SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
March 16, 1997
WESTERFED FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 0-22772 81-3899950
- --------------------------------------------------------------------------------
(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification
incorporation) No.)
110 East Broadway, Missoula, Montana 59802
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (406) 721-5254
- --------------------------------------------------------------------------------
N/A
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
The purpose of this amendment on Form 8-K/A to the Current Report on
Form 8-K (the "8-K") of WesterFed Financial Corporation (the "Company") is to
provide the pro forma financial information required by Form 8-K which, at the
time of the filing of the 8-K, was impracticable for the Company to have
provided.
Item 2. Acquisition or Disposition of Assets.
On February 28, 1997, WesterFed Financial Corporation ("WesterFed"), a
Delaware corporation, completed the merger of Security Bancorp, a Montana
corporation ("Security"), with and into WesterFed (the "Merger"). In addition,
as of such date, Security Bank, a federally chartered stock savings bank and
wholly owned subsidiary of Security ("Security Bank"), merged with and into
Western Federal Savings Bank ("Western Federal"), a wholly owned subsidiary of
WesterFed (the "Subsidiary Merger"). The Merger was consummated pursuant to an
Agreement and Plan of Merger dated as of September 24, 1996 (the "Merger
Agreement"), by and between WesterFed and Security. Copies of the Merger
Agreement were included as Appendix I to the Joint Proxy Statement/Prospectus
included as a part of WesterFed's Registration Statement on Form S- 4
(Registration No. 333-16429), filed with the Securities and Exchange Commission
on November 19, 1996, and incorporated by reference herein.
Following the Merger and Subsidiary Merger, the assets and liabilities
of Security were assumed by WesterFed and the assets and liabilities of Security
Bank were assumed by Western Federal. WesterFed intends to integrate the
operations of Security Bank into its existing operations and continue to
maintain the business and physical assets of Security Bank, subject to the needs
of WesterFed. Pursuant to the Merger Agreement, Security stockholders were given
the opportunity to elect to receive either cash, WesterFed common stock or a
combination of both in exchange for Security common stock, subject to the total
shares of WesterFed common stock issued not exceeding 45% of the aggregate
Merger consideration. As a result, stockholders who elected to receive cash or
did not make an election, received $30.00 for each share of Security common
stock. Stockholders who elected to receive stock, or a combination of cash and
stock, exchanged approximately 46.42% of their Security common stock and
received WesterFed common stock (based on a ratio of 1.78 shares of WesterFed
common stock for each share of Security common stock) and the remainder in cash.
Stockholders due a fractional share received cash in lieu of the fractional
share, paid on the basis of $30.00 per share. The total consideration (based on
the $21.50 per share closing price of WesterFed common stock on the Nasdaq
National Market System on February 28, 1997) was $50.7 million. The cash portion
of the consideration was financed from WesterFed's working capital.
2
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
The Consolidated Financial Statements, and the notes thereto,
of Security, which are contained in the Joint Proxy
Statement/Prospectus included as part of WesterFed's
Registration Statement on Form S-4 (Registration No.
333-16429), filed with the Securities and Exchange Commission
(the "SEC") on November 19, 1996 and its Quarterly Report on
Form 10-Q for the quarter ended December 31, 1996, filed with
the SEC on February 12, 1997 which reports are incorporated by
reference herein.
(b) Pro Forma financial information.
The Pro Forma financial information for the interim period
ending December 31, 1996.
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial information gives effect to
the merger of WesterFed Financial Corporation ("WesterFed") and Security Bancorp
("Security") pursuant to a Merger Agreement (the "Merger") based on the purchase
accounting adjustments, estimates and other assumptions described in the
accompanying notes. The unaudited pro forma combined balance sheet and statement
of operations as of and for the six months ended December 31, 1996 are based
upon the unaudited quarterly consolidated balance sheets and statements of
operations of WesterFed and Security. The unaudited pro forma combined statement
of operations for the year ended June 30, 1996 is based upon the audited annual
consolidated statements of operations of WesterFed and Security.
3
<PAGE>
PRO FORMA COMBINED BALANCE SHEET
WESTERFED FINANCIAL CORPORATION AND SECURITY BANCORP
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31, 1996 (Unaudited)
------------------------------------------------------------
Pro Forma Pro Forma
WesterFed Security Adjustments(D) Combined
--------- -------- -------------- --------
ASSETS
<S> <C> <C> <C> <C>
Cash and due from banks ......................................... $ 8,300 $ 15,029 $ -- $ 23,329
Interest-bearing due from banks ................................. 16,108 0 -- 16,108
--------- --------- -------- ---------
Cash and cash equivalents ................................ 24,408 15,029 -- 39,437
Interest-bearing deposits ....................................... 190 -- -- 190
Investment securities available-for-sale ........................ 47,892 23,073 (26,036) 44,929
Investment securities, at amortized cost ........................ 1,852 200 -- 2,052
Stock in Federal Home Loan Bank of Seattle, at cost ............. 7,775 3,273 -- 11,048
Mortgage-backed securities available-for-sale ................... 35,475 66,777 -- 102,252
Mortgage-backed securities, at amortized cost ................... 56,129 28,250 (1,000) 83,379
Loans available-for-sale ........................................ 1,156 3,000 -- 4,156
Loans receivable, net ........................................... 365,309 218,070 1,200 584,579
Accrued interest receivable ..................................... 3,691 2,662 -- 6,353
Premises and equipment, net ..................................... 14,411 9,371 4,500 28,282
Cash surrender value of life insurance policies ................. 3,258 2,720 -- 5,978
Goodwill ........................................................ -- 4,208 (4,208) 12,024
12,024
Intangible assets ............................................... -- -- 7,500 7,500
Other assets .................................................... 2,071 1,158 -- 3,229
--------- --------- -------- ---------
Total assets ............................................. $ 563,617 $ 377,791 $ (6,020) $ 935,388
========= ========= ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits ...................................................... $ 343,842 $ 290,674 $ 1,500 $ 636,016
Borrowed funds ................................................ 130,712 46,234 (300) 176,646
Advances from borrowers for taxes and insurance ............... 2,848 447 -- 3,295
Income taxes .................................................. 2,719 950 2,200 5,869
Accrued interest payable ...................................... 1,217 1,897 -- 3,114
Accrued expenses and other liabilities ........................ 2,773 4,581 1,000 9,104
750
--------- --------- -------- ---------
Total liabilities ........................................ 484,111 344,783 5,150 834,044
--------- --------- -------- ---------
Stockholders' Equity:
Preferred stock ............................................... -- -- -- --
Common stock .................................................. 46 1,508 (1,508) 58
-- -- 12
Additional paid-in capital .................................... 45,499 9,391 (9,391) 67,325
21,253
873
(300)
Common stock acquired by ESOP/RRP ............................. (3,155) -- -- (3,155)
Treasury stock, at cost ....................................... (3,080) -- -- (3,080)
Net unrealized loss on securities available-for-sale .......... (144) (604) 604 (144)
Retained earnings, substantially restricted ................... 40,340 22,713 (22,713) 40,340
--------- --------- -------- ---------
Total stockholders' equity ............................... 79,506 33,008 (11,170) 101,344
--------- --------- -------- ---------
Total liabilities and stockholders' equity ............... $ 563,617 $ 377,791 $ (6,020) $ 935,388
========= ========= ======== =========
</TABLE>
See accompanying notes to unaudited pro forma combined financial
information, to which specific references above also refer.
4
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
WESTERFED FINANCIAL CORPORATION AND SECURITY BANCORP
(Dollars in thousands except share and per share data)
<TABLE>
<CAPTION>
Six Months Ended December 31, 1996 (Unaudited)
----------------------------------------------------
Pro Forma Pro Forma
WesterFed Security Adjustments(D) Combined
--------- -------- -------------- --------
Interest income:
<S> <C> <C> <C> <C>
Loans receivable ....................................................... $ 15,544 $ 9,123 $ (86) $ 24,581
Mortgage-backed securities ............................................. 3,435 3,840 83 7,358
Investment securities .................................................. 2,150 691 (879) 1,962
Other .................................................................. 92 158 -- 250
-------- -------- -------- --------
Total interest income ................................................ 21,221 13,812 (882) 34,151
-------- -------- -------- --------
Interest expense:
NOW and money market demand ............................................ 749 -- -- 749
Savings ................................................................ 939 -- -- 939
Certificates of deposit ................................................ 6,003 6,157 (250) 11,910
Cost of Swaps and Caps ................................................. 161 -- -- 161
-------- -------- -------- --------
7,852 6,157 (250) 13,759
Advances from FHLB - Seattle and other borrowed funds .................. 4,003 1,377 50 5,430
-------- -------- -------- --------
Total interest expense ............................................... 11,855 7,534 (200) 19,189
-------- -------- -------- --------
Net interest income .................................................. 9,366 6,278 (682) 14,962
Provision for loan losses ................................................. 42 300 -- 342
-------- -------- -------- --------
Net interest income after provision for loan losses .................. 9,324 5,978 (682) 14,620
-------- -------- -------- --------
Non-interest income:
Loan origination fees on loans sold .................................... 223 -- -- 223
Service fees ........................................................... 1,131 1,219 (70) 2,280
Net gain on sale of loans and securities available-for-sale ............ 314 582 -- 896
Other .................................................................. 70 747 -- 817
-------- -------- -------- --------
Total non-interest income ............................................ 1,738 2,548 (70) 4,216
-------- -------- -------- --------
Non-interest expenses:
Compensation and employee benefits ..................................... 3,593 2,545 -- 6,138
Net occupancy expense of premises ...................................... 478 714 90 1,282
Equipment and furnishings expense ...................................... 364 -- -- 364
Data processing expenses ............................................... 333 389 -- 722
Federal insurance premium .............................................. 366 237 -- 603
SAIF special assessment ................................................ 2,297 1,331 -- 3,628
Marketing and advertising .............................................. 232 64 -- 296
Core deposit intangible amortization ................................... -- -- 500 500
Other .................................................................. 1,519 1,477 71 3,067
-------- -------- -------- --------
Total non-interest expense ........................................... 9,182 6,757 661 16,600
-------- -------- -------- --------
Income (loss) before income taxes .................................... 1,880 1,769 (1,413) 2,236
Income tax benefit (expense) .............................................. (707) (550) 445 (812)
-------- -------- -------- --------
Net income ........................................................... $ 1,173 $ 1,219 $ (968) $ 1,424
======== ======== ======== ========
Net income per share ...................................................... $ 0.27 $ 0.81 $ 0.26
======== ======== ========
Weighted average common shares outstanding for earnings
per share ................................................................ 4,278,233 1,506,870 5,475,907
========= ========= =========
</TABLE>
See accompanying notes to unaudited pro forma combined
financial information, to which specific references above also refer.
5
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
WESTERFED FINANCIAL CORPORATION AND SECURITY BANCORP
(Dollars in thousands, except share and per share data)
<TABLE>
<CAPTION>
Year Ended June 30, 1996
--------------------------------------------------------------
Pro Forma Pro Forma
Adjustments Combined
WesterFed Security (Unaudited)(D) (Unaudited)
--------- -------- -------------- -----------
Interest income:
<S> <C> <C> <C> <C>
Loans receivable ................................................ $ 28,640 $ 14,115 $ (171) $ 42,584
Mortgage-backed securities ...................................... 9,167 9,220 167 18,554
Investment securities ........................................... 4,556 1,785 (1,758) 4,583
Other ........................................................... 181 222 -- 403
---------- ----------- ----------- ----------
Total interest income ......................................... 42,544 25,342 (1,762) 66,124
---------- ----------- ----------- ----------
Interest expense:
NOW and money market demand ..................................... 1,740 1,392 -- 3,132
Savings ......................................................... 1,940 1,228 -- 3,168
Certificates of deposit ......................................... 12,074 10,556 (500) 22,130
Cost of Swaps and Caps .......................................... 331 -- -- 331
---------- ----------- ----------- ----------
16,085 13,176 (500) 28,761
Advances from FHLB - Seattle and other borrowed funds ........... 8,652 1,736 100 10,488
---------- ----------- ----------- ----------
Total interest expense ........................................ 24,737 14,912 (400) 39,249
---------- ----------- ----------- ----------
Net interest income ........................................... 17,807 10,430 (1,362) 26,875
Provision for loan losses .......................................... -- 120 -- 120
---------- ----------- ----------- ----------
Net interest income after provision for loan losses ........... 17,807 10,310 (1,362) 26,755
Non-interest income:
Loan origination fees on loans sold ............................. 348 798 -- 1,146
Service fees .................................................... 2,120 1,077 (140) 3,057
Net gain on sale of loans and securities available-for-sale ..... 577 975 -- 1,552
Other ........................................................... 837 1,164 -- 2,001
---------- ----------- ----------- ----------
Total non-interest income ..................................... 3,882 4,014 (140) 7,756
---------- ----------- ----------- ----------
Non-interest expenses:
Compensation and employee benefits .............................. 7,523 4,832 -- 12,355
Net occupancy expense of premises ............................... 1,450 812 180 2,442
Equipment and furnishings expense ............................... 643 533 -- 1,176
Data processing expenses ........................................ 632 749 -- 1,381
Federal insurance premium ....................................... 806 475 -- 1,281
Marketing and advertising ....................................... 559 211 -- 770
Core deposit intangible amortization ............................ -- -- 1,360 1,360
Other ........................................................... 2,961 2,746 (340) 5,848
481
---------- ----------- ----------- ----------
Total non-interest expense .................................... 14,574 10,358 1,681 26,613
---------- ----------- ----------- ----------
Income (loss) before income taxes ............................. 7,115 3,966 (3,183) 7,898
Income tax benefit (expense) ....................................... (2,556) (1,422) 1,027 (2,951)
---------- ----------- ----------- ----------
Net income .................................................... $ 4,559 $ 2,544 $ (2,156) $ 4,947
========== =========== =========== ==========
Net income per share ............................................... $ 1.07 $ 1.68 $ 0.91
========== =========== ==========
Weighted average common shares outstanding for earnings per share .. 4,259,109 1,515,947 5,456,783
========== =========== ==========
</TABLE>
See notes to unaudited pro forma combined financial
information, to which specific references above also refer.
6
<PAGE>
NOTE A: BASIS OF PRESENTATION
The unaudited pro forma combined balance sheet combines the historical
consolidated balance sheets of WesterFed and Security as if the Merger had
become effective on December 31, 1996. The unaudited pro forma combined
statements of operations for the six months ended December 31, 1996, and the
year ended June 30, 1996, combines the historical consolidated statements of
operations of WesterFed and Security as if the Merger had become effective on
July 1, 1995. Certain amounts in the historical financial statements of Security
have been reclassified in the unaudited pro forma combined financial information
to conform to WesterFed's historical financial statements.
The Merger will be accounted for using the purchase method of accounting. Under
this method of accounting, assets and liabilities of Security are adjusted to
their estimated fair value and combined with the historical recorded book values
of the assets and liabilities of WesterFed. Additionally, Security's Common
Stock, additional paid-in capital, unrealized gain on
securities-available-for-sale and retained earnings is eliminated. Applicable
income tax effects of such adjustments are included as a component of
WesterFed's net deferred taxes with a corresponding offset to goodwill. The
actual revaluation of Security's net assets acquired is subject to the
completion of studies and evaluations by management and will be based on the
estimated fair value of the net assets acquired on February 28, 1997, which was
the "Effective Date" of the Merger.
Any transactions conducted between WesterFed and Security were in the ordinary
course of business and would not be material and, accordingly, have not been
eliminated.
Following the Effective Date, Security merged its savings bank subsidiary with
and into the savings bank subsidiary of WesterFed. WesterFed also expects to
achieve certain operating cost savings as a result of the Merger, however, no
pro forma adjustment has been included in the unaudited pro forma combined
financial information for the anticipated operating cost savings.
NOTE B: PURCHASE PRICE
The purchase price is based on the amounts and shares paid or issued at the
Effective Date. The total consideration is calculated as follows (in thousands,
except share amounts):
Acquisition of 866,516 Security shares for cash ..................... $25,995
Exchange of 646,166 Security shares for 1,150,175 WesterFed shares .. 21,265
Acquisition of Security stock options for cash ...................... 41
Exchange of Security stock options for WesterFed stock options ...... 873
Estimated direct acquisition costs .................................. 450
-------
Total purchase price consideration ............................. 48,624
Estimated common stock issuance costs ............................... 300
-------
Total acquisition consideration ..................................... $48,924
=======
Approximately 45% of the consideration paid to Security shareholders was in the
form of WesterFed common stock. The assumed fair value of these shares is
$18.49, which is the average market price of WesterFed common stock for the 20
trading days commencing 30 trading days prior to the Effective Date (the
"Closing Price").
7
<PAGE>
NOTE C: ALLOCATION OF PURCHASE PRICE
Certain matters are still pending that will have an effect on the ultimate
allocation of the purchase price. Accordingly, the allocation of the purchase
price has not been finalized and the portion of the purchase price allocated to
fair value adjustments, identifiable intangibles and goodwill is subject to
change.
Subject to the foregoing, the purchase price has been allocated as described
below (in thousands):
Security's net assets at December 31, 1996 $33,008
Increase (decrease) to the Security historical net
asset values as a result of estimated fair
value adjustments:
Mortgage-backed securities (1,000)
Loans receivable, net 1,200
Premises and equipmen 4,500
Deposits (1,500)
Accrued expenses(1) (1,000)
Borrowed funds 300
Mortgage servicing rights 700
Core deposit intangible 6,800
------
10,000
Applicable income tax effects(2) (3,800)
------
Net fair value adjustments 6,200
Eliminate Security's existing goodwill of $4,208
net of income tax effects of $1,600 (2,608)
-------
Estimated fair value of identifiable tangible and
intangible net assets 36,600
Goodwill 12,024
-------
Total purchase price consideration $48,624
=======
- --------
(1) Includes $750,000 of estimated severance costs under existing Security
employment agreements.
(2) Estimated marginal tax rate of 38%.
NOTE D: PRO FORMA ADJUSTMENTS
For the unaudited pro forma statements of operations, the pro forma adjustments
are based on the allocated purchase price of the net assets acquired based on
the fair value estimates at December 31, 1996 described above.
Mortgage-backed securities will be adjusted to fair value based on current
mortgage-backed securities yields and the fair value adjustment will be
amortized to interest income as a yield adjustment using the level yield method
over the average estimated life of the underlying mortgage-backed securities,
currently estimated to be six years.
Loans receivable will be adjusted to fair value based on current loan interest
rates and the fair value adjustment will be amortized to interest income as a
yield adjustment using the level yield method over the average estimated life of
the underlying loan receivable, currently estimated to be seven years.
Premises and equipment will be adjusted to fair value based on current market
value evaluations and the fair value adjustment will be depreciated on a
straight line basis over the remaining estimated economic life of the related
assets, currently estimated at 25 years.
Interest bearing time deposits will be adjusted to fair value based on current
time deposit interest rates and the fair value adjustment will be amortized into
interest expense using the interest method over the estimated duration of the
related deposit, currently estimated to be three years.
8
<PAGE>
Borrowed funds will be adjusted to fair value based on current borrowing
interest rates and the fair value adjustment will be amortized to interest
expense using the interest method over the contractual duration of the related
borrowings, currently estimated to be three years.
For purposes of calculating the pro forma adjustments, straight line
amortization has been used as any differences between the interest method and
the straight line method would not be significant.
The core deposit intangible and mortgage servicing rights will be amortized on
an accelerated basis over their respective economic lives, currently estimated
not to exceed ten years. Goodwill resulting from the Merger is expected to be
amortized over 25 years.
The assumed interest rate on securities sold to fund the consideration paid in
cash is 6.75%.
The incremental effect on pro forma combined net income of the purchase
accounting adjustments for the six months ended December 31, 1996, the twelve
months ended June 30, 1996 and the 12-month periods subsequent to the year
ending June 30, 1996 is estimated to be an after-tax increase in expenses as
follows:
<TABLE>
<CAPTION>
Amortization
--------------------------------
Amortization for the year ended June 30,
Adjustment in Semi- -------------------------------------------------
Amount Years Annual Annual 1997 1998 1999 2000 2001
------ ----- ------ ------ ---- ---- ---- ---- ----
Fair value adjustments (in thousands):
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage-backed securities ................. $ (1,000) 6 $ (83) $ (167) (167) (167) (167) (167) (167)
Loans receivable ........................... 1,200 7 86 171 171 171 171 171 171
Premises and equipment ..................... 4,500 25 90 180 180 180 180 180 180
Deposits ................................... (1,500) 3 (250) (500) (500) (500) -- -- --
Borrowed funds ............................. 300 3 50 100 100 100 -- -- --
Mortgage Servicing ......................... 700 7 70 140 112 90 72 57 46
Core deposit intangible .................... 6,800 7 500 1,360 1,088 870 696 557 446
Security historical goodwill ............... (4,208) * (170) (340) (340) (340) (340) (340) (340)
Goodwill ................................... 12,024 25 241 481 481 481 481 481 481
-------- ------ ------- ------- ------ ------ ---- ---- ----
Total adjustments .......................... $ 18,816 534 1,425 1,125 885 1,093 939 817
========
Income Taxes ............................... (111) (359) (245) (154) (233) (174) (128)
------- ------- ------ ------ ----- ---- ----
Incremental effect on pro forma
combined net income ...................... $ 423 1,066 880 731 860 765 689
======= ======= ====== ====== ==== ==== ====
<FN>
- -------------
* Represents the elimination of the historical Security goodwill and the
related actual amortization.
</FN>
</TABLE>
Applicable income tax effects have been recorded using an estimated marginal tax
rate of 38% and the table does not include a reduction in annual interest income
of $1,758,000 from the liquidation of investment securities to fund the cash
consideration paid.
NOTE E: PRO FORMA INCOME (LOSS) PER SHARE
Pro forma combined weighted average shares outstanding is based on the number of
shares issued to Security shareholders at the Effective Date of 1,150,175 as
described above combined with the actual weighted average shares outstanding for
WesterFed for the respective periods. The common stock equivalent shares of
Security stock options exchanged for WesterFed stock options allowing holders to
acquire 94,696 shares of WesterFed common stock at the Effective Date is assumed
to be 47,500.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
WESTERFED FINANCIAL CORPORATION
Date: May 5, 1997 By: /s/ Lyle R. Grimes
----------- -----------------------
Lyle R. Grimes
President and Chief
Executive Officer
10
