date: May 8, 2000 By: /s/ Phyllis A. Murphy
----------- ---------------------
Phyllis A. Murphy
President and Chief Executive Officer
Date: May 8, 2000 By: /s/Stephen L. Mourlam
----------- ---------------------
Stephen L. Mourlam
Executive Vice President/Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,963,787
<INT-BEARING-DEPOSITS> 1,765,000
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 22,217,980
<INVESTMENTS-MARKET> 21,551,247
<LOANS> 64,287,012
<ALLOWANCE> 0
<TOTAL-ASSETS> 92,208,301
<DEPOSITS> 66,363,179
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,459,394
<LONG-TERM> 3,200,000
0
0
<COMMON> 212,222
<OTHER-SE> 20,973,506
<TOTAL-LIABILITIES-AND-EQUITY> 92,208,301
<INTEREST-LOAN> 1,233,031
<INTEREST-INVEST> 344,845
<INTEREST-OTHER> 83,808
<INTEREST-TOTAL> 1,661,684
<INTEREST-DEPOSIT> 733,815
<INTEREST-EXPENSE> 778,708
<INTEREST-INCOME-NET> 882,976
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 358,621
<INCOME-PRETAX> 524,355
<INCOME-PRE-EXTRAORDINARY> 319,849
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 319,849
<EPS-BASIC> .16
<EPS-DILUTED> .16
<YIELD-ACTUAL> 7.10
<LOANS-NON> 0
<LOANS-PAST> 17,004
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 382,402
<CHARGE-OFFS> 0
<RECOVERIES> 250
<ALLOWANCE-CLOSE> 382,652
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 382,652
</TABLE>
