FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
[ ] 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 0-11130
OLYMPUS CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
UTAH 87-0166750
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
115 South Main St. Salt Lake City, Utah 84111
(Address of principal executive offices)
(Zip Code)
(801) 325-1000
(Registrant's telephone number, including area code)
Not Applicable
(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.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
3,104,639 shares of $1.00 par value common stock of the registrant were
outstanding as of August 12, 1994.
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OLYMPUS CAPITAL CORPORATION AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Condensed Statements of Financial
Condition - June 30, 1994, and December 31, 1993
Consolidated Condensed Statements of Operations -
Three months and six months ended June 30, 1994
and 1993
Consolidated Condensed Statements of Cash Flows -
Six months ended June 30, 1994 and 1993
Notes to Consolidated Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security
Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
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<TABLE>
<CAPTION>
OLYMPUS CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
June 30, 1994 December 31, 1993
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ASSETS
Cash on hand and in banks $ 6,477,498 $ 8,323,332
Federal funds sold 2,206,878 81,099
Total cash and cash equivalents 8,684,376 8,404,431
Investments available for sale (amortized cost of $81,548,702
in 1994 and $132,302,225 in 1993) 79,976,267 132,195,692
Investment securities held to maturity (fair value $50,893,921 in 1994
and $12,711,849 in 1993) 53,386,375 12,712,941
Loan receivables
Real estate loans 231,776,194 233,316,431
Real estate loans held for sale 1,288,659 6,469,655
Commercial loans 7,269,782 7,091,863
Other loan receivables 2,088,444 2,238,761
Less unamortized loan fees (1,140,220) (1,036,824)
Less allowance for losses (6,496,701) (5,610,010)
Total loan receivables 234,786,158 242,469,876
Accrued interest receivable (less allowance for uncollectible 2,172,387 2,232,629
interest of $45,093 in 1994 and $99,499 in 1993)
Real estate acquired in settlement of loans, net 3,054,916
Premises and equipment, net 7,113,351 7,333,637
Other assets and deferred charges 7,864,517 5,765,291
TOTAL ASSETS $ 393,983,431 $ 414,169,413
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 300,387,699 $ 294,560,648
Advances from Federal Home Loan Bank 24,832,427 36,649,913
Securities sold under agreements to repurchase 30,574,446 44,996,245
(including accrued interest payable)
Other liabilities and accrued expense 4,652,950 4,599,067
Total liabilities 360,447,522 380,805,873
Stockholders' equity
Common stock - $1 par value, 10,000,000 shares authorized; shares
issued and outstanding 3,104,639 in 1994 and 3,099,639 in 1993 3,104,639 3,099,639
Paid-in capital 1,917,155 1,894,005
Retained earnings - substantially restricted 30,518,041 28,476,429
Net unrealized loss on investments available for sale (2,003,926) (106,533)
Total stockholders' equity 33,535,909 33,363,540
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 393,983,431 $ 414,169,413
See notes to consolidated condensed financial statements.
</TABLE>
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<TABLE>
<CAPTION>
OLYMPUS CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, 1994 June 30, 1993 June 30, 1994 June 30, 1993
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INTEREST INCOME:
Real estate loans $ 4,568,776 $ 4,912,072 $ 9,020,831 $ 9,887,951
Investments available for sale 1,026,434 1,260,080 2,634,789 2,478,665
Investment securities 671,366 162,821 750,119 427,458
Equity securities 65,065 133,325 148,565 252,025
Commercial loans 143,252 159,029 342,411 317,784
Other loans and contracts 45,436 45,329 90,749 97,395
Loan origination fees 228,553 295,266 490,781 518,032
Total 6,748,882 6,967,922 13,478,245 13,979,310
INTEREST EXPENSE:
Deposits 2,722,351 2,749,336 5,368,079 5,574,919
Advances from Federal Home Loan Bank 204,568 903,412 474,892 1,700,004
Securities sold under agreements to
repurchase and other borrowings 383,494 50,285 784,342 245,535
Total 3,310,413 3,703,033 6,627,313 7,520,458
NET INTEREST INCOME 3,438,469 3,264,889 6,850,932 6,458,852
Provision for loan losses 21,055 (421,940) 889,815 (384,099)
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 3,417,414 3,686,829 5,961,117 6,842,951
OTHER INCOME:
Fees 502,614 373,021 1,148,980 723,616
Income (loss) from real estate operations 13,682 (67,328) 621,353 (194,379)
Gain on sale of loans and investments 51,798 745,016 240,842 978,554
Miscellaneous 58,118 111,839 125,949 178,703
Total 626,212 1,162,548 2,137,124 1,686,494
OTHER EXPENSES:
Compensation and other employee expense 1,662,955 1,313,313 3,149,285 2,527,664
Occupancy 527,553 525,003 1,105,000 1,048,563
Advertising 106,871 82,384 165,146 195,779
Loan and collection expense 20,452 117,199 11,571 228,851
Insurance expense 241,046 80,861 483,670 169,783
Provision for losses:
Real estate acquired in settlement
of loans 321,940 54,000 321,940
Other accounts receivable (200) 257,414 (200) 136,506
Other operating expenses 472,725 447,797 1,088,157 861,482
Total 3,031,402 3,145,911 6,056,629 5,490,568
INCOME BEFORE CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING PRINCIPLE 1,012,224 1,703,466 2,041,612 3,038,877
CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE 337,813
NET INCOME $ 1,012,224 $ 1,703,466 $ 2,041,612 $ 3,376,690
</TABLE>
<TABLE>
<CAPTION>
OLYMPUS CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, 1994 June 30, 1993 June 30, 1994 June 30, 1993
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PRIMARY
Income per share of common stock
before cumulative effect of a
change in accounting principle $ 0.31 $ 0.53 $ 0.63 $ 0.95
Cumulative effect of a change in
accounting principle $ 0.11
Earnings per share of common stock $ 0.31 $ 0.53 $ 0.63 $ 1.06
FULLY DILUTED
Income per share of common stock
before cumulative effect of a
change in accounting principle $ 0.31 $ 0.53 $ 0.63 $ 0.94
Cumulative effect of a change in
accounting principle $ 0.11
Earnings per share of common stock $ 0.31 $ 0.53 $ 0.63 $ 1.05
See notes to consolidated condensed financial statements.
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</TABLE>
<TABLE>
<CAPTION>
OLYMPUS CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30, 1994 June 30, 1993
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CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 13,032,257 $ 13,496,842
Fees and commissions received 2,364,253 1,529,562
Income (loss) from real estate operations 621,353 (194,379)
Loans originated or purchased for resale (14,183,861) (29,243,074)
Proceeds from sale of loans originated or purchased for resale 19,501,723 31,526,069
Miscellaneous income received 115,485 581,096
Interest paid (6,859,294) (7,490,886)
Cash paid for services to suppliers and employees (4,547,238) (3,744,479)
Cash paid for other expenses (1,016,273) (591,977)
Net cash provided by operating activities 9,028,405 5,868,774
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturity of investment securities 300,000 450,000
Proceeds from sale of investment securities 3,967,437
Purchase of investment securities (344,849) (12,663,775)
Principal collected on investment securities 1,041,268 354,791
Proceeds from sale of investments available for sale 95,347,079
Purchase of investments available for sale (101,560,591)
Principal collected on investments available for sale 8,666,744 4,131,013
Principal collected on loans 49,723,386 69,063,199
Proceeds from sale of loans 880,852
Loans originated or purchased (45,223,946) (72,296,059)
Proceeds from sale of real estate 45,252 6,913,885
Capital expenditures for premises and equipment (123,311) (2,043,566)
Purchases of other assets (2,749,161) (1,763,413)
Net cash provided by (used in) investing activities 11,335,383 (9,219,148)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 5,827,051 (1,670,387)
Proceeds from advances from Federal Home Loan Bank 95,600,000 32,158,200
Principal repayment on advances from Federal Home Loan Bank (107,417,486) (14,003,013)
Net proceeds (repayment) of securities sold under
agreement to repurchase (14,348,466) (4,745,000)
Proceeds from (repayment of) other borrowings 226,908 (7,213,022)
Proceeds from issuance of common stock 28,150 85,025
Net cash provided by (used in) financing activities (20,083,843) 4,611,803
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 279,945 1,261,429
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 8,404,431 12,076,564
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 8,684,376 $ 13,337,993
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
Loans transferred to real estate acquired in
settlement of loans $ 1,130,000 $ 1,506,656
Loan origination to facilitate the sale of real estate
acquired in settlement of loans $ 4,100,000 None
Securities transferred to investment securities from investments
available for sale (net of $462,185 unrealized loss included
stockholders' equity in 1994) $ 42,401,856 None
See notes to consolidated condensed financial statements
</TABLE>
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OLYMPUS CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In management's opinion, the accompanying consolidated condensed
financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the financial
condition of Olympus Capital Corporation (the "Corporation") and
subsidiaries as of June 30, 1994, and December 31, 1993, and the
results of operations for the three and six month periods ended June
30, 1994, and 1993 and the cash flows for the six month periods ended
June 30, 1994 and 1993.
2. The results of operations for the three and six month periods ended
June 30, 1994, are not necessarily indicative of the results to be
expected for the full year.
3. Refer to Part II, Item 1 of this report for a discussion of
contingencies which may affect the Corporation.
4. For the quarters ended June 30, 1994, and 1993, no income tax expense
was recorded due to net operating loss carry forwards.
5. The Corporation adopted Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes," effective January 1,
1993. The cumulative effect of adopting SFAS No. 109 on the
Corporation's financial statements was to increase income by $338,000
($.10 per share) for the six month period ended June 30, 1993.
Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities
for financial purposes and the amounts used for income tax purposes,
and (b) operating loss and tax credit carry forwards. Net deferred
tax assets of $4,475,000 as of June 30, 1994, were offset by a
corresponding valuation allowance.
6. Effective December 31, 1993, the Corporation adopted provisions of
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" (Statement No.
115). Pursuant to Statement No. 115, investments available for sale
are recorded at fair value, with net unrealized gains or losses
excluded from income and reported as a separate component of
stockholders' equity. Gains or losses on investments available for
sale are determined on the specific identification method and are
included in income when realized. Investments available for sale
include securities for which the Corporation has entered into a
commitment to sell the securities as well as securities to be held
for indefinite periods of time that management intends to use as part
of its asset/liability management strategy and that may be sold in
response to changes in interest rates, prepayment risk, or other
factors. Prior to the adoption of Statement No. 115, investments
available for sale were carried at the lower of aggregate cost or
market with unrealized losses reported in the statement of
operations. Gross unrealized gains and losses on investments
available for sale at June 30, 1994, were $6,000 and $1,578,000,
respectfully.
<PAGE>
7. Investment securities held to maturity are carried at amortized cost,
based on management's intent and ability to hold such securities to
maturity. Discounts are accreted or premiums amortized using the
interest method over the life of the security. Gains or losses on
sales of securities are determined based on the specific
identification method. Gross unrealized gains and losses on
investment securities at June 30, 1994 were $17,000 and $2,509,000
respectfully.
8. On July 22, 1994, the Corporation and it subsidiary Olympus Bank, a
Federal Savings Bank, ("the Bank"), signed an Agreement for Merger
(the "Agreement") with Washington Mutual Savings Bank of Seattle,
Washington ("Washington Mutual") and its subsidiary Washington Mutual
Federal Savings Bank. Pursuant to the Agreement and upon
satisfaction of certain conditions, the Corporation will be merged in
1995 into Washington Mutual and each share of the Corporation's
common stock will be exchanged for $15.50 worth of Washington Mutual
common stock, based on the average closing price for the ten trading
days immediatley preceding the third trading day before the effective
date. However, if the average price of Washington Mutual common
stock falls below $18.00, Washington Mutual may elect to purchase up
to 49% of the Corporation's stock with cash. The total purchase
price is anticipated to be approximately $52.1 million.
The Corporation has also entered into a Stock Option Agreement with
Washington Mutual pursuant to which it has issued a stock option to
Washington Mutual for the purchase of up to approximately 9.9% of the
Corporation's common stock under certain conditions.
<PAGE>
OLYMPUS CAPITAL CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion and analysis covers significant
changes in the results of operations of the Corporation and its
subsidiaries for the three and six month periods ended June 30,
1994, as compared to the same periods in 1993 and significant
changes in the financial condition of the Corporation and its
subsidiaries since December 31, 1993 and should be read in
conjunction with the consolidated condensed financial
statements and related notes.
On July 22, 1994, the Corporation and the Bank, signed an
Agreement for Merger (the "Agreement") with Washington Mutual
and its subsidiary Washington Mutual Federal Savings Bank.
Pursuant to the Agreement and upon satisfaction of certain
conditions, the Corporation will be merged in 1995 into
Washington Mutual and each share of the Corporation's common
stock will be exchanged for $15.50 worth of Washington Mutual
common stock, based on the average closing price for the ten
trading days immediatley preceding the third trading day before
the effective date. However, if the average price of
Washington Mutual common stock falls below $18.00, Washington
Mutual may elect to purchase up to 49% of the Corporation's
stock with cash. The total purchase price is anticipated to be
approximately $52.1 million. There can be no assurance that
such purchase or merger will occur. Pending the merger or
termination of the agreements the corporation has agreed to
certain restrictions on its and the Bank's operations.
The Corporation has also entered into a Stock Option Agreement
with Washington Mutual pursuant to which it has issued a stock
option to Washington Mutual for the purchase of up to
approximately 9.9% of the Corporation's common stock under
certain conditions.
RESULTS OF OPERATIONS
The following table highlights results of operation and earnings per
share for the three and six months ended June 30, 1994, compared to
the same period in 1993.
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<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
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Net interest income $ 3,438,469 $ 3,264,889 $ 6,850,932 $ 6,458,852
Provision for loan losses 21,055 (421,940) 889,815 (384,099)
Other income 626,212 1,162,548 2,137,124 1,686,494
Other expenses 3,031,402 3,145,911 6,056,629 5,490,568
Net income 1,012,224 1,703,466 2,041,612 3,376,690
Primary earnings per share .31 .53 .63 1.06
Fully diluted earnings per share .31 .53 .63 1.05
</TABLE>
A significant component of the Corporation's income is net interest
income. Net interest income is the difference between interest
earned on loans, investments and other interest-earning assets
("interest income") and interest paid on deposits and other interest-
bearing liabilities ("interest expense"). Net interest margin,
expressed as a percentage, is net interest income divided by average
interest-earning assets. Changes in interest rates, the volume and
the mix of interest-earning assets and interest-bearing liabilities
and the levels of non-performing assets affect net interest income
and net interest margin. Net interest spread is the difference
between the yield on interest-earning assets and the percentage cost
of interest-bearing liabilities.
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The following table highlights net interest income for the three and
six months ended June 30, 1994, compared to the same periods in 1993.
<TABLE>
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Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
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Interest income $ 6,748,882 $ 6,967,922 $ 13,478,245 $ 13,979,310
Interest expense 3,310,413 3,703,033 6,627,313 7,520,458
Net interest income 3,438,469 3,264,889 6,850,932 6,458,852
Total interest income/
average interest earning assets 7.50% 7.43% 7.01% 7.56%
Total interest expense/
average costing liabilities 3.73 4.22 3.72 4.35
Net interest spread 3.32 3.21 3.29 3.21
Net interest margin 3.58 3.47 3.54 3.46
</TABLE>
Results of Operation - Three Months Ended June 30, 1994 and 1993
Interest income declined $219,000 for the quarter ended June 30,
1994, compared to the same period in 1993. Interest income earned
from real estate loans for the quarter ended June 30, 1994, declined
$340,000 compared to the same period in 1993. Overall, during the
quarter ended June 30, 1994, the weighted average interest rate
earned on the loan portfolio declined 0.44% compared to the same
period in 1993. The decline in the rate is due largely to the high
repayments in the commercial real estate portfolio that occured in
the first quarter of 1994. The average balance of real estate loans
outstanding during the quarter ended June 30, 1994, declined
$4,200,000 compared to the same period during 1993. The Bank had
lower average balances of $23,000,000 in its commercial real estate
loan portfolio during the quarter ended June 30, 1994, compared to
the same period during 1993. The bulk of this decline occurred in
the third quarter of 1993 and continued to the first quarter of 1994.
During the three months ended June 30, 1994, the average balance of
the multi-family real estate loan portfolio grew by $7,300,000, the
construction loan portfolio grew by $8,600,000, and the consumer loan
portfolio, composed of short term fixed rate residential lending and
home equity lines of credit, grew by $5,600,000 compared to the same
period in 1993. Interest income from investments available for sale
declined by $230,000 during the quarter ended June 30, 1994, compared
to the same period in 1993. The average balance of investments
available for sale during the quarter ended June 30, 1994, declined
by $19,700,000 compared to the same period of 1993. During the first
quarter of 1994, the Bank reclassified to investment securities
$42,400,000 of mortgage backed securities previously reported as
available for sale. This reclassification was the reason income from
investment securities for the three months ended June 30, 1994
increased by $550,000. During the quarter ended June 30, 1994,
dividend income from the Federal Home Loan Bank of Seattle ("FHLB")
stock declined $70,000 compared to the same period of 1993. The
dividend paid by the FHLB for the quarter ended June 30, 1994, was
6.50% compared to 15.30% for the same period in 1993. Management of
the Bank believes the dividend paid by FHLB will remain significantly
lower for the remainder of 1994 than dividends paid in 1993. Though
the average balance of commercial loans outstanding during the
quarter ended June 30, 1994, declined $1,100,000 compared to the same
period in 1993, the average interest rate earned on the portfolio
increased 0.29% for the same periods. The level of loan origination
fee amortization is determined in large part by the level of
principal repayments in the loan portfolio. For the quarter ended
June 30, 1994, the Bank collected $16,500,000 in principal payments
in the loan portfolio, compared to $46,300,000 for the same period in
1993. However, amortization of construction loan fees for the
quarter ended June 30, 1994, increased $120,000 compared to the same
period in 1993, due to the increased construction lending volume.
Interest expense declined $390,000 for the quarter ended June 30,
1994, compared to the same period in 1993. Overall, the average
balance of all deposits and other interest-bearing liabilities for
the quarter ended June 30, 1994, increased by $4,540,000 and the
average rate paid decreased by 1.66% compared to the same period in
1993. Interest expense from deposits for the quarter ended June 30,
1994, declined $30,000 compared to the same period in 1993. During
the quarter ended June 30, 1994, the average balance of all deposits
increased $19,800,000 and the average rate paid for all deposits
declined 0.19% compared to the same period in 1993. The increase in
deposits was concentrated in demand deposit accounts and certificates
of deposit. Interest expense from FHLB advances for the quarter
ended June 30, 1994, declined $700,000 compared to the same period in
1993. During this quarter in 1994, the average balance of FHLB
advances was $32,100,000 lower than the same period of 1993. The
lower balances in 1994 were the result of the Bank prepaying high
interest FHLB advances in the last half of 1993. The average rate
paid for FHLB advances during the quarter ended June 30, 1994 was
2.84% lower than the average rate in the same period of 1993.
Interest expense from repurchase agreements and other borrowing for
the quarter ended June 30, 1994, increased $330,000 compared to the
same period in 1993. During this quarter in 1994, the average
balance of repurchase agreements was $21,800,000 higher and the
average rate the Bank paid for these funds was 4.28% lower than the
average rate in the same period of 1993. During the second quarter
of 1993, most of the funds borrowed by the Bank from repurchase
agreements were long term, high interest funds. While these funds
have been retained by the Bank, they represent a smaller portion of
funds from repurchase agreements and their impact on the average
interest rate is much smaller. During the three months ended June
30, 1993, the Bank recovered $115,000 previously expensed interest
payments with respect to an industrial revenue bond issued in
connection with a property previously owned by the Bank. The Bank
sold the property during the second quarter of 1993. The recovery
lowered interest expense from other borrowing for the quarter ended
June 30, 1993.
<PAGE>
The provision for loan losses during the three months ended June 30,
1994, of $21,000 was $440,000 higher than the same period in 1993.
The Bank recorded net recoveries of $422,000 during the second
quarter of 1993, the result of lower non-performing asset levels and
the resolution of several troubled loans during the first half of
1993.
Other income for the quarter ended June 30, 1994, was $540,000 less
than the same period of 1993. Fee income for the three months ended
June 30, 1994, was $130,000 higher compared to the same period in
1993. During the quarter ended June 30, 1994, service fee income
from deposits increased $71,000, service fee income from credit cards
increased $31,000, and net loan servicing fee income increased
$15,000 compared to the same period in 1993. Income from real estate
operations for the three months ended June 30, 1994 was $81,000
higher compared to the same period in 1993. Rental income from
branch offices during the three months ended June 30, 1994, was
$22,000 lower compared to the same period in 1993. During the
quarter ended June 30, 1994, the net loss from real estate acquired
in settlement of loans ("REO") was $101,000 lower than the same
period in 1993. The lower costs of holding REO reflects the lower
level of these assets. During the quarter ended June 30, 1994, gains
from sale of loans and investments was $693,000 lower than the same
period in 1993. Lower prices due to higher interest rates and lower
production and sales volume led to this decline. During the second
quarter of 1993, the Bank sold mortgage servicing rights and recorded
a gain of $350,000. Miscellaneous income for the three months ended
June 30, 1994, was $54,000 lower than the same period in 1993.
During the quarter ended June 30, 1994, fee income from the sale of
annuity products by Olympus Financial Services, Incorporated, a
subsidiary of the Bank, was $62,000 lower than the same period in
1993.
Other expenses during the quarter ended June 30, 1994, were $115,000
lower compared to the same period in 1993. During the three months
ended June 30, 1994, compensation and other employee expense was
$350,000 higher than the same period in 1993. During the quarter
ended June 30, 1994, the Bank accrued or paid $228,000 in severence
pay for former employees and an officer of the Bank. During the
second quarter of 1994, the expense for employee benefits, such as
retirement fund contribution and health insurance was $74,000 higher
compared to the same period in 1993. On June 30, 1994 the
Corporation had 125 full time and 52 part time employees, compared to
120 full time and 42 part time employees at June 30, 1993. For the
quarter ended June 30, 1994, the Bank spent $24,000 more for
advertising compared to the same period in 1993. Most of the
increase came in the form of television advertising. Management of
the Bank intends to continue the use of television advertising. Loan
and collection expense encompasses the costs of reviewing loans,
foreclosure expense and the costs of collecting amounts which are
owed to the Bank. During the quarter ended June 30, 1994, loan and
collection expense was $97,000 lower compared to the same quarter of
1993. As of June 30, 1994, the Bank held no REO and non-performing
assets, principally loan with payments ninety days or more
delinquent, totalled less than $1 million. Insurance expense
included the premiums the Bank pays for Federal Deposit Insurance
Corporation ("FDIC") insurance on deposits. For the three months
ended June 30, 1994 this premium was $160,000 higher than the same
period in 1993, cheifly because during the second quarter of 1993,
the Bank received a credit from the FDIC for $208,000, the final
installment of the Banks' Federal Savings and Loan Insurance
Corporation ("FSLIC"), secondary reserve credit. During the quarter
ended June 30, 1994, the Bank recorded no provisions for the losses
from REO and recovered a small amount from other accounts receivable
which had previously been written off compared to losses of $322,000
and $257,000, respectively for the quarter ended June 30, 1993. The
1993 provision for loss from REO resulted from the recognition of
loss in the carrying value of a hydroelectric plant which has
subsequently been sold. The 1993 provision for loss from other
accounts receivable was the recognition of the loss of value in two
purchased mortgage service portfolios due to high rates of repayment.
No similar impairment has occurred in 1994. Other operating expenses
includes general legal fees, independent audit fees, tax preparation
fees, as well as fees paid for other professional services which the
Corporation uses. During the quarter ended June 30, 1994, other
operating expenses increased $25,000 compared to the same quarter in
1993.
<PAGE>
Results of Operation - Six Months Ended June 30, 1994 and 1993
Interest income declined by $501,000 and the average interst rate
earned declined by 0.38% for the six months ended June 30, 1994,
compared to the same period in 1993. The decline is centered mainly
in real estate loans, and more precisely, commercial real estate
loans. Interest income earned from real estate loans for the six
months ended June 30, 1994, declined by $867,000 compared to the same
period in 1993. The average balance of real estate loans outstanding
during the six months ended June 30, 1994, declined by $7,400,000
compared to the same period during 1993 and the weighted average
interest rate earned declined by 0.48% compared to the same period in
1993. The decline in the rate is due largely to the high repayment
of loans with higher fixed rates in the commercial real estate
portfolio. The Bank experienced a decline of $23,000,000 in its
average balance of the commercial real estate loan portfolio during
the six months ended June 30, 1994, compared to the same period
during 1993. The bulk of this decline occurred in the third quarter
of 1993 and continued to the first quarter of 1994. During the six
months ended June 30, 1994, the average balance of the multi-family
real estate loan portfolio grew $8,000,000, the construction loan
portfolio grew $7,300,000, and the consumer loan portfolio, composed
of short term fixed rate residential lending and home equity lines of
credit, grew $5,600,000 compared to the same period in 1993.
Overall, during the six months ended June 30, 1994, interest income
from investments available for sale increased by $156,000 during the
six months ended June 30, 1994, compared to the same period in 1993.
The average balance of investments available for sale during the six
months ended June 30, 1994, was $9,400,000 higher compared to the
same period of 1993. During the first quarter of 1994, the Bank
reclassified to investment securities $42,400,000 of mortgage backed
securities previously reported as available for sale. This
reclassification was the reason income from investment securities for
the six months ended June 30, 1994, increased by $510,000. During the
six months ended June 30, 1994, the balances of investment
securities, including overnight federal funds and other short-term
liquidity investments, declined $8,300,000 compared to the same
period in 1993. The rate paid for these investments remains low, so
management has limited investments to those required for liquidity.
During the six months ended June 30, 1994, dividend income from FHLB
stock declined $100,000 compared to the same period of 1993. The
dividend paid by the FHLB for the six months ended June 30, 1994, was
7.60% compared to 14.77% for the same period in 1993. Management of
the Bank believes the dividend paid by FHLB will remain significantly
lower for the remainder of 1994 than dividends paid in 1993. The
Bank collected $100,000 in delinquent interest from non real estate
commercial loans during the first six months of 1994. The amount of
loan origination fee amortization is determined in large part by the
level of principal repayments in the loan portfolio. For the six
months ended June 30, 1994, the Bank collected $49,700,000 in
principal payments in the loan portfolio, compared to $69,100,000 for
the same period in 1993. Amortization of construction loan fees for
the six months ended June 30, 1994, increased $119,000 compared to
the same period in 1993.
<PAGE>
Overall, interest expense declined $870,000, while the average
balance of interest costing liabilities increased $10,430,000 for the
six months ended June 30, 1994, compared to the same period in 1993.
Interest expense for deposits for the six months ended June 30, 1994,
declined $210,000 compared to the same period in 1993. During the
six month ended June 30, 1994, the average balance of all deposits
increased $14,300,000 and the average rate paid for all deposits
declined 0.27% compared to the same period in 1993. The increase in
deposits was concentrated in demand deposit accounts and certificates
of deposit. Interest expense from FHLB advances for the six months
ended June 30, 1994, declined $1,220,000 compared to the same period
in 1993. During this period in 1994, the average balance of FHLB
advances was $21,700,000 lower than the same period of 1993. The
lower balances in 1994 were the result of the Bank prepaying high
interest FHLB advances in the last half of 1993. The average rate
paid for FHLB advances during the six months ended June 30, 1994 was
3.51% lower than the average rate paid in the same period of 1993.
Interest expense from repurchase agreements and other borrowing for
the six months ended June 30, 1994, increased $540,000 compared to
the same period in 1993. During this period in 1994, the average
balance of repurchase agreements was $33,320,000 compared to
$7,480,000 during the first six months of 1993 and the average rate
the Bank paid for this borrowing was 3.79% lower compared to the same
period of 1993. During the six months ended June 30, 1993 most of
the funds borrowed by the Bank from repurchase agreements were long-
term, high interest funds. These funds have been retained by the
Bank, but their impact on the weighted average interst rate is
smaller. During the six months ended June 30, 1993, the Bank
recovered $87,000 previously expensed interest payments with respects
to an industrial revenue bond issued in connection with a property
previously owned by the Bank. The Bank sold the property during the
second quarter of 1993. The recovery lowered interest expense from
other borrowing by $87,000 for the six months ended June 30, 1993.
The provision for loan losses of $890,000 during the six months ended
June 30, 1994, was $1,270,000 higher than the same period in 1993.
The Bank recorded net recoveries of $380,000 during the first six
months of 1993, the result of lower non-performing asset levels and
the resolution of several troubled loans during the first half of
1993. Most of the provisions for 1994, were established for loans
secured by Southern California properties in response to
uncertainties caused by natural disasters and the overall weakness of
the rental market for commercial space in the region.
<PAGE>
Other income for the six months ended June 30, 1994, was $450,000
more compared to the same period of 1993. Fee income for the six
months ended June 30, 1994, was $430,000 higher compared to the same
period in 1993. During the six months ended June 30, 1994, service
fee income from deposits increased $120,000, service fee income from
credit cards increased $80,000, and net loan servicing fee income
decreased $75,000 compared to the same period in 1993. Due to
prepayments of certain commercial real estate loans, the Bank
collected $270,000 in prepayment fees during the first six months of
1994. Income from real estate operations for the six months ended
June 30, 1994 was $815,000 higher compared to the same period in
1993. Rental income from branch offices during the six months ended
June 30, 1994, was $25,000 lower compared to the same period in 1993.
During the second quarter of 1994, the Bank lost a major tenant from
the corporate office building in Salt Lake City. The area remains
unleased. During the six months ended June 30, 1994, the net income
from REO was $740,000 higher than the same period in 1993. The lower
costs of holding REO reflects the lower level of these assets.
During the six months ended June 30, 1994, settlements surrounding
REO properties resulted in the Bank collecting $627,000 for operating
these properties. During the six months ended June 30, 1994, gains
from sale of loans and investments was $740,000 lower than the same
period in 1993. Lower prices due to higher interest rates and lower
production and sales volume led to this decline. During the second
quarter of 1993, the Bank sold mortgage servicing rights and recorded
a gain of $350,000. The Bank has not sold mortgage servicing rights
during 1994. Miscellaneous income for the six months ended June 30,
1994, was $54,000 lower than the same period in 1993. During the six
months ended June 30, 1994, fee income from the sale of annuity
products by Olympus Financial Services, Incorporated, a subsidiary of
the Bank, was $60,000 lower than the same period in 1993.
Other expenses during the six months ended June 30, 1994, were
$570,000 higher compared to the same period in 1993. During the six
months ended June 30, 1994, compensation and other employee expense
was $620,000 higher than the same period in 1993. During the six
months ended June 30, 1994, the Bank accrued or paid $228,000 in
severence pay for former employees and an officer of the Bank. Bonus
payments during the first six months of 1994 were $90,000 higher than
the same period in 1993. During the first six months of 1994, the
expense for employee benefits, such as retirement fund contribution
and health insurance was $110,000 higher compared to the same period
in 1993. For the six months ended June 30, 1994, the Bank spent
$30,000 more for advertising compared to the same period in 1993.
Most of the increase came in the form of television advertising.
Management of the Bank intends to continue the use of television
advertising. During the six months ended June 30, 1994, loan and
collection expense was $220,000 lower compared to the same quarter of
1993. As of June 30, 1994, the Bank held no REO and non-performing
assets totalled less than $1 million. For the six months ended June
30, 1994, the FDIC insurance premium was $320,000 higher than the
same period in 1993, cheifly because during the first six months of
1993, the Bank received a credit from the FDIC for $516,000, the
final installment of the Banks' FSLIC secondary reserve credit.
During the six months ended June 30, 1994, the Bank recorded $54,000
provisions for the losses from REO and recovered a small amount from
other accounts receivable which had previously been written off. The
provision for other accounts receivable for the first six months of
1993 included a recovery of $120,000. During the six months ended
June 30, 1994, other operating expenses increased $230,000 compared
to the same quarter in 1993. During the six months ended June 30,
1994, the Corporation spent $130,000 more for legal services than
during the same period of 1993. Much of the increase was to review
strategic alternatives in connection with an expression of interest
to acquire the Corporation.
FINANCIAL CONDITION
Total consolidated assets at June 30, 1994, were $393,983,000 a
decrease of $20,186,000 from $414,169,000 at December 31, 1993.
Principal repayments both scheduled and unscheduled from mortgage
backed securities as well as the real estate loan portfolio, are the
primary reason for this decrease. The proceeds from loan payoffs and
increased deposits were used to pay advances from the FHLB and other
borrowing sources.
Investment securities increased $40,673,000 during the first six
months of 1994, while investments available for sale decreased
$52,219,000 as the result of a reclassification of securities from
investments available for sale to investments held to maturity. The
Bank charged the carrying value of the investment $462,000, with an
offsetting entry to stockholders' equity for the difference between
the carrying value and the fair value at the date of
reclassification. The Bank amortized $31,000 of this unrealized
holding loss reported in equity during the six months of 1994, to
offset the effect on interest income of the amortization of the
discount created by this reclassification. The reclassified
securities included fixed rate, fifteen year original maturity
mortgage backed securities ("MBS"), MBS collaterized by loans with
five and seven year balloon payments and a MBS pledged as collateral
for a long term letter of credit issued by the Bank. In reassessing
the classification of these assets management concluded they bear
many of the same characteristics as mortgage loans currently being
originated for the Corporation's portfolio. At June 30, 1994, the
market value of investments available for sale was $1,572,000 lower
than the carrying value of these securities. This unrealized loss is
reported as a separate component of stockholders equity.
Loan receivables declined by $7,684,000, from December 31, 1993 to
June 30, 1994, with commercial real estate loans declining the most
decreasing by $14,920,000. During the first quarter of 1994, a
large commercial real estate loan borrower prepaid approximately
$11,000,000 of commercial real estate loans. During the six months
ended June 30, 1994, the Bank originated real estate loans totalling
$4,100,000 to facilitate the sale of REO. Excluding the commercial
real estate portfolio, the balances of the remaining real estate loan
portfolios increased $8,027,000. During the six months ended June
30, 1994, non real estate commercial loans increased by $180,000.
Also during this period, the Bank received a pay off of a commercial
loan receivable of $1,130,000 previously reported as a non-performing
asset. Financing of this loan is included in the total loans to
facilitate the sale of REO. During the first six months of 1994, the
Bank provided financing funded for the sale of a hydro electric plant
previously reported as real estate acquired in settlement of loans.
The increase in provisions for loan loss of $890,000 is in response
to commercial real estate conditions in California. Other assets and
deferred charges increased $2,099,000 due mainly to the acquisition
of mortgage servicing portfolios for $1,860,000. On December 31,
1993, the Bank was closed for New Years holiday. Although the Bank
was closed, the Federal Reserve System was open. The Federal Reserve
System posted credits to the Bank on December 31, 1993 which the Bank
then posted to depositors' accounts January 3, 1994. These unposted
credits which totalled $500,000 at December 31, 1993, are reported as
other assets and deferred charges.
Total deposits increased $5,830,000 from December 31, 1993 to June
30, 1994. Most of this increase was in the form of time deposits.
The proceeds from these deposits and from collections from loans were
used to pay off maturing advances from the FHLB and obligations
arising from securities sold under agreements to repurchase. The
Bank currently borrows only short term funds from the FHLB. Other
liabilities and accrued expense includes deposits for borrowers'
taxes and insurance, interest accrued but unpaid on deposits, and
other expenses which are accrued but unpaid, and unposted mortgage
payments. Deposits for borrowers' taxes and insurance increased
$1,120,000 during the fist six months of 1994 while unposted payments
and accrued interest decreased $1,000,000.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Regulations of the Office of Thrift Supervision ("OTS"), require the
Bank to maintain specified levels of liquid assets, generally defined
as cash and marketable securities which are quickly convertible into
cash. Such assets must equal at least 5% of the daily average
balance of total withdrawable savings and short-term borrowings
(liquidity base). As of March 31, 1994, the Bank's average liquid
assets were approximately $22,320,000 or 6.4% of its liquidity base.
The Bank had loan commitments of approximately $35,384,000 as of June
30, 1994. In addition, management has determined to increase funding
for single-family construction loans and existing multi-family
properties. It is expected that these commitments will be funded
primarily from loan sales, together with cash from maturities and
monthly payments received from the existing portfolio of loans and
MBS.
In connection with the insurance of savings accounts by the Savings
Association Insurance Fund (SAIF), the Bank is required to meet
certain minimum capital standards consisting of a tangible capital
requirement of 1.5% of tangible assets, a core or leveraged capital
requirement of 3% of tangible assets, and a risked-based capital
requirement. The risk-based requirement takes each asset and gives
it a weighting of 0% to 100% based upon credit risk as defined in the
regulations of the OTS. The risk-based requirement as of March 31,
1994, was 8% of the risk weighted assets. Eligible capital to meet
this test is composed of core or tier one capital and supplementary
or tier two capital. Supplementary or tier two capital is composed
of general loan loss reserves up to a maximum of 1.25% of risk
weighted assets.
The following is a summary of the Bank's regulatory capital at June
30, 1994.
<TABLE>
<CAPTION>
Requirement Actual Amount Exceeding
Capital Ratio Capital Ratio Requirements
<S> <C> <C> <C> <C> <C>
Tangible $ 5,910,000 1.50 % $ 33,442,000 8.49% $ 27,532,000
Core 11,820,000 3.00 33,442,000 8.49 21,622,000
Risk-Based 18,625,000 8.00 36,380,000 15.63 17,755,000
</TABLE>
NON-PERFORMING ASSETS
Non-performing assets totaled $974,000 at June 30, 1994, compared
with $5,297,000 at December 31, 1993. The balance of REO, $3,055,000
at December 31,1993, had been sold at June 30, 1994. The sales were
financed in part by loans provided by the Bank. The major non-
performing loan at June 30, 1994, was a commercial real estate loan
located in southern California.
<PAGE>
OLYMPUS CAPITAL CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Richard Madsen vs. Prudential Federal Savings and Loan
Association, Third Judicial District Court of Salt Lake County,
State of Utah, Civil No. 226073, filed February, 1975.
One June 20, 1994, the trial court appointed a special master
who will identify the class members and compute damages. Also
on June 20, 1994, the trial court ordered the Bank to pay the
cost of the master. The Bank has filed petition for
interlocutory appeal to the Supreme Court challenging the trial
court's order requiring the Bank to pay the costs of the
master.
The amount of the damages that may be awarded against the Bank
cannot be determined at this time. Appeal must await the trial
court's determination of class issues.
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable
Item 5. Other Information.
None
Item 6. Exhibits and Reports on form 8-K
(a) Exhibits
None
(b) Reports on form 8-K
On or about August 1, 1994, the Corporation filed a
Current Report on Form 8-K reporting that on July 22,
1994, and the Bank signed an Agreement for Merger (the
"Agreement") with Washington Mutual and its subsidiary
Washington Mutual Federal Savings Bank. Pursuant to the
Agreement and upon satisfaction of certain conditions,
the Corporation will be merged in 1995 into Washington
Mutual and each share of the Corporation's common stock
will be exchanged for $15.50 worth of Washington Mutual
common stock, based on the average closing price for the
ten trading days immediatley preceding the third trading
day before the effective date. However, if the average
price of Washington Mutual common stock falls below
$18.00, Washington Mutual may elect to purchase up to 49%
of the Corporation's stock with cash. The total purchase
price is anticipated to be approximately $52.1 million.
For information regarding the terms of the proposed
transaction, reference is made to the Agreement and the
Corporation's press release dated July 25, 1994, which
were attached thereto as Exhibits 2.1 and 99.1,
respectively, and incorporated herein by reference.
The Corporation has also entered into a Stock Option
Agreement with Washington Mutual pursuant to which it has
issued a stock option to Washington Mutual for the
purchase of up to approximately 9.9% of the Corporation's
common stock under certain conditions. For information
regarding the terms of the stock option, reference is
made to the Stock Option Agreement dated July 22, 1994,
which is attached thereto as exhibit 2.2 and incorporated
herein by reference.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
OLYMPUS CAPITAL CORPORATION
Date August 15, 1994 By:
Brad Foley, Vice President/
Chief Accounting Officer
Date August 15, 1994 By:
R. Gibb Marsh, President
