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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-K/A2
ITEM 8 OF PART II AND ITEMS 11 AND 12 OF PART III ARE SET FORTH IN THEIR
ENTIRETY. NO CHANGES ARE BEING MADE IN ANY OTHER ITEMS.
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM ______ TO ______
COMMISSION FILE NUMBER: 0-15826
WASHINGTON BANCORP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-2800126
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 WASHINGTON STREET, HOBOKEN, NEW JERSEY 07030
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 659-0013
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.10 PER SHARE
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
As of March 1, 1994, there were issued and outstanding 2,307,937 shares
of the Registrant's common stock.
The aggregate market value of the voting stock held by non-affiliates of
the Registrant based on the closing sales price of the Registrant's common
stock as quoted on the Nasdaq National Market on February 28, 1994 was
approximately $27.3 million. (The exclusion from such amount of the market
value of shares owned by any person shall not be deemed an admission by the
Registrant that such person is an affiliate of the Registrant).
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<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) The following audited consolidated financial statements and related
documents are presented herein on the following pages:
Report of Independent Accountants ............................... 2
The Company and Subsidiary:
Consolidated Balance Sheets ................................... 3
Consolidated Statements of Operations ......................... 4
Consolidated Statements of Changes in Stockholders' Equity..... 5
Consolidated Statements of Cash Flows ......................... 6
Notes to Consolidated Financial Statements .................... 8
(b) The following supplementary financial information is presented herein
on the following page:
Summary of Quarterly Results .................................. 26
1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and
Stockholders of Washington Bancorp, Inc.
Hoboken, New Jersey
We have audited the accompanying consolidated balance sheets of
Washington Bancorp, Inc. and Subsidiary as of December 31, 1993 and 1992, and
the related consolidated statements of operations, changes in stockholders'
equity, and cash flows for each of the three years in the period ended
December 31, 1993. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Washington Bancorp, Inc. and Subsidiary as of December 31, 1993 and 1992, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1993 in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1993
the Company changed its method of accounting for income taxes and its method
of accounting for investments in debt and equity securities.
As discussed in Note 11 to the consolidated financial statements, the
Company is presently a defendant in two lawsuits. One lawsuit seeks
unspecified damages and alleges violations of state securities laws, certain
banking laws and state common law. The other was filed by a former Bank
officer and alleges wrongful termination and seeks unspecified damages. Legal
counsel has advised the Company that the effect, if any, of the ultimate
outcome of these actions cannot presently be determined, and accordingly, no
provision for loss, if any, that may result upon resolution of these matters
has been made in the accompanying consolidated financial statements.
/s/COOPERS & LYBRAND
Coopers & Lybrand
Parsippany, New Jersey
January 28, 1994
2
<PAGE>
WASHINGTON BANCORP, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31,
-------------------------
1993 1992
----- -----
Assets
Cash and due from banks . . . . . . . . $ 4,283,032 $ 4,336,433
Federal funds sold. . . . . . . . . . . 1,900,000 3,000,000
------------ ------------
Cash and cash equivalents. . . . . . . 6,183,032 7,336,433
Investment securities:
Available-for-sale . . . . . . . . . . 57,740,195 1,936,700
Held-to-maturity (market value
$14,128,000 and $57,430,000). . . . . 13,848,830 56,793,662
Mortgage-backed securities:
Available-for-sale . . . . . . . . . . 9,516,832 --
Held-to-maturity (market value
$9,365,000 and $7,197,000). . . . . . 9,447,366 7,213,343
Loans:
Held-for-sale (market value
$4,909,000 and $9,032,000). . . . . . 4,852,000 9,000,000
In portfolio (net of allowance for
losses of $2,828,000 and
$2,776,000) . . . . . . . . . . . . . 165,332,900 182,500,728
Other real estate owned ("REO") (net
of allowance for losses of $1,880,000
and $1,802,000). . . . . . . . . . . . 7,078,038 12,998,022
Accrued interest receivable . . . . . . 2,563,176 2,606,893
Premises and equipment, net . . . . . . 2,614,031 2,840,090
Federal Home Loan Bank stock, at cost . 1,711,300 1,632,000
Income tax refund . . . . . . . . . . . -- 320,000
Deferred income tax asset . . . . . . . 1,369,000 250,000
Other assets. . . . . . . . . . . . . . 378,636 342,758
------------ ------------
TOTAL ASSETS. . . . . . . . . . . . . $282,635,336 $285,770,629
============ ============
Liabilities and Stockholders' Equity
Liabilities:
Interest-bearing deposits. . . . . . . $237,026,264 $244,249,625
Noninterest-bearing deposits . . . . . 9,016,464 8,373,055
------------ ------------
Total deposits. . . . . . . . . . . . 246,042,728 252,622,680
Advances from Federal Home Loan
Bank ("FHLB") . . . . . . . . . . . . 400,000 --
Mortgage escrow deposits . . . . . . . 1,276,819 1,393,709
Accrued interest payable . . . . . . . 189,154 336,657
Other liabilities. . . . . . . . . . . 1,185,136 948,538
------------ ------------
TOTAL LIABILITIES . . . . . . . . . . 249,093,837 255,301,584
------------ ------------
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, par value $.10 per
share, 3,000,000 shares authorized,
no shares issued and outstanding. . . -- --
Common stock, par value $.10 per share,
6,000,000 shares authorized,
shares issued and outstanding--
2,307,687 in 1993
and 2,307,187 in 1992 . . . . . . . . 230,768 230,718
Paid-in capital. . . . . . . . . . . . 22,500,728 22,498,778
Retained earnings. . . . . . . . . . . 10,744,003 7,919,549
Unrealized gain on available-for-sale
securities, net of tax. . . . . . . . 186,000 --
------------ ------------
33,661,499 30,649,045
Deferred compensation--Management
Recognition and Retention Plan
("MRP"). . . . . . . . . . . . . . . . (120,000) (180,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY . . . . . 33,541,499 30,469,045
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY. . . . . . . . . . . . . . . $282,635,336 $285,770,629
============ ============
See notes to consolidated financial statements
3
<PAGE>
WASHINGTON BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31,
-------------------------------------
1993 1992 1991
---- ---- ----
Interest income:
Loans, including fees . . . . . . $14,781,686 $18,041,437 $22,616,388
U.S. Treasury obligations . . . . 1,766,978 2,833,951 1,995,094
Mortgage-backed securities. . . . 915,652 193,365 849,600
Federal funds sold. . . . . . . . 171,990 380,910 372,369
Dividends . . . . . . . . . . . . 150,639 155,715 199,088
Due from banks. . . . . . . . . . 48,311 50,378 22,719
Other investment securities . . . 722,669 223,335 1,538,383
----------- ----------- -----------
Total interest income . . . . . . 18,557,925 21,879,091 27,593,641
----------- ----------- -----------
Interest expense:
Deposits. . . . . . . . . . . . . 8,794,623 12,189,233 17,148,425
Borrowed funds. . . . . . . . . . 17,809 1,350 1,970,423
----------- ----------- -----------
Total interest expense. . . . . . 8,812,432 12,190,583 19,118,848
----------- ----------- -----------
Net interest income. . . . . . . 9,745,493 9,688,508 8,474,793
----------- ----------- -----------
Provision for losses on loans. . . 420,000 1,100,000 1,500,000
----------- ----------- -----------
Net interest income after provision
for losses on loans. . . . . . . 9,325,493 8,588,508 6,974,793
----------- ----------- -----------
Other income:
Service charges on deposit
accounts . . . . . . . . . . . . 186,459 181,743 149,163
Gain on sale of loans, net. . . . 157,030 196,845 1,275,976
Security gains, net . . . . . . . 22,450 1,638,132 856,843
Gain on sale of bank building . . 186,519 -- --
Other . . . . . . . . . . . . . . 396,675 273,536 287,286
----------- ----------- -----------
Total other income. . . . . . . . 949,133 2,290,256 2,569,268
----------- ----------- -----------
Other expenses:
Salaries and employee benefits. . 3,468,089 3,519,704 3,924,724
REO expense, net. . . . . . . . . 1,457,341 1,171,544 1,935,927
Occupancy and equipment expenses,
net . . . . . . . . . . . . . . 797,303 1,010,739 869,705
Federal Deposit Insurance
Corporation ("FDIC") assessment. 690,516 597,054 577,945
Other . . . . . . . . . . . . . . 2,354,923 2,394,742 1,997,571
----------- ----------- -----------
Total other expenses. . . . . . . 8,768,172 8,693,783 9,305,872
----------- ----------- -----------
Income before income taxes,
extraordinary items and
cumulative effect of change in
accounting principle. . . . . . 1,506,454 2,184,981 238,189
Income tax benefit/(expense) . . 1,018,000 (628,000) (552,000)
----------- ----------- -----------
Income/(loss) before extraordinary
items and cumulative effect of
change in accounting
principle . . . . . . . . . . . 2,524,454 1,556,981 (313,811)
Extraordinary items:
Utilization of net operating
loss ("NOL") carryforward. . . -- 539,000 --
Loss on early extinguishment of
FHLB advances (net of applicable
income tax effect of $-0-) . . -- -- (1,034,319)
Cumulative effect of change in
accounting principle. . . . . . 300,000 -- --
----------- ----------- -----------
NET INCOME/(LOSS). . . . . . . . $ 2,824,454 $ 2,095,981 $(1,348,130)
=========== =========== ===========
Income/(loss) per share:
Income/(loss) before extraordinary
items and cumulative effect of
change in accounting
principle . . . . . . . . . . . $ 1.10 $ 0.68 $ (0.14)
Extraordinary items. . . . . . . -- 0.24 (0.46)
Cumulative effect of change in
accounting principle. . . . . . .13 -- --
----------- ----------- -----------
NET INCOME/(LOSS). . . . . . . . $ 1.23 $ 0.92 $ (0.60)
=========== =========== ===========
Weighted average number of shares
outstanding . . . . . . . . . . . 2,296,876 2,276,035 2,263,547
=========== =========== ===========
See notes to consolidated financial statements
4
<PAGE>
<TABLE>
<CAPTION>
WASHINGTON BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Unrealized
gain on Deferred
available- compensation
Preferred Common Paid-in for-sale Retained -------------
stock stock capital securities earnings ESOP MRP Total
---------- ------- ------- ---------- -------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1991. . $ -- $230,718 $22,498,778 $ -- $ 7,171,698 $(386,400) $(300,000) $29,214,794
Recognition of deferred
compensation
expense. . . . . . . . . . -- -- -- -- -- 289,800 60,000 349,800
Net loss. . . . . . . . . . -- -- -- -- (1,348,130) -- -- (1,348,130)
----- -------- ----------- -------- ----------- --------- --------- -----------
BALANCE, December 31, 1991. -- 230,718 22,498,778 -- 5,823,568 (96,600) (240,000) 28,216,464
Recognition of deferred
compensation expense . . . -- -- -- -- -- 96,600 60,000 156,600
Net income. . . . . . . . . -- -- -- -- 2,095,981 -- -- 2,095,981
----- -------- ----------- -------- ----------- --------- --------- -----------
BALANCE, December 31, 1992. -- 230,718 22,498,778 -- 7,919,549 -- (180,000) 30,469,045
Recognition of deferred
compensation expense . . . -- -- -- -- -- -- 60,000 60,000
Excercise of stock options. -- 50 1,950 -- -- -- -- 2,000
Adoption of SFAS 115. . . . -- -- -- 186,000 -- -- -- 186,000
Net income. . . . . . . . . -- -- -- -- 2,824,454 -- -- 2,824,454
----- -------- ----------- -------- ----------- --------- --------- -----------
BALANCE, December 31, 1993. $ -- $230,768 $22,500,728 $186,000 $10,744,003 $ -- $(120,000) $33,541,499
===== ======== =========== ======== =========== ========= ========= ===========
See notes to consolidated financial statements
</TABLE>
5
<PAGE>
WASHINGTON BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
--------------------------------------
1993 1992 1991
---- ---- ----
Cash Flows from Operating Activities:
Interest received . . . . . . . $ 20,368,341 $ 22,383,276 $ 27,978,824
Loan fees received . . . . . . 288,037 449,833 406,092
Service charges on deposits
received . . . . . . . . . . . 186,459 181,743 149,163
Miscellaneous other income
received . . . . . . . . . . . 260,392 273,536 287,286
Income tax refund received . . 1,196,969 -- 1,105,511
Income taxes paid . . . . . . . (545,107) (609,000) --
Loans originated for resale . . (852,000) -- --
Interest paid . . . . . . . . . (8,959,935) (12,520,427) (19,699,816)
Cash paid to employees and for
other expenses . . . . . . . . (7,630,874) (7,863,590) (5,278,204)
----------- ----------- ------------
Net cash provided by operating
activities . . . . . . . . . 4,312,282 2,295,371 4,948,856
----------- ----------- ------------
Cash Flows from Investing Activities:
Proceeds from maturity of term
federal funds sold. . . . . . . -- 9,000,000 --
Purchase of term federal funds
sold . . . . . . . . . . . . . -- -- (9,000,000)
Proceeds from sales of securities
available-for-sale . . . . . . 3,375,706 19,834,531 --
Proceeds from maturities of
securities available-for-
sale. . . . . . . . . . . . . . 500,000 -- --
Purchase of securities available-
for-sale . . . . . . . . . . . (60,197,058) (21,353,814) --
Principal collected on mortgage-
backed securities available-
for-sale. . . . . . . . . . . . 2,967,578 -- --
Purchase of mortgage-backed
securities available-
for-sale .. . . . . . . . . . . (10,847,957) -- --
Proceeds from sales of loans
held for sale . . . . . . . . . 7,021,863 15,717,358 34,600,519
Proceeds from sales of investment
securities . . . . . . . . . . 9,248,633 54,466,694 68,049,943
Proceeds from maturities of
investment securities . . . . . 35,371,615 10,445,843 52,378,000
Purchase of investment securities (2,452,068) (68,592,457)(117,910,408)
Principal collected on
mortgage-backed securities. . . 5,769,780 532,190 1,042,580
Proceeds from sales of
mortgage-backed securities. . . 2,028,385 1,533,314 27,191,360
Purchase of mortgage-backed
securities . . . . . . . . . . (10,534,937) (7,785,292) --
Purchase of loans . . . . . . . -- (10,086,000) --
Net decrease/(increase) in loans
and loans held for sale . . . . 14,240,619 (7,095,165) (11,481,243)
Recoveries on loans charged-off 261,348 257,045 240,898
Proceeds from sale of bank
building . . . . . . . . . . . 224,100 -- --
Capital expenditures . . . . . (64,614) (312,723) (261,474)
Proceeds from sales of REO, net of
financed sales and closing costs 3,995,466 1,126,761 2,658,486
Proceeds from redemption of FHLB
stock . . . . . . . . . . . . -- 520,300 104,600
Purchase of FHLB stock . . . . (79,300) -- --
----------- ----------- ------------
Net cash (used in)/provided by
investing activities . . . . . 829,159 (1,791,415) 47,613,261
----------- ----------- ------------
Cash Flows from Financing Activities:
Net increase in savings and
transaction accounts. . . . . . 4,164,930 14,330,173 5,693,096
Net decrease in certificates of
deposit . . . . . . . . . . . (10,744,882) (20,728,505) (21,998,795)
Net increase/(decrease) in mortgage
escrow deposits . . . . . . . (116,890) (739,381) 149,309
Repayment of advances from FHLB -- -- (45,134,319)
Advances from FHLB . . . . . . 400,000 -- 15,600,000
Exercise of stock options . . . 2,000 -- --
----------- ----------- ------------
Net cash used in financing
activities . . . . . . . . . (6,294,842) (7,137,713) (45,690,709)
----------- ----------- ------------
Net Increase/(Decrease) in Cash and
Cash Equivalents . . . . . . . (1,153,401) (6,633,757) 6,871,408
Cash and Cash Equivalents,
beginning of year. . . . . . . . 7,336,433 13,970,190 7,098,782
----------- ----------- ------------
Cash and Cash Equivalents, end of
year . . . . . . . . . . . . . $ 6,183,032 $ 7,336,433 $ 13,970,190
=========== =========== ============
See notes to consolidated financial statements
6
<PAGE>
WASHINGTON BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
Year ended December 31,
---------------------------------
1993 1992 1991
---- ---- ----
Reconciliation of Net Income/(Loss)
to Net Cash Provided by
Operating Activities:
Net income/(loss) . . . . . . . . $ 2,824,454 $ 2,095,981 $ (1,348,130)
Adjustments to reconcile net income/
(loss) to net cash
provided by operating activities:
Depreciation . . . . . . . . . 253,092 372,186 319,678
Provision for losses on loans and
REO . . . . . . . . . . . . . 1,443,965 1,951,900 2,670,206
Recognition of deferred
compensation expense . . . . . 60,000 156,600 349,800
Deferred loan fees . . . . . . (194,779) (163,765) (248,842)
Deferred taxes . . . . . . . . (699,000) (250,000) 552,000
Gain on sales of investment and
mortgage-backed securities . (67,623) (1,671,946) (1,078,931)
Loss on sales of investment and
mortgage-backed securities . 45,173 33,814 222,088
Gain on sale of bank building (186,519) -- --
Gain on sales of REO . . . . . (429,255) (454,734) (329,927)
Loss on sales of REO . . . . . 125,355 53,887 153,157
Gain on sale of loans . . . . (157,030) (206,314) (1,275,976)
Loss on sale of loans . . . . -- 9,469 --
Premium amortization, net of
discount earned. . . . . . . . 2,249,515 817,490 243,249
Extraordinary loss on early
extinguishment of FHLB
advances . . . . . . . . . . -- -- 1,034,319
Changes in operating assets and
liabilities:
(Increase) in loans originated
for resale. . . . . . . . . . (852,000) -- --
(Increase)/decrease in income
tax refund receivable . . . . 320,000 (320,000) 243,000
(Increase)/decrease in accrued
interest receivable . . . . 43,717 300,293 796,868
(Increase)/decrease in other
assets . . . . . . . . . . (35,878) 83,567 890,585
Increase/(decrease) in accrued
interest payable . . . . . . (147,503) (329,844) (580,968)
Increase/(decrease) in other
liabilities . . . . . . . . (283,402) (183,213) 2,336,680
----------- ----------- -----------
Net cash provided by operating
activities . . . . . . . . . . . $ 4,312,282 $ 2,295,371 $ 4,948,856
=========== =========== ===========
Supplemental Schedule of Noncash
Investing and Financing
Activities:
Transfer of loans to REO . . . $ 3,705,035 $ 5,330,339 $ 9,571,387
=========== =========== ===========
Portion of REO sales financed
by the Bank. . . . . . . . . . $ 5,427,475 $ 3,486,900 $ 4,700,200
=========== =========== ===========
Transfer of loans to loans held
for sale, net . . . . . . . . $ -- $24,520,513 $ --
=========== =========== ===========
Exchange of loans for
mortgage-backed securities . . $ 1,788,408 $ -- $ 6,732,250
=========== =========== ===========
Available-for-sale securities
market value change. . . . . . $ 186,000 $ -- $ --
=========== =========== ===========
See notes to consolidated financial statements
7
<PAGE>
WASHINGTON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Washington Bancorp, Inc. and
Subsidiary follow generally accepted accounting principles and general
practices applicable to the banking industry. The policies which materially
affect the determination of financial position, results of operations and cash
flows are summarized below.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Washington
Bancorp, Inc, (the "Company") and its wholly-owned subsidiary, Washington
Savings Bank (the "Bank"). All significant intercompany balances and
transactions have been eliminated.
STATEMENTS OF CASH FLOWS
The statements of cash flows are presented using the direct method. For
purposes of reporting cash flows, cash and cash equivalents are cash on hand,
amounts due from banks and Federal funds sold (generally due within a one-week
period).
SECURITIES
During 1993, the Financial Accounting Standards Board (the "FASB") issued
and the Company adopted Statement of Financial Accounting Standards No. 115:
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS
115"). SFAS 115 requires entities to classify their securities into either a
held-to-maturity, available-for-sale or trading category. Each of these
classifications require a different basis of accounting.
Securities in which there is both the positive intent and ability to hold
until call date, if any, or maturity are classified as held-to-maturity and
carried at cost, adjusted for amortization of premiums and accretion of
discounts. Premiums are amortized and discounts are accreted using the level
yield method over the period to call, if any, or maturity for investments, and
over the estimated remaining lives based on anticipated prepayments for
mortgage-backed securities. Gains and losses, if any, are recognized when
securities are sold by the specific identification method.
Securities which may be sold prior to maturity for either asset/liability
purposes or for other reasons are classified as available-for-sale and are
accounted for at fair value with fair value changes, net of tax, reported as a
net amount in a separate component of stockholders' equity.
The Company does not engage in trading securities; however, such
securities would be accounted for at fair value with fair value changes
reported in the income statement.
The effect of adopting SFAS 115 as of December 31, 1993 was to increase
securities by $286,000, reduce the net deferred tax asset by $100,000 and
increase stockholders' equity by $186,000. There was no effect on the results
of operations.
The Bank, as a member of the Federal Home Loan Bank of New York ("FHLB"),
is required to hold shares of capital stock in the FHLB in an amount equal to
one percent of the outstanding balance of mortgage loans or five percent of
its outstanding advances from the FHLB, whichever is greater.
LOANS
Loans in which there is both the intent and ability to hold until
maturity are carried at their principal amounts outstanding. Generally, when a
loan is past due as to payment of principal or interest for ninety days or
when, in the opinion of management, the accrual of interest should be ceased
before ninety days, it is the Company's policy to cease accruing interest and
to place such a loan on a "nonaccrual status". Any accrued but unpaid interest
previously recorded, if not adequately collateralized, is charged against
current period interest income. Cash receipts on nonaccrual loans are recorded
as either income or as a reduction of principal, according to management's
judgement as to the collectibility of principal.
8
<PAGE>
WASHINGTON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Loan origination fees and certain direct loan origination costs are
offset, and the resulting net amount is deferred and amortized as an
adjustment of the loans' yields. Net loan fees are generally amortized over
the contractual lives of the related loans.
Loans held for sale are carried at the lower of aggregate cost or market.
No valuation allowance was required at December 31, 1993 or 1992. Gains and
losses, including deferred loan origination fees, are recognized when loans
are sold by the specific identification method.
In May 1993, the FASB issued Statement of Financial Accounting Standards
No. 114, "Accounting by Creditors for Impairment of a Loan" ("SFAS 114").
SFAS 114 establishes criteria for accounting for loans that have been
impaired. It requires that impaired loans be measured based on the present
value of expected future cash flows discounted at the loan's effective
interest rate or at the loan's observable market price or the fair value of
the collateral if the loan is collateral dependent. The Company has not fully
evaluated the effect of SFAS 114 on its financial statements. SFAS 114 is
effective for fiscal years beginning after December 15, 1994. The Company
plans to adopt SFAS 114 in 1995 with no prior period restatement.
ALLOWANCE FOR LOSSES ON LOANS
The allowance for losses on loans is established through charges to
operations in the form of a provision for losses on loans. Loans which are
determined to be uncollectible are charged against the allowance account and
subsequent recoveries, if any, are credited to the account. The provision for
losses on loans is based upon percentage allocations with regard to the
performing loan portfolio, as well as specific allocations for classified
loans. Loans are classified in accordance with their estimated risk based on
various factors, including: (a) the financial status and credit history of the
borrower; (b) collateral value; (c) loan documentation; (d) prevailing and
anticipated economic conditions; and (e) such other factors that, in
management's judgement, warrant current recognition in providing an adequate
allowance.
OTHER REAL ESTATE OWNED ("REO"), NET
REO consists of real estate properties acquired through foreclosure or
deed in lieu of foreclosure and "in-substance" foreclosures ("ISF"). A loan is
classified as an in-substance foreclosure even though actual foreclosure has
not occurred based upon the following criteria: the borrower has little or no
equity in the collateral based upon its current estimated fair value; proceeds
for repayment are expected to come only from the operations or sale of the
collateral; and either the borrower has abandoned control of the collateral or
it is doubtful that the borrower will rebuild equity in the collateral or
repay the loan by other means in the foreseeable future.
REO is carried at the lower of cost (principal balance of the former loan
plus cost of obtaining title and possession) or fair value less estimated cost
to sell. When a property is transferred to ISF, the excess of the loan balance
over market or the fair value less estimated cost to sell is charged to the
allowance for losses on loans.
The allowance for losses on REO is established through charges to
operations in the form of a provision for losses on REO that is reflected in
the expense caption--"REO expense, net." Factors considered in establishing
the allowance for losses on REO include appraisals of the fair market value of
a property and management's assessment of the overall real estate market for
that type of property and its location. In addition, carrying costs (e.g. real
estate taxes, repairs and maintenance, and insurance), net of rental income,
are charged to operations in the current period and are reflected in the
expense caption--"REO expense, net".
PREMISES AND EQUIPMENT, NET
Land is carried at cost. Buildings, building improvements, and furniture
and equipment are stated at cost less accumulated depreciation computed on the
straight-line basis over the estimated useful lives of each type of asset.
Leasehold improvements are stated at cost less accumulated amortization
computed on a straight-line basis over the term of the lease or useful life,
whichever is less. Expenditures for maintenance and repairs are charged to
expense; major replacements and betterments are capitalized. Gains and losses
on dispositions are reflected in current operations.
9
<PAGE>
WASHINGTON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
INCOME TAXES
The Company and the Bank file a consolidated federal income tax return.
State income tax returns are filed on a separate basis.
Prior to 1993, the Company recorded income tax provisions in accordance
with Accounting Principles Board Opinion No.11: "Income Taxes" ("APB 11"),
which recorded deferred income taxes on transactions which are reported for
financial statement purposes in different years than for income tax
purposes--principally loan fees, interest on nonaccrual loans and carrying
costs of REO.
On January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109: "Accounting for Income Taxes" ("SFAS 109") with no prior
period adjustment. SFAS 109 requires an asset and liability approach, the
objective of which is to establish deferred tax assets and liabilities for
temporary differences between the financial reporting basis and the tax basis
of assets and liabilities at enacted tax rates expected to be in effect when
such amounts are realized or settled. The effect of adopting SFAS 109, as of
January 1, 1993, was to increase assets and net earnings by $300,000, or $.13
per share.
PENSION PLAN AND POSTRETIREMENT BENEFITS
A noncontributory defined benefit pension plan is provided through
Retirement System Group Inc. that covers substantially all employees. Benefits
are based upon years of service and generally upon the employee's average
compensation during the three consecutive years prior to normal retirement.
The funding policy is generally to make the minimum annual contributions
required by applicable regulations. Pension cost is determined by Statement of
Financial Accounting Standards No. 87: "Employers' Accounting for Pensions."
The Entry Age Normal Cost Method was used to determine the actuarial present
value of accumulated and projected benefit obligations.
During 1992, the Company undertook a policy to eliminate its balance sheet
liability under the new Statement of Financial Accounting Standards No. 106:
"Accounting for Postretirement Benefits Other Than Pensions" ("SFAS 106").
This goal was achieved in a two step process. First, current retirees were
offered, and accepted, a lump sum payment equal to a percentage of the
estimated cost to the Company of each retiree's future health insurance
premiums in exchange for the Company's liability for future coverage. The
aggregate lump sum amount for all such retirees approximated $77,000 and was
paid in two equal installments in January 1992 and 1993. Second, the
obligation for future retirees was moved to the tax-qualified pension plan.
Future retirees who meet certain age and service requirements will be awarded
a supplemental pension benefit equal to a percentage of estimated future
health insurance premiums.
During 1992 and prior periods, postretirement health care benefits were
recognized in the year that the benefits were paid to certain retired
employees--the "pay-as-you-go" or cash basis. The costs of providing
postretirement health care benefits approximated $42,000 and $38,000 for the
years ended December 31, 1992 and 1991, respectively.
POSTEMPLOYMENT BENEFITS
In December 1992, the FASB issued Statement of Financial Accounting
Standards No. 112: "Employers' Accounting for Postemployment Benefits" ("SFAS
112"). SFAS 112 requires accrual accounting for benefits provided to former or
inactive employees after employment but before retirement--including salary
continuation, disability benefits, severance pay and continuation of health
care benefits. Under SFAS 112, each benefit will be accrued either over the
employee's working career for benefits that vest or vary based on an
employee's years of service, or as an expense at the date of the event giving
rise to the benefits (e.g., at the date of disability). SFAS 112 is effective
for fiscal years beginning after December 15, 1993. Earlier application is not
required by the FASB. The Company plans to adopt SFAS 112 in 1994 with no
prior period restatement. Management believes that the effect of adopting SFAS
112 will not be significant on the financial position or results of operations
of the Company.
FINANCIAL INSTRUMENTS
Disclosures are made of the fair value of financial instruments, both
assets and liabilities recognized and not recognized in the consolidated
balance sheet, for which it is practicable to estimate fair value as of the
balance sheet
10
<PAGE>
WASHINGTON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
date. Changes in market conditions subsequent to that date are not reflected
and the fair value of financial instruments are not representative of the
Company's total value. For example, when quoted market prices are not
available, the Company calculates the present value of anticipated future cash
flows. In that regard, the estimated fair value will be affected by prepayment
and discount rate assumptions. Such method may not provide the actual amount
which would be realized in the ultimate sale of the financial instrument.
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practical to
estimate that value:
Cash and short-term investments
The carrying amount is a reasonable estimate of fair value.
Securities
Fair values are based on quoted market prices as published by various
quotation services or, if quoted market prices are not available, on dealer
quotes. Fair value of the investment in FHLB is its carrying amount.
Loan receivables and commitments to extend credit
Loans are grouped into homogeneous categories, such as one-to-four family
mortgages, consumer loans, and loans held for sale. Fair value is based on
either a quoted market price from a dealer for similar maturities, interest
rate and type of collateral or the present value of anticipated future cash
flows using the current rates at which similar loans would be made to
borrowers with similar credit risks and for the same remaining maturities.
Deposit liabilities
Carrying amount is a reasonable estimate of fair value for savings,
demand deposit, and money market accounts. Fair value of certificates of
deposit is estimated by discounting the future cash flows using the rates
currently offered for deposits of similar remaining maturities.
PER SHARE DATA
Income/(loss) per share was computed by dividing net income/(loss) for
each year by the weighted average number of shares outstanding (which excludes
unvested shares of the MRP).
RECLASSIFICATIONS
Certain reclassifications have been made to the 1992 and 1991 financial
statements to conform to the 1993 presentation.
2. CASH AND DUE FROM BANKS
Reserves maintained to meet Federal Reserve Board regulations amounted to
$331,000 and $280,000 during the bi-weekly maintenance periods that included
December 31, 1993 and 1992, respectively.
11
<PAGE>
WASHINGTON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
3. SECURITIES
December 31, 1993 December 31, 1992
---------------------------------------------- -------------------------------------------
Gross Gross
Weighted Unrealized Weighted Unrealized
Average Carrying --------------- Market Average Carrying ------------- Market
Yield Value Gains Losses Value Yield Value Gains Losses Value
------ ------- ----- ------ ----- ------ ----- ----- ----- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT SECURITIES HELD TO
MATURITY
U.S. Treasury:
Maturing between 1-5 years . . . 5.45% $13,546 $275 $ (1) $13,820 5.95% $19,090 $453 $ -- $19,543
---- ------- ---- ------ ------- ----- ------- ---- ------ -------
U.S. Government agencies:
Maturing within 1 year . . . . . -- -- -- -- -- 3.74 5,611 2 (7) 5,606
---- ------- ---- ------ ------- ----- ------- ---- ------ -------
Corporate Bonds and Notes:
Maturing within 1 year . . . . . -- -- -- -- -- 4.00 19,754 187 (37) 19,904
Maturing between 1-5 years . . . 4.28 303 5 -- 308 4.53 3,151 46 (2) 3,195
---- ------- ---- ------ ------- ----- ------- ---- ------ -------
4.28 303 5 -- 308 4.07 22,905 233 (39) 23,099
---- ------- ---- ------ ------- ----- ------- ---- ------ -------
Other Securities:
Maturing within 1 year . . . . . -- -- -- -- -- 3.65 9,188 2 (8) 9,182
---- ------- ---- ------ ------- ----- ------- ---- ------ -------
5.43% $13,849 $280 $ (1) $14,128 4.58% $56,794 $690 $(54) $57,430
==== ======= ==== ====== ======= ===== ======= ==== ===== =======
MORTGAGED-BACKED SECURITIES HELD
TO MATURITY
Government National
Mortgage Association ("GNMA")
pass-through certificates. . . . 6.24% $ 7,155 $ 14 $ (75) $ 7,094 7.12% $ 7,213 $ 16 $(32) $ 7,197
Federal National Mortgage
Association ("FNMA") pass-through
certificates . . . . . . . . . . 5.85 1,582 5 (21) 1,566 -- -- -- -- --
Federal Home Loan Mortgage
Association (FHLMC") pass-through
certificates . . . . . . . . . . 5.67 710 -- (5) 705 -- -- -- -- --
---- ------- ---- ------ ------- ----- ------- ---- ------ -------
6.13% $ 9,447 $ 19 $(101) $ 9,365 7.12% $ 7,213 $ 16 $(32) $ 7,197
==== ======= ==== ====== ======= ===== ======= ==== ===== =======
</TABLE>
<TABLE>
<CAPTION>
December 31, 1993 December 31, 1992
-------------------- -------------------------------------------
Gross
Weighted Carrying Weighted Unrealized
Average Market Average Carrying ------------- Market
Yield Value Yield Value Gains Losses Value
------ -------- ------ ----- ----- ----- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT SECURITIES AVAILABLE
FOR SALE
U.S. Treasury:
Maturing between 1-5 years . . . 4.69% $51,822 --% $ -- $ -- $ -- $ --
U.S. Government agencies:
Maturing within 1 year . . . . . 3.59 505 -- -- -- -- --
Corporate Bonds and Notes:
Maturing within 1 year . . . . . 4.12 3,836 4.64 1,937 17 -- 1,954
Other Securities:
Maturing within 1 year . . . . . 4.50 1,577 -- -- -- -- --
---- ------- ---- ------ ----- ----- ------
4.64% $57,740 4.64% $1,937 $ 17 $ -- $1,954
==== ======= ==== ===== ===== ===== ======
MORTGAGED-BACKED SECURITIES
AVAILABLE FOR SALE
GNMA pass-through certificates. . 6.82% $ 5,986 --% $ -- $ -- $ -- $ --
FHLMC pass-through certificates . 7.82 2,558 -- -- -- -- --
FNMA pass-through certificates. . 5.53 973 -- -- -- -- --
---- ------- ---- ------ ----- ----- ------
6.95% $ 9,517 --% $ -- $ -- $ -- $ --
==== ======= ==== ====== ===== ===== ======
</TABLE>
During 1993, the Company adopted SFAS 115 which increased the carrying
value of the available-for-sale securities by $286,000 for unrealized gains.
The carrying value of securities pledged to collateralize public deposits
approximated $828,000 and $1,454,000 at December 31, 1993 and 1992,
respectively.
12
<PAGE>
WASHINGTON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. LOANS AND REO
Loans
The primary market area for lending encompasses Hudson and Bergen
Counties, New Jersey. The following table sets forth the composition of the
loan portfolio:
December 31,
---------------------------
1993 1992
------------ ------------
Real estate:
1-4 family . . . . . . . . . . . . . . . . . $109,211,067 $125,858,058
Multi-family/commercial. . . . . . . . . . . 53,860,461 52,742,859
Construction . . . . . . . . . . . . . . . . 3,282,555 2,533,164
------------ ------------
Total real estate loans . . . . . . . . . . 166,354,083 181,134,081
Commercial/financial. . . . . . . . . . . . . 1,421,985 3,551,679
Consumer and other loans. . . . . . . . . . . 1,322,178 1,731,241
------------ ------------
Total loans . . . . . . . . . . . . . . . . 169,098,246 186,417,001
Less:
Unearned interest. . . . . . . . . . . . . . 79,393 87,541
Deferred loan fees . . . . . . . . . . . . . 857,953 1,052,732
Allowance for losses . . . . . . . . . . . . 2,828,000 2,776,000
------------ ------------
Loans, net. . . . . . . . . . . . . . . . . $165,332,900 $182,500,728
============ ============
Nonperforming loans
Nonperforming loans, which are a component of loans, include loans which
are accounted for on a nonaccrual basis and troubled debt restructurings.
December 31,
---------------------------
1993 1992
------------ ------------
Nonaccrual loans:
Real estate loans:
1-4 family. . . . . . . . . . . . . . . . . $ 2,783,813 $5,527,941
Multi-family/commercial . . . . . . . . . . 9,981,691 1,648,146
Construction. . . . . . . . . . . . . . . . -- 944,000
----------- ----------
Total real estate loans. . . . . . . . . . 12,765,504 8,120,087
Commercial/financial . . . . . . . . . . . . -- 224,591
Consumer and other loans . . . . . . . . . . 32,647 254,571
----------- ----------
Total nonaccrual loans . . . . . . . . . . 12,798,151 8,599,249
Troubled debt restructurings:
Commercial/financial. . . . . . . . . . . . 151,788 207,088
----------- ----------
Total nonperforming loans. . . . . . . . . $12,949,939 $8,806,337
=========== ==========
Interest on nonperforming loans which would have been recorded had such
loans been performing (based upon original contract terms) throughout the
period approximated $826,000, $609,000 and $975,000 for the years ended
December 31, 1993, 1992 and 1991, respectively. Interest income on those
loans, which is recorded only when received, amounted to $223,000, $416,000
and $548,000 for the years ended December 31, 1993, 1992 and 1991,
respectively.
During the first quarter of 1993, a Chapter 11 bankruptcy petition was
filed by the obligor of an approximately $9.0 million loan, a loan on which
the Bank currently has a first mortgage and an assignment-of-rents (the
13
<PAGE>
WASHINGTON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
"Bankruptcy Loan"). On November 10, 1993, the Court dismissed the bankruptcy
petition. Nevertheless, the Bank did not receive any of the rental payments
from April 1993 through November 1993, as the payments were made to a
debtor-in-possession account and pursuant to a Court Order were released to
the City of Philadelphia (and not to the Bank) to pay a substantial portion of
property tax arrearages. Rental payments were resumed to the Bank in December
1993. On January 29, 1994, the Bank paid approximately $450,000 to the City
of Philadelphia to resolve all remaining property tax arrearages and to pay
1994 property taxes. The amount of such payment was capitalized into the
Bankruptcy Loan balance. The Bank anticipates that the Bankruptcy Loan will
be renegotiated during 1994. The Bank has classified the Bankruptcy Loan as
a nonaccrual loan included in the multi-family/commercial category. Management
believes that the Bank has adequate collateral with respect to the Bankruptcy
Loan and anticipates collection of the outstanding principal balance.
REO
December 31,
-----------------------
1993 1992
--------- -----------
Acquired by foreclosure or deed in
lieu of foreclosure. . . . . . . . $3,920,667 $ 7,460,541
Loans foreclosed in-substance . . . 5,037,371 7,339,481
Less: Allowance for losses on REO . 1,880,000 1,802,000
---------- -----------
REO, net . . . . . . . . . . . . . $7,078,038 $12,998,022
========== ===========
Allowance for losses on loans and REO
Loans REO Total
---------- ---------- ----------
Balance, December 31, 1990. . . . . $2,579,000 $ 976,000 $3,555,000
Provision for losses. . . . . . . . 1,500,000 1,170,206 2,670,206
Recoveries. . . . . . . . . . . . . 240,898 -- 240,898
Losses charged off. . . . . . . . . (1,330,898) (818,206) (2,149,104)
---------- ---------- ----------
Balance, December 31, 1991. . . . . 2,989,000 1,328,000 4,317,000
Provision for losses. . . . . . . . 1,100,000 851,900 1,951,900
Recoveries. . . . . . . . . . . . . 257,045 -- 257,045
Losses charged off. . . . . . . . . (1,570,045) (377,900) (1,947,945)
---------- ---------- ----------
Balance, December 31, 1992. . . . . 2,776,000 1,802,000 4,578,000
Provision for losses. . . . . . . . 420,000 1,023,965 1,443,965
Recoveries. . . . . . . . . . . . . 261,319 -- 261,319
Losses charged off. . . . . . . . . (629,319) (945,965) (1,575,284)
---------- ---------- ----------
Balance, December 31, 1993. . . . . $2,828,000 $1,880,000 $4,708,000
========== ========== ==========
Related-Party Loans
An analysis of activity with respect to loans outstanding to directors,
officers, their entities and immediate family is as follows:
Year ended December 31,
----------------------
1993 1992
--------- ----------
Balance, beginning of year. . . . . . . . . . . $ 866,000 $1,007,000
New loans. . . . . . . . . . . . . . . . . . . -- 356,000
Repayments/reductions. . . . . . . . . . . . . (320,000) (497,000)
--------- ----------
Balance, end of year. . . . . . . . . . . . . . $ 546,000 $ 866,000
========= ==========
As of December 31, 1993 and 1992, $543,000 and $842,000, respectively, of
such loans represented collateralized real estate loans and $3,000 and
$24,000, respectively, represented uncollateralized loans. All such loans
were, in the opinion of management, made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with outside third parties.
14
<PAGE>
WASHINGTON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. PREMISES AND EQUIPMENT
December 31,
------------
1993 1992
---------- ----------
Land. . . . . . . . . . . . . . . . . . . . . . . . $ 513,570 $ 532,496
Buildings . . . . . . . . . . . . . . . . . . . . . 3,185,933 3,211,426
Leasehold improvements. . . . . . . . . . . . . . . 145,123 356,462
Equipment . . . . . . . . . . . . . . . . . . . . . 2,483,214 2,423,942
---------- ----------
6,327,840 6,524,326
Less: Accumulated depreciation and amortization . . 3,713,809 3,684,236
---------- ----------
$2,614,031 $2,840,090
========== ==========
During 1993, a building used to store bank-owned vehicles (i.e., a
garage) with a net book value of $37,000 was sold for $224,000.
6. INTEREST-BEARING DEPOSITS
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------
1993 1992
----------------------- ------------------------
Average Average
effective effective
interest rate Amount interest rate Amount
------------- ------ ------------- -------
<S> <C> <C> <C> <C>
Regular savings accounts. . . . . . . . . . . . . . . . . . . 2.50% $103,033,812 3.25% $ 99,347,342
Money market accounts . . . . . . . . . . . . . . . . . . . . 2.25 6,700,155 3.15 7,369,440
Checking accounts . . . . . . . . . . . . . . . . . . . . . . 2.00 4,690,136 2.90 4,185,800
---- ------------ ---- ------------
Total savings and transaction deposits . . . . . . . . . . . 2.47 114,424,103 3.23 110,902,582
---- ------------ ---- ------------
Market-rate certificates under $100,000 maturing:
Three months or less . . . . . . . . . . . . . . . . . . . . 3.84 37,909,328 4.86 45,781,741
Three months to six months . . . . . . . . . . . . . . . . . 3.69 22,848,926 4.97 29,851,480
Six months to one year . . . . . . . . . . . . . . . . . . . 3.65 26,694,662 4.79 33,046,983
One to two years . . . . . . . . . . . . . . . . . . . . . . 4.36 10,430,845 6.22 11,860,462
Two to three years . . . . . . . . . . . . . . . . . . . . . 4.91 10,514,059 4.91 3,212,207
Three to five years. . . . . . . . . . . . . . . . . . . . . 5.07 5,576,637 6.11 1,225,039
Market-rate certificates $100,000 and over maturing:
Three months or less . . . . . . . . . . . . . . . . . . . . 4.02 2,754,760 4.90 3,294,615
Three months to six months . . . . . . . . . . . . . . . . . 3.32 1,710,739 4.68 2,014,480
Six months to one year . . . . . . . . . . . . . . . . . . . 4.12 1,819,949 5.16 2,417,186
One to two years . . . . . . . . . . . . . . . . . . . . . . 4.51 527,622 6.89 428,375
Two to three years . . . . . . . . . . . . . . . . . . . . . 4.99 701,366 5.30 214,475
Three to five year . . . . . . . . . . . . . . . . . . . . . 5.05 1,113,268 -- --
---- ------------ ---- ------------
Total certificates of deposit . . . . . . . . . . . . . . . 3.98 122,602,161 5.01 133,347,043
---- ------------ ---- ------------
Total interest-bearing deposits. . . . . . . . . . . . . . 3.25% $237,026,264 4.20% $244,249,625
==== ============ ==== ============
Average effective interest rate on all deposits . . . . . . . 3.13% 4.04%
==== ====
</TABLE>
7. BORROWINGS
On February 1, 1993, the FHLB advanced the Company $400,000, maturing on
February 1, 1996. There were no advances during 1992. The average amount
outstanding during 1993 and 1991 was $367,000 and $23,308,000, respectively,
with a weighted average rate of 4.9% and 8.4%, respectively. The FHLB advance
is collateralized by
15
<PAGE>
WASHINGTON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
mortgage-backed securities and the mortgage loan portfolio. During the fourth
quarter of 1991, the proceeds primarily from the sale of one-to-four family
performing mortgage loans and investment securities were used to prepay
$15,900,000 of FHLB advances, incurring approximately $1,034,000 of early
extinguishment costs. The costs have been included in the consolidated
statements of operations as an extraordinary item. Due to the net operating
loss carryforward position, there was no income tax effect for these
transactions.
In 1987, the Bank established an Employee Stock Ownership Plan ("ESOP"),
which borrowed $l,449,000 from an unrelated third party lender to acquire
138,000 shares of the Company's Common Stock at $10.50 per share (secured by
the shares purchased). The loan was scheduled to mature in 1997; however, the
ESOP, at its option, repaid the remaining balance of the loan during 1992 with
no penalty. The ESOP repaid the loan as contributions were received from the
Bank. Interest was paid and accrued monthly at a variable rate which
approximated the prime rate. The related interest expense incurred for the
years ended December 31, 1992 and 1991 approximated $1,000 and $23,000, at an
effective rate of 3.9% and 9.3%, respectively.
The Bank also has a line of credit, which expires on September 1, 1994,
of approximately $14.3 million with the FHLB, none of which was in use at
December 31, 1993.
8. PENSION PLAN
The components of net periodic pension cost include the following:
Year ended December 31,
-------------------------------
1993 1992 1991
-------- -------- --------
Service cost of benefits earned . . . . . $131,925 $122,405 $102,672
Interest cost on projected benefit
obligation . . . . . . . . . . . . . . . 220,512 209,194 205,182
Actual return on plan assets. . . . . . . (408,089) (279,886) (210,743)
Net amortization:
Deferred investment liability. . . . . . 147,402 33,433 --
Unrecognized net transition asset. . . . (58,356) (58,356) (58,356)
Unrecognized prior service liability . . (254) 1,456 1,456
-------- -------- --------
Net periodic pension cost . . . . . . . . $ 33,140 $ 28,246 $ 40,211
======== ======== ========
16
<PAGE>
WASHINGTON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The funded status of the plan, which invests primarily in marketable
equity and debt securities, and the amounts recognized in the consolidated
balance sheets are as follows:
December 31,
--------------------------
1993 1992
----------- -----------
Actuarial present value of accumulated benefit
obligation:
Vested benefits. . . . . . . . . . . . . . . . $(2,838,600) $(2,338,576)
Nonvested benefits . . . . . . . . . . . . . . (182,800) (150,610)
----------- -----------
Accumulated benefit obligation . . . . . . . . (3,021,400) (2,489,186)
Effect of assumed increase in future
compensation levels. . . . . . . . . . . . . . (415,000) (341,898)
----------- -----------
Projected benefit obligation. . . . . . . . . . (3,436,400) (2,831,084)
Plan assets at fair value . . . . . . . . . . . 3,617,300 3,333,266
----------- -----------
Plan assets in excess of projected
benefit obligation. . . . . . . . . . . . . . . 180,900 502,182
Unrecognized net transition asset . . . . . . . (242,200) (300,524)
Unrecognized net (gain)/loss. . . . . . . . . . 87,200 (142,334)
Unrecognized prior service liability. . . . . . (7,500) (7,784)
----------- -----------
Net pension asset . . . . . . . . . . . . . . . $ 18,400 $ 51,540
========== ==========
The expected long-term rate of return on plan assets used in determining
the net periodic pension cost was 8.00% in 1993, 1992 and 1991. The projected
benefit obligation is based on an assumed discount rate of 7.00% in 1993 and
8.00% in 1992, and an assumed rate of compensation increase of 5.5% and 6.00%
in 1993 and 1992, respectively. The original net transition asset of $650,660
is being amortized over approximately eleven years and is due to expire in
1998.
9. BENEFIT PLANS
The expense charged to operations for the following benefit plans during
the years ended December 31, 1993, 1992 and 1991 approximated $151,000,
$193,000 and $376,000, respectively.
Incentive Stock Option Plan ("Option Plan")
The Option Plan authorizes the granting of 172,500 nonqualified and
incentive stock options through 1997 to certain officers and other key
employees. Each option entitles the holder to purchase one share of Common
Stock at an exercise price equal to the fair market value as of the date of
grant. Options may be exercisable at such times (not after ten years from
grant) as the Stock Option Plan Committee determines. The exercise price may
be paid in cash or Common Stock. The following table summarizes stock option
transactions during the three years ended December 31, 1993:
Balance at January 1, 1991, exercisable between $5.25
and $18.75 . . . . . . . . . . . . . . . . . . . . . . . . 58,000
Granted in 1992 at $4.00. . . . . . . . . . . . . . . . . 26,500
Granted in 1993 at $7.25. . . . . . . . . . . . . . . . . 88,000
Exercised in 1993 at $4.00. . . . . . . . . . . . . . . . (500)
-------
Balance at December 31, 1993, exercisable between $4.00
and $18.75 . . . . . . . . . . . . . . . . . . . . . . . . 172,000
=======
Exercisable at December 31, 1993. . . . . . . . . . . . . . 74,700
=======
Available for future grant of stock options . . . . . . . . --
=======
17
<PAGE>
WASHINGTON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Employee Stock Ownership Plan ("ESOP")
The ESOP, established for employees age 21 or older who have at least one
year of credited service, was funded by discretionary cash contributions that
are invested in the Common Stock. Benefits may be paid either in shares of
Common Stock or in cash. Shares purchased with such proceeds are held in a
suspense account by the ESOP Trustee for allocation among members. Benefits
become 20% vested each year of credited service, with 100% vesting after 5
years of credited service. Forfeitures will be reallocated among remaining
participating employees. Benefits may be payable upon retirement, early
retirement, disability or separation from service.
The ESOP Trustee must vote all allocated shares held in the ESOP in
accordance with the instructions of the participating employees. Shares for
which employees do not give instructions, shares held by the ESOP trustee and
unallocated shares will be voted in the same proportion as the shares with
respect to which instructions have been given.
The ESOP is subject to the requirements of the Employee Retirement Income
Security Act of 1974, as amended (which applies to all employee stock
ownership plans), and the regulations of the Internal Revenue Service and the
Department of Labor thereunder. The Company has begun to terminate the ESOP.
The effect of terminating the ESOP will not be significant to the financial
position or results of operations of the Company.
Management Recognition Plan ("MRP")
The MRP was established as a method of providing employees in key
positions with a proprietary interest in a manner designed to encourage such
key employees to remain with the Company. The Company contributed $630,000 to
the MRP to enable it to acquire 60,000 shares of Common Stock. Such amount
represents deferred compensation and has been accounted for as a reduction of
stockholders' equity. Awards generally vest over either a three or five year
period and will be 100% vested upon termination of employment by death,
disability, retirement, or following a change in control of the Company.
Option Plan for Outside Directors ("Directors' Option Plan")
Each member of the Board of Directors who is not an officer or employee
of the Company was granted a single non-qualified option to purchase 7,187.5
shares (aggregate 57,500 shares) of the Common Stock at an exercise price
equal to the fair market value as of the date of grant. Each option granted
under the Directors' Option Plan expires upon the earlier of ten years
following the date of the option or thirty days following the date the
optionee ceases to be a director. The following table summarizes the
Directors' Option Plan transactions during the three years ended December 31,
1993:
Balance at January 1, 1991, exercisable between $10.50
and $13.00 . . . . . . . . . . . . . . . . . . . . . . . . 50,312.50
Granted in 1993 at $7.25. . . . . . . . . . . . . . . . . 10,782.00
Options returned for granting in 1993 . . . . . . . . . . (10,782.00)
----------
Balance at December 31, 1993, excersisable between $7.25
and $13.00 . . . . . . . . . . . . . . . . . . . . . . . . 50,312.50
==========
Exercisable at December 31, 1993. . . . . . . . . . . . . . 50,312.50
==========
Available for future grant of stock options . . . . . . . . --
==========
Deferred Compensation Plan for Outside Directors ("DCP")
During 1993, the DCP, a plan which covers any outside director who has
served in that capacity for at least five consecutive calendar years, was
approved in principle subject to certain conditions. Eligibility, benefits and
vesting will continue should an outside director subsequently become an
officer or employee. An outside director becomes fully vested upon either
fifteen years of service as director, sixty-five years of age, death, or
change in control of the Company, as described below. Subsequent to
retirement, the DCP provides an annual benefit equal to (a) 50% of the outside
director's annual retainer in effect at the time of retirement (the "then
current retainer"), plus (b) 5% of the then current retainer for each
additional year of service in excess of 5 years (up to a maximum of 10
additional years).
18
<PAGE>
WASHINGTON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Benefits are based on actuarial assumptions then in effect under the
Retirement Plan of the Bank. Benefits payable under the DCP shall be paid
directly from the general assets of the Company. The Company is not obligated
to set aside, earmark or escrow funds or other assets to satisfy its
obligations under the DCP. At December 31, 1993, the accumulated
postretirement benefit obligation reflected on the consolidated balance sheet
in other liabilities was $25,000.
In the event of a change in control of the Company, each outside director
(regardless of whether he has served as a director for five years) who is
neither an officer nor an employee shall receive a single cash payment equal
to four times the then current retainer. The cumulative liability under a
change in control of the Company is approximately $252,000. Such cumulative
liability in excess of the aforementioned $25,000 was not reflected in the
consolidated financial statements as of December 31, 1993.
Bonus programs
Employees of the Bank are awarded cash bonuses based upon length of
service, responsibility level and performance.
10. INCOME TAX EXPENSE/(BENEFIT)
Year ended December 31,
----------------------
1993 1992 1991
---- ---- ----
(Dollars in thousands)
Current:
Federal. . . . . . . . . . . . . . . . . . . $ 396 $ 288 $ --
State. . . . . . . . . . . . . . . . . . . . 32 51 --
------- ----- -----
428 339 --
Deferred. . . . . . . . . . . . . . . . . . . 110 (250) --
Elimination of valuation allowance. . . . . . (809) -- --
Income tax refund . . . . . . . . . . . . . . (747) -- --
Charge in lieu of income taxes. . . . . . . . -- 539 --
Write-off of net deferred tax asset . . . . . -- -- 552
------- ----- -----
$(1,018) $ 628 $ 552
======= ===== =====
Upon adoption of SFAS 109, deferred tax assets of $2.4 million, deferred
tax liabilities of $1.0 million and a valuation allowance of $809,000 were
established, resulting in a net deferred tax asset of $550,000 as of January
1, 1993. As of December 31, 1993, the $809,000 valuation allowance was reduced
to zero as a result of taxes paid in prior and current years and anticipated
future taxable income sufficient to realize these tax benefits. Based upon the
Company's historical and current pretax earnings, management believes it is
more likely than not that the Company will generate future net taxable income
in sufficient amounts to realize its net deferred tax asset at December 31,
1993, however, there can be no assurance that the Company will generate any
earnings or any specific level of continuing earnings. In addition during
1993, an income tax refund of $747,000 was received as a result of an
overassessment of previously paid federal income taxes.
During 1992, the Company utilized its remaining net operating loss
carryforwards of approximately $754,000 for federal income tax purposes and
approximately $1,700,000 for financial reporting purposes to record an
extraordinary credit in the amount of $539,000, which partially offset income
tax expense of $628,000. During 1991, the $552,000 of expense was primarily a
result of the write-off of the net deferred tax asset as a result of the
Company's tax loss carryforward position.
19
<PAGE>
WASHINGTON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A reconciliation between the reported income tax expense/(benefit) and
the amount computed by multiplying income before income taxes, extraordinary
items and cumulative effect of change in accounting principle by the statutory
Federal income tax rate is as follows:
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------------------
1993 1992 1991
--------------- --------------- --------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Statutory expense . . . . . . . . . . . . . . . . . . . . $ 512 34.0% $ 743 34.0% $ 81 34.0%
(Deductible)/ nondeductible provision
for losses on loans. . . . . . . . . . . . . . . . . . . -- -- (151) (6.9) 160 67.3
State income tax, net of federal benefit. . . . . . . . . 30 2.0 35 1.6 -- --
Reduction in valuation allowance. . . . . . . . . . . . . (809) (53.7) -- -- -- --
Income tax refunds. . . . . . . . . . . . . . . . . . . . (747) (49.6) -- -- -- --
Write-off of deferred tax asset, net of
benefit. . . . . . . . . . . . . . . . . . . . . . . . . -- -- -- -- 310 130.2
Other . . . . . . . . . . . . . . . . . . . . . . . . . . (4) (.3) 1 -- 1 (.2)
------- ------ ----- ---- ----- -----
$(1,018) (67.6)% $ 628 28.7% $ 552 231.7%
======= ====== ===== ==== ===== =====
</TABLE>
Temporary differences, which give rise to deferred tax assets and
liabilities under SFAS 109, as of December 31, 1993, are as follows:
Deferred Tax
---------------------
Assets Liabilities
------ -----------
(Dollars in thousands)
Financial basis reserve for losses on loans and REO . . $1,710 $ --
Tax basis reserve for losses on loans and REO
in excess of base year tax reserve . . . . . . . . . . -- 1,088
Deferred loan origination fees. . . . . . . . . . . . . 309 --
Interest on nonaccrual loans. . . . . . . . . . . . . . 262 --
Premises and equipment. . . . . . . . . . . . . . . . . 146 --
Deferred compensation . . . . . . . . . . . . . . . . . 83 --
Unrealized gain on available for sale securities. . . . -- 100
Other . . . . . . . . . . . . . . . . . . . . . . . . . 54 7
------ ------
Deferred taxes/liabilities. . . . . . . . . . . . . . . $2,564 $1,195
====== ======
Net deferred tax asset. . . . . . . . . . . . . . . . . $1,369
======
Under APB 11, the provision for losses on loans and REO was treated as a
permanent difference which did not require deferred taxes. Under SFAS 109,
differences between the book and tax basis reserve for losses on loans and REO
are treated as temporary differences requiring deferred taxes, except that no
deferred tax liability is required for the base year tax reserve of
approximately $270,000 as of December 31, 1993.
20
<PAGE>
WASHINGTON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The deferred income tax provision/(benefit) on income from operations is
due to the following items:
Year ended December 31,
------------------------
1993 1992 1991
---- ---- ----
(Dollars in thousands)
Financial basis reserve for losses on loans and
REO. . . . . . . . . . . . . . . . . . . . . . $ 63 $ -- $ --
Tax basis reserve for losses on loans and REO in
excess of base year tax reserve. . . . . . . . (87) -- --
Deferred loan origination fees. . . . . . . . . (70) (248) --
Interest on nonaccrual loans. . . . . . . . . . 186 23 --
Deferred compensation . . . . . . . . . . . . . (26) (28) --
Other . . . . . . . . . . . . . . . . . . . . . 44 3 --
---- ----- ----
$110 $(250) $ --
==== ===== ====
11. COMMITMENTS AND CONTINGENCIES
Total rent expense for all bank branches under operating leases was
approximately $73,000, $130,000 and $105,000 for the years ended December 31,
1993, 1992 and 1991, respectively. Future minimum lease payments required
under noncancellable operating leases for bank branches as of December 31,
1993 are as follows:
1994 . . . . . . . . . . . . . $ 71,000
1995 . . . . . . . . . . . . . 71,000
1996 . . . . . . . . . . . . . 71,000
1997 . . . . . . . . . . . . . 50,000
1998 . . . . . . . . . . . . . 7,000
Thereafter . . . . . . . . . . --
--------
$270,000
========
Certain of the above leases contain renewal options which provide for
increased rental payments as a result of increases in real estate taxes. It is
generally expected that in the normal course of business, leases that expire
will be renewed or replaced by other leases with similar terms.
The Company has entered into a severance agreement with a certain key
executive. In the event of a change in control of the Company (such as the
Merger referred to in Note 15), this executive will receive a payment equal to
three times his average annual compensation over the five previous years of
his employment with the Bank, if terminated for other than cause or upon
certain other events of termination of employment. In the event that severance
payments combined with other payments to be made to this executive by the
Company in connection with the Merger would constitute an excess parachute
payment under Section 280 G of the Internal Revenue Code of 1986, as amended,
then the executive will receive a combination of benefits and payments which
will equal the maximum aggregate amount which can be paid to the executive
without constituting such an excess parachute payment.
In October 1991, a complaint was filed by a former officer in New Jersey
Superior Court against the Company, the Bank and certain directors and
officers seeking unspecified damages relating to the termination of such
officer's employment. The Company and individual defendants have filed an
answer and have asserted certain counterclaims. Although this complaint was
recently dismissed, it was dismissed without prejudice to the plaintiff's
right to refile the complaint by March 31, 1994. In April 1992, a complaint
was filed in the New Jersey Superior Court against the Company and the Bank
seeking unspecified damages and alleging violations of state securities laws,
certain banking laws and state common law. This lawsuit is in the discovery
stage. The plaintiffs recently amended their complaint to add claims against
nine individual defendants, including current and former officers and
directors of the Company and the Bank. Management believes that the defendants
have meritorious defenses in both of these matters and intends to vigorously
defend these matters. Given the uncertainties involved in judicial proceedings
and the preliminary stage of discovery in these matters, management cannot
determine the precise amount of any potential loss that may arise in these
matters. Accordingly, no provision for loss, if any, that may result upon
resolution of these matters has been recorded in the Company's consolidated
financial statements.
21
<PAGE>
WASHINGTON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Bank is also subject to other legal proceedings involving collection
matters, contract claims and miscellaneous items arising in the normal course
of business. It is the opinion of management that the resolution of such legal
proceedings will not have a material impact on the financial statements of the
Company or the Bank.
12. FINANCIAL INSTRUMENTS
Off-Balance-Sheet Risk
In the normal course of business, the Company is a party to financial
instruments with off-balance-sheet risk which are properly not recorded in the
consolidated financial statements. These financial instruments principally
represent commitments to extend credit to potential borrowers and involve, to
varying degrees, elements of credit and interest-rate risk. At December 31,
1993 and 1992, the exposure to credit loss in the event of nonperformance by
potential customers was represented by the contractual amount of the financial
instruments as follows:
Expiration
Contractual Interest Dates
Amount Rates Through
---------- ------- ----------
At December 31, 1993:
Loan commitments--variable . . . . . $1,575,000 6.3%- 9.5% March 1994
Loan commitments--fixed. . . . . . . 4,939,000 6.3 -10.5 March 1994
Lines of credit--variable. . . . . . 1,081,000 7.5 -11.0 September 1994
Undisbursed construction loans--
fixed . . . . . . . . . . . . . . . 853,000 8.0 -10.0 August 1995
At December 31, 1992:
Loan commitments--variable . . . . . $2,628,000 5.8%- 8.0% March 1993
Loan commitments--fixed. . . . . . . 2,519,000 7.8 -10.5 March 1993
Lines of credit--variable. . . . . . 808,000 8.0 -11.0 November 1993
Undisbursed construction loans--
fixed . . . . . . . . . . . . . . . 197,000 7.0 -10.0 October 1993
Since loan commitments and lines of credit may expire without being
exercised, the total commitment amount does not necessarily represent future
cash requirements. In addition, expiration dates may be extended. The amount of
collateral obtained upon originating the loan is based upon management's credit
evaluation of the potential borrower and the real estate financed.
Concentrations of Credit Risk
The Company's exposure to credit risk is dependent upon the economic
condition of its primary market areas for lending--Bergen and Hudson counties,
New Jersey. In addition, as of December 31, 1993, the Bankruptcy Loan is the
only loan to any one borrower whose aggregate loan concentration was greater
than 10% of stockholders' equity. Refer to Note 4 for a discussion of the
Bankruptcy Loan. Furthermore, another borrower whose aggregate loan balance was
greater than 10% of stockholders' equity as of December 31, 1992, prepaid such
loan during 1993.
The Company originates adjustable-rate loans to manage its interest
exposure on its deposits. The adjustable-rate loans have interest rate
adjustment limitations with annual and lifetime caps and are generally indexed
to the 1 and 3 year Treasury indices. Future market factors may affect the
correlation of the interest rate adjustment with the rates paid on deposits that
have been primarily utilized to fund such loans. No loans had reached their
interest rate adjustment limitation ceiling as of December 31, 1993.
22
<PAGE>
WASHINGTON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Fair Value of Financial Instruments
The estimated fair values of financial instruments, for which it is
practicable to estimate fair values, as of December 31, 1993 and 1992 are as
follows:
December 31,
---------------------------------------
1993 1992
------------------ -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ----- ------- -----
(in thousands)
Financial assets:
Cash and Federal funds sold. . . $ 6,183 $ 6,183 $ 7,336 $ 7,336
Investments available for sale . 57,740 57,740 1,936 1,954
Mortgage-backed securities
available for sale. . . . . . . 9,517 9,517 -- --
Loans held for sale. . . . . . . 4,852 4,909 9,000 9,032
Investment securities. . . . . . 13,849 14,128 56,794 57,430
Mortgage-backed securities . . . 9,447 9,365 7,213 7,197
Loans. . . . . . . . . . . . . . 169,098 186,417
Less: allowance for losses. . . (2,828) (2,776)
unearned income. . . . . . . (937) (1,140)
------- -------
165,333 169,292 182,501 182,283
Investment in FHLB . . . . . . . 1,711 1,711 1,632 1,632
Financial liabilities:
Deposits . . . . . . . . . . . . 246,043 246,305 252,623 253,287
Advances . . . . . . . . . . . . 400 401 -- --
13. STOCKHOLDERS' EQUITY AND DIVIDEND RESTRICTIONS
In 1987, when the Bank converted from a savings bank in mutual form to a
savings bank in stock form, the Company established a liquidation account in
an amount equal to the Bank's surplus and reserves at December 31, 1986
($14,351,000). The liquidation account will be maintained for the benefit of
eligible depositors who held deposit accounts of $50 or more in the Bank as of
December 31, 1985 and who continue to maintain their accounts in the Bank. The
liquidation account is reduced annually to the extent that eligible depositors
have reduced their eligible deposits (subsequent increases will not restore an
interest in the liquidation account). In the unlikely event of a complete
liquidation, each eligible depositor will be entitled to receive a
distribution from the liquidation account in a proportionate amount to the
then current adjusted eligible balances for accounts then held. No dividends
may be paid to stockholders if such dividends reduce stockholders' equity
below the liquidation account, which was approximately $1.4 million at
December 31, 1993.
Certain restrictions exist regarding the ability of the Bank to transfer
funds to the Company in the form of cash dividends, loans or advances. FDIC
regulations limit the amount of dividends that may be paid by the Bank to the
Company without prior approval of the FDIC to net profits (as defined) for the
current year and the retained net profits (as defined) for the preceding two
years. In addition, State banking regulations allow for the payment of
dividends in any amount provided that capital stock will be unimpaired and
there remains an additional amount of paid-in capital of not less than 50% of
the capital stock amount. As of December 31, 1993, the undistributed earnings
of the Bank approximated $11.6 million, of which $3.6 million was available
for the payment of dividends to the Company.
14. REGULATORY MATTERS
During the third quarter, the Federal Deposit Insurance Corporation (the
"FDIC") completed its examination of the Bank as of August 2, 1993. As a
result of that examination, the FDIC rescinded its Memorandum of
Understanding which the Bank had signed on December 22, 1992 with the FDIC and
the State of New Jersey Department of Banking in connection with their
examination as of July 13, 1992.
23
<PAGE>
WASHINGTON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Subsequently, the Federal Reserve Bank of New York (the "FRB") completed
an off-site analysis of the Company. As a result of that analysis, the FRB
rescinded its Memorandum of Understanding, which the Company had originally
signed on August 13, 1991 in connection with the FRB's examination as of
December 31, 1990.
Under banking policies issued by the FDIC and the FRB, the Company and
the Bank must maintain an adequate level of capital sufficient to meet a
leverage capital ratio, a core risk-based capital ratio and a total risk-based
capital ratio. The leverage capital ratio is calculated by dividing core
capital by average total assets of the most recent quarter-end. The risk-based
capital ratios require the Company and the Bank to classify their assets and
certain off-balance-sheet activities into categories, and maintain specified
levels of capital for each category. The least capital is required for the
category deemed to have the least risk, and the most capital is required for
the category deemed to have the greatest risk. For purposes of leverage and
risk-based capital guidelines, core capital (also known as Tier 1 capital)
consists of common equity in accordance with generally accepted accounting
principles ("GAAP") excluding net unrealized gains or losses on
available-for-sale securities and deferred tax assets that are dependent on
the future taxable income greater than one year, and total capital consists of
core capital plus a portion of the allowance for losses on loans. The
qualifying portion of the allowance for losses on loans for the Company and
the Bank was approximately $1.8 million and $2.3 million as of December 31,
1993 and 1992, respectively. As of December 31, 1993 and 1992, capital ratios
were as follows:
December 31,
------------------------------------
1993 1992
---------------- ----------------
Capital ratios: Required* Company Bank Company Bank
- - --------------- -------- ------- ---- ------- ----
Leverage. . . . . . . . . . 5.00% 11.70% 11.38% 10.62% 10.33%
Core risk-based . . . . . . 6.00 23.55 22.90 16.32 15.87
Total risk-based. . . . . . 10.00 24.81 24.16 17.58 17.12
- - ------------
*For qualification as a well-capitalized institution.
15. MERGER AGREEMENT
On November 8, 1993, the Company signed a definitive agreement (the
"Agreement") providing for the merger of the Company with and into Hubco, Inc.
of Union City, New Jersey. Under the terms of the Agreement, shareholders of
the Company will receive either $16.10 in cash or .6708 of a share of new
Series A Convertible Preferred Stock of Hubco, Inc. for each share of the
Company's common stock. In addition, the Company issued an option to Hubco,
Inc., exercisable in certain circumstances, to acquire 765,000 shares of its
authorized but unissued stock at a price of $11.50 per share. The Agreement is
subject to several conditions, including regulatory and shareholder approvals.
Since significant conditions to effect the merger have not occurred, most
merger costs are not included in the 1993 results of operations in the
accompanying financial statements.
24
<PAGE>
WASHINGTON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
16. PARENT ONLY FINANCIAL INFORMATION
The following are the balance sheets as of December 31, 1993 and 1992,
and the statements of operations and retained earnings and the statements of
cash flows for the years ended December 31, 1993, 1992 and 1991 for Washington
Bancorp, Inc. (parent company only).
BALANCE SHEETS
December 31,
--------------------------
1993 1992
----------- -----------
Assets:
Due from banks. . . . . . . . . . . . . . . . . $ 1,002,000 $ 1,000,000
Investment in wholly-owned subsidiary,
equity basis . . . . . . . . . . . . . . . . . 32,539,499 29,469,045
----------- -----------
$33,541,499 $30,469,045
=========== ===========
Stockholders' Equity:
Preferred stock, par value $.10 per share,
3,000,000 shares authorized, no shares issued
and outstanding. . . . . . . . . . . . . . . . $ -- $ --
Common stock, par value $.10 per share, 6,000,000
shares authorized, shares issued and outstanding--
2,307,687 in 1993 and 2,307,187 in 1992 . . . 230,768 230,718
Paid-in capital . . . . . . . . . . . . . . . . 22,500,728 22,498,778
Retained earnings . . . . . . . . . . . . . . . 10,744,003 7,919,549
Unrealized gain on available-for-sale securities,
net of tax . . . . . . . . . . . . . . . . . . 186,000 --
----------- -----------
33,661,499 30,649,045
Deferred compensation--MRP. . . . . . . . . . . (120,000) (180,000)
----------- -----------
$33,541,499 $30,469,045
=========== ===========
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Year ended December 31,
----------------------------------------
1993 1992 1991
----------- ----------- -----------
Equity in undistributed earnings/
(loss) of subsidiary . . . . . . $ 2,824,454 $ 2,095,981 $ (1,348,130)
Retained earnings, beginning of
year . . . . . . . . . . . . . . 7,919,549 5,823,568 7,171,698
----------- ----------- ------------
Retained earnings, end of year. . $10,744,003 $ 7,919,549 $ 5,823,568
=========== =========== ============
STATEMENTS OF CASH FLOWS
Year ended December 31,
----------------------------------------
1993 1992 1991
----------- ----------- -----------
Cash Flows from Financing Activities:
Exercise of stock options . . . . $ 2,000 $ -- $ --
Cash, at beginning of year. . . . 1,000,000 1,000,000 1,000,000
---------- ---------- ----------
Cash, at end of year. . . . . . . $1,002,000 $1,000,000 $1,000,000
========== ========== ==========
25
<PAGE>
WASHINGTON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
17. Summary of Quarterly Results (Unaudited)
<TABLE>
<CAPTION>
The results of operations on a quarterly basis are presented in the
following tables:
1993 1992
------------------------------------- --------------------------------------
Fourth Third Second First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
------ ------- ------- ------- ------- ------- ------- -------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income . . . . . . . . . . . . . . . $4,452 $4,634 $4,669 $4,802 $5,030 $5,442 $5,688 $5,719
Interest expense. . . . . . . . . . . . . . . 1,987 2,153 2,260 2,412 2,664 2,891 3,136 3,499
------ ------ ------ ------ ------ ------ ------ ------
Net interest income . . . . . . . . . . . . . 2,465 2,481 2,409 2,390 2,366 2,551 2,552 2,220
Provision for losses on loans . . . . . . . . 70 50 100 200 350 400 200 150
------ ------ ------ ------ ------ ------ ------ ------
Net interest income after provision
for losses on loans. . . . . . . . . . . . . 2,395 2,431 2,309 2,190 2,016 2,151 2,352 2,070
Net security transactions . . . . . . . . . . (7) (13) 12 30 426 1,197 10 5
Net gain on sale of loans . . . . . . . . . . 16 (3) 144 -- -- 132 65 --
Other non-interest income . . . . . . . . . . 304 110 116 240 99 134 111 111
REO expense, net. . . . . . . . . . . . . . . 533 372 116 436 556 251 145 219
Other non-interest expense. . . . . . . . . . 1,885 1,666 1,903 1,857 1,673 1,839 2,095 1,916
------ ------ ------ ------ ------ ------ ------ ------
Income before income taxes,
extraordinary item and cumulative
effect of change in accounting
principle. . . . . . . . . . . . . . . . . . 290 487 562 167 312 1,524 298 51
Income tax benefit/(expense) (1). . . . . . . 703 (179) (201) 695 11 (559) (62) (18)
------ ------ ------ ------ ------ ------ ------ ------
Income before extraordinary item and
cumulative effect of change in
accounting principle . . . . . . . . . . . . 993 308 361 862 323 965 236 33
Extraordinary item. . . . . . . . . . . . . . -- -- -- -- (17) 481 57 18
Cumulative effect of change in
accounting principle (2) . . . . . . . . . . -- -- -- 300 -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Net income. . . . . . . . . . . . . . . . . . $ 993 $ 308 $ 361 $1,162 $ 306 $1,446 $ 293 $ 51
====== ====== ====== ====== ====== ====== ====== ======
Per share data:
Income before extraordinary
items and cumulative effect of change
in accounting principle. . . . . . . . . . . $0.43 $0.14 $0.16 $.38 $0.14 $0.43 $0.10 $0.01
Extraordinary items . . . . . . . . . . . . . -- -- -- -- (0.01) 0.21 0.03 0.01
Cumulative effect of change in
accounting principle . . . . . . . . . . . . -- -- -- 0.13 -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Net income. . . . . . . . . . . . . . . . . . $0.43 $0.14 $0.16 $0.51 $0.13 $0.64 $0.13 $0.02
====== ====== ====== ====== ====== ====== ====== ======
<FN>
(1) The first quarter of 1993 includes an income tax refund of $747,000 and the
fourth quarter of 1993 includes a deferred tax adjustment of $809,000 in
order to reduce the deferred tax asset valuation allowance (to a zero balance).
(2) The cumulative effect of change in accounting principle resulted from the
adoption of SFAS 109 -- "Accounting for Income Taxes".
</FN>
</TABLE>
26
<PAGE>
Item 11. Executive Compensation
Directors' Compensation
Directors are paid a monthly retainer of $750, plus $250 per board
meeting attended. An additional fee of $250 is paid for each committee meeting
attended. Officers who are Directors do not receive fees for services as a
Director. Honorary directors are paid $200 per board meeting attended, but are
not paid a retainer.
During 1993, James M. Ungerleider, a director of the Company and the
Bank, was paid fees of $27,500 for services provided as an outside director
representative on a committee that monitors compliance under certain
regulatory agreements and for other compliance services.
During 1993, the Board adopted a retirement plan for outside directors
which will provide benefits aggregating $252,000 to the members of the Board
other than Paul C. Rotondi and Theodore J. Doll upon consummation of the
proposed merger with Hubco, Inc. (the "Merger"). See Note 9 of the Notes to
Consolidated Financial Statements on page 45 of the Annual Report on Form 10-K
for the year ended December 31, 1993 for more information regarding this plan.
27
<PAGE>
Summary of Cash and Certain Other Compensation
The following table sets forth, for the fiscal years ended December 31,
1993, 1992 and 1991, the annual and long-term compensation of the Company's
Chief Executive Officer and Chief Operating Officer (the "Named Officers"),
the only two executive officers whose salary and bonus exceeded $100,000
during 1993:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
-----------------------------------
Annual Compensation(1) Awards
----------------------- -----------------------------------
(a) (b) (c) (d) (f) (g) (i)
Restricted Securities All Other
Name and Stock Underlying Compensation(3)
Principal Position Year Salary ($) Bonus ($) Award(s)(2)($) Options/SARs (#) ($)
------------------ ---- ---------- --------- -------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Paul C. Rotondi, . . 1993 $158,317 $29,000 $ -- $ -- $3,879
Chairman and Chief 1992 166,154 2,000 12,750 -- 4,420
Executive Officer 1991 160,000 -- -- --
Theodore J. Doll, . . 1993 148,317 4,000 -- 24,500 877
President and Chief 1992 155,769 2,000 12,750 -- 877
Operating Officer 1991 150,000 -- -- --
<FN>
- - ------------
(1) During the three years ended December 31, 1993, no Named Officer received
perquisites (i.e., personal benefits) in excess of 10% of such
individual's reported salary and bonus.
(2) Restricted Stock Awards ("RSA") are made under the Company's Management
Recognition and Retention Plan (the "MRP") and are payable in shares of
the Company's Common Stock at the expiration of the vesting period
established by the Salaries Committee of the Board. Under the MRP, no
awards will vest in less than five years from the date of grant.
Dividends are paid to the executives on all RSAs at the same time and at
the same rate as all other holders of the Company's Common Stock. The
number and value of aggregate RSA holdings for the Named Officers at
December 31, 1993 are as follows: Paul C. Rotondi, 2,400 shares with a
value of $31,200 and Theodore J. Doll, 2,400 shares with a value of
$31,200. The foregoing values are based on the closing price of the
Company's Common Stock on the Nasdaq National Market on December 31, 1993
($13.00 per share).
(3) Represents premiums paid on group term life insurance greater than
$50,000. Pursuant to SEC regulations, information is not provided with
respect to 1991.
</FN>
</TABLE>
Stock Options
The following table contains information regarding the grant of stock
options (all of which were granted under the Company's employee stock option
plan (the "Employee Plan")) to the Named Officers during the year ended
December 31, 1993. In addition, in accordance with rules of the Securities and
Exchange Commission (the "SEC"), the following table sets forth the
hypothetical gains or "option spreads" that would exist for such options,
assuming rates of annual compound price appreciation in the Company's Common
Stock of 5% and 10% from the date the options were granted to their final
expiration date.
28
<PAGE>
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term(1)
- - ----------------------------------------------------------------------------- ---------------------------
(a) (b) (c) (d) (e) (f) (g)
Number of Percent of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/sh) Date 5% ($) 10% ($)
---- ------------ ------------ ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Paul C. Rotondi . . . -- -- -- -- -- --
Theodore J. Doll. . . 24,500 27.84% $7.25 9/20/2003 $115,559 $292,850
<FN>
- - -----------
(A) The Employee Plan is administered by the Salaries Committee of the
Company's Board of Directors. That committee determines which employees
will receive options, the number of options to be granted and the terms
of option grants. Options generally are granted at exercise prices equal
to the fair market value of the Company's Common Stock on the grant date.
(B) No assurances can be given that the market price of the Company's Common
Stock will appreciate over the applicable period or, if such appreciation
does occur, that such appreciation will be greater or less than the
assumed rates set forth above.
</FN>
</TABLE>
Option Exercises and Holdings
None of the Named Officers exercised any of his stock options during the
year ended December 31, 1993. The following table provides data regarding the
number of shares covered by both exercisable and non-exercisable stock options
held by the Named Officers at December 31, 1993. Also reported are the values
for "in-the-money" options, which represent the positive spread between the
exercise prices of existing options and $13.00, the closing sale price of the
Company's Common Stock on December 31, 1993. None of Mr. Rotondi's options
were "in-the-money" on that date.
UNEXERCISED OPTIONS AT FISCAL YEAR END
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/
Options/SARs at FY-End (#) SARs at FY-End ($)
Name -------------------------- --------------------------
---- (d) (e)
(a) Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Paul C. Rotondi . . . 27,200 6,800 -- --
Theodore J. Doll. . . -- 24,500 -- $140,875
Severance Agreement
The Company has entered into a Severance Agreement with Paul Rotondi,
which agreement provides that if at any time following a "Change in Control"
of the Company, the Company or the Bank were to terminate his employment with
the Company or the Bank, for any reason other than for "cause," or if he were
to terminate his own employment following a demotion, loss of title, office or
significant authority, a reduction in annual compensation or relocation of his
principal place of employment, he would be entitled to receive a payment in an
amount equal to three times his average annual compensation over the five
previous years of his employment with the Bank. If a Change in Control had
occurred as of December 31, 1993, followed by a termination of employment, the
amount payable to Mr. Rotondi pursuant to his severance agreement would have
been $507,000. The agreement also provides for certain retirement benefits in
the event of a termination of employment for reasons other than cause. Certain
insurance coverage maintained by the Bank at the time of any such termination
would be continued for a three-year period. The
29
<PAGE>
Merger will constitute a "Change in Control" under the terms of the Severance
Agreement. Mr. Rotondi has agreed with Hubco, Inc. to reduce his benefits such
that they will not result in an excise tax being imposed under certain
provisions of the Internal Revenue Code.
Retirement Benefits
The Bank maintains and funds a tax-qualified, non-contributory defined
benefit pension plan for its employees, which is administered by the
Savings Bank. All salaried employees age 21 or older who have
completed at least one year of service participate in the plan. The plan
provides an annual benefit payable at age 65 (or the fifth year of participation
in the plan, if that is later) equal to 2% of the employee's
"Average Annual Salary," multiplied by years of credited service, without
offset for Social Security benefits. The calculation of Average Annual Salary
is essentially based on the "Salary" reported in the Summary Compensation
Table. The average represents the average of the highest 36 months of base
salary within the final 120 months. The maximum annual benefit is 50% of the
Average Annual Salary. A participant who at the time of his or her termination
of service (for reasons other than death) has completed at least five years of
vested service shall be eligible for a vested retirement benefit. A
participant at the time of his or her termination of service shall be eligible
for an early retirement benefit provided (a) he or she has attained age sixty
and completed fifteen or more years of vested service with the employer,
or (b) he or she has completed thirty or more years of vested service with the
employer. Only that compensation and credited service accrued by the
participant prior to his or her termination of service is used to compute his
or her retirement benefit. A participant who incurs a termination of service
prior to his or her normal retirement date and after having completed at least
ten years of vested service is eligible for a retirement benefit.
The table below illustrates annual benefits under the plan assuming
retirement at age 65 during 1993, at various levels of compensation and years
of credited service. The amount of benefits shown are on a "straight life"
basis (i.e., payment during the life of the employee with no continuing
payments following the employee's death).
Amount of Annual Retirement Benefit
With Credited Years of Service
Annual ------------------------------------
Compensation 15 Years 20 Years 25 Years
- - ------------- -------- -------- --------
$ 40,000 . . . . . . . . . . . . . $12,000 $16,000 $20,000
60,000 . . . . . . . . . . . . . 18,000 24,000 30,000
80,000 . . . . . . . . . . . . . 24,000 32,000 40,000
100,000 . . . . . . . . . . . . . 30,000 40,000 50,000
120,000 . . . . . . . . . . . . . 36,000 48,000 60,000
140,000 . . . . . . . . . . . . . 42,000 56,000 70,000
160,000 . . . . . . . . . . . . . 48,000 64,000 80,000
180,000 . . . . . . . . . . . . . 54,000 72,000 90,000
200,000 . . . . . . . . . . . . . 60,000 80,000 100,000
As of December 31, 1993, Messrs. Rotondi and Doll had 5 and 4 years of
credited service, respectively. Mr. Doll would have 20 years of credited
service at age 65 if he were to remain in the Bank's employ until age 65.
Compensation Committee Interlocks and Insider Participation
The Company's Salaries Committee consists of Wilson Britten (Chairman),
Duncan M. Lasher and Robert A. Hand. Theodore Doll, Jr. was a member of the
Salaries Committee for the first twelve days of 1993 and is also an "ex
officio" member of that Committee. Mr. Doll is the father of Theodore J. Doll,
the Company's President and Chief Operating Officer and a director.
Theodore J. Doll, the Chief Operating Officer and President of the
Company and the Bank since December 21, 1989, is one of about 40 limited
partners of a partnership (the "Partnership") that is the obligor on the
Bank's largest non-performing asset, a loan on which the Bank currently has a
first mortgage and an assignment of rents (the "Bankruptcy Loan"). The
Bankruptcy Loan is currently in non-accrual status. Mr. Doll's equity interest
in the Partnership is less than 5% and he plays no role in the management or
decision-making with respect to that entity. Mr. Doll acquired his equity
interest, and the Bankruptcy Loan was made to the Partnership, at a time when
Mr. Doll was neither a director or officer of the Company or the Bank
(although his father was a director of the Company and the Bank when the
Bankruptcy Loan was extended to the Partnership and remains a director at this
time).
During 1993, a bankruptcy petition was filed by the Partnership. That
petition was dismissed on November 10, 1993. Pursuant to a court order, rental
payments that would otherwise have been paid to the Bank in accordance with
30
<PAGE>
its assignment of rents were released to the City of Philadelphia to pay a
substantial portion of property tax arrearages. Rental payments were resumed
in December 1993. The interest income which would have been recorded had the
rental payments been received and the actual income recorded approximated
$580,000 and $295,000, respectively, for the year ended December 31, 1993.
The balance of the Bankruptcy Loan at March 31, 1994 was $9.2 million.
During the three years ended March 31, 1994, the largest indebtedness under
the Bankruptcy Loan was $9.3 million. The Bankruptcy Loan has an interest rate
of 10% per annum; however, the Bank is currently involved in negotiations
which may result in a restructuring of the Bankruptcy Loan.
The Bankruptcy Loan is secured by an approximately 450,000 square foot
building which is rented to the Internal Revenue Service (the "IRS") under a
lease which is cancelable by the IRS upon 60 days' notice. The building is
situated in northeast Philadelphia in a site with two other IRS facilities.
The IRS announced in early December 1993 that this site will be converted into
a customer service center with a potential loss of 2,500 permanent and
seasonal jobs. It has been reported in the press that the process of reducing
the workforce at the northeast Philadelphia center will begin in 1996 and be
completed in 1999. The effect, if any, of the conversion and reduction in
workforce on the building securing this loan is unknown at this time.
The Bank has loans outstanding with certain executive officers, directors
and their affiliates, which loans were made in the ordinary course of
business, on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons. In the opinion of management, these loans do not involve more
than the normal risk of collectibility or present other unfavorable features.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Amount and Nature
of Beneficial Ownership Percent of
Name of Common Stock(1) Class
---- ----------------------- -----------
Wilson A. Britten . . . . . . . . . 17,830(2)(3) 0.8%
Theodore Doll, Jr. . . . . . . . . 19,187(2) 0.8
Theodore J. Doll . . . . . . . . . 91,541(4) 3.9
Robert A. Hand . . . . . . . . . . 9,875(2) 0.4
Duncan M. Lasher . . . . . . . . . 8,187(2) 0.4
Charles A. Rotondi . . . . . . . . 17,710(2) 0.8
Paul C. Rotondi . . . . . . . . . . 89,791(5) 3.8
Joseph A. Tighe, Jr. . . . . . . . 12,084(2)(6) 0.5
James M. Ungerleider . . . . . . . 18,052(2) 0.8
All Directors and Executive
Officers as a group
(15 persons)(7) . . . . . . . . . 386,917 15.7%
- - ----------
(1) As of March 15, 1994. Unless otherwise indicated, each person effectively
exercises sole (or shares with spouse) voting and dispositive power as to
the shares reported.
(2) Includes 7,187 shares that may be acquired pursuant to the exercise of
stock options within 60 days of March 15, 1994.
(3) Includes 1,500 shares held in trust.
(4) Includes 12,250 shares that may be acquired pursuant to the exercise of
stock options within 60 days of March 15, 1994 and 1,800 shares subject
to awards under the Company's MRP, as to all of which shares voting may be
directed. Under the terms of the MRP, recipients of unvested awards may
direct the voting of the shares covered by their awards and unawarded
shares held in the MRP trust are voted by the trustee in the same
proportion as shares which have been awarded. Also includes shares held by
the ESOP described below as to which Mr. Doll may direct the vote by virtue
of shares allocated to his account (estimated to be a total of 2,791
shares as of March 15, 1994). Includes 15,000 shares held by Mr. Doll's
children.
(5) Includes 4,490 shares held for the benefit of minor children, 34,000
shares that may be acquired pursuant to the exercise of stock options
within 60 days of March 15, 1994 and 1,800 shares subject to awards under
the Company's MRP, as to all of which shares voting may be directed. Under
the terms of the MRP, recipients of unvested awards may direct the voting
of the shares covered by their awards and unawarded shares held in the MRP
trust are voted by the trustee in the same proportion as shares which have
been awarded. Also includes shares held by the ESOP described below as to
which Mr. Rotondi may direct the vote by virtue of shares allocated to his
account (estimated to be a total of 6,044 shares as of March 15, 1994).
(6) Includes 150 shares held for the benefit of his children.
31
<PAGE>
(7) Includes 102,650 shares that may be acquired pursuant to the exercise of
stock options within 60 days of March 15, 1994 and 8,872 shares subject
to awards under the Company's Management Recognition and Retention Plan
(the "MRP"), as to all of which shares voting may be directed. Under the
terms of the MRP, recipients of unvested awards may direct the voting of
the shares covered by their awards and unawarded shares held in the MRP
trust are voted by the trustee in the same proportion as shares which
have been awarded. Also includes shares of Common Stock held by the the
Bank's Employee Stock Ownership Plan (the "ESOP") as to which directors
and officers of the Company may direct the vote by virtue of shares
allocated to their accounts (estimated to be a total of 28,537 shares as
of March 15, 1994).
32
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amendment to its
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WASHINGTON BANCORP, INC.
By /s/ Paul C. Rotondi
-------------------------------------------------
(Paul C. Rotondi)
Chairman of the Board and Chief Executive Officer
Dated: May 10, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
amendment to its report has been signed below on May 10, 1994 by the
following persons on behalf of the Registrant and in the capacities indicated.
/s/ Paul C. Rotondi Chairman of the Board and Chief
- - ------------------------------------ Executive Officer and
(Paul C. Rotondi) * as attorney in fact
*/s/ Thomas S. Bingham Chief Financial and Accounting Officer
- - ------------------------------------
(Thomas S. Bingham)
Directors:
*/s/ Theodore Doll, Jr.
- - ------------------------------------ ----------------------------------
(Wilson A. Britten) (Theodore Doll Jr.)
*/s/ Joseph A. Tighe, Jr. /s/ Paul C. Rotondi
- - ------------------------------------ -----------------------------------
(Joseph A. Tighe, Jr.) (Paul C. Rotondi)
*/s/ Robert A. Hand */s/ James M. Ungerleider
- - ------------------------------------ -----------------------------------
(Robert A. Hand) (James M. Ungerleider)
*/s/ Theodore J. Doll */s/ Charles A. Rotondi
- - ------------------------------------ ----------------------------------
(Theodore J. Doll) (Charles A. Rotondi)
*/s/ Duncan M. Lasher
- - ------------------------------------
(Duncan M. Lasher)
33
