<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
July 26, 1999
WESTERFED FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Delaware 0-22772 81-0487794
- --------------------------------------------------------------------------------
(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification
incorporation) Number)
110 East Broadway, Missoula, Montana 59802
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(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>
Item 5. Other Events
On July 26, 1999 the Registrant issued the press
releases attached as Exhibit 99.6.
Item 7. Financial Statements and Exhibits
(a) Exhibits
99.6 Press releases, dated July 26, 1999
<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: August 2, 1999 By: /s/ Suzanne Loewen
------------------------ -------------------------------------
Suzanne Loewen
Secretary
<PAGE>
Index to Exhibits
Sequentially
Numbered Page
Where Attached
Exhibit Exhibits
Number are located
------ ------------
99.6 Press Releases dated July 26, 1999 5
<PAGE>
CONSOLIDATED BALANCE SHEETS
WESTERFED FINANCIAL CORPORATION AND SUBSIDIARIES
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
---------- ----------
ASSETS
<S> <C> <C>
Cash and due from banks $ 25,867 $ 19,440
Interest-bearing due from banks 3,079 9,628
---------- ----------
Cash and cash equivalents 28,946 29,068
Interest-bearing deposits 1,985 100
Investment securities available-for-sale 103,441 108,511
Investment securities, at amortized cost (estimated market value
of $9,255 at June 30, 1999 and $16,974 at June 30, 1998) 9,235 16,847
Stock in Federal Home Loan Bank of Seattle, at cost 14,615 13,560
Mortgage-backed securities available-for-sale 68,029 24,135
Mortgage-backed securities, at amortized cost (estimated market value
of $85,252 at June 30, 1999 and $104,962 at June 30, 1998) 83,720 102,298
Loans available-for-sale 3,740 6,922
Loans receivable, net 627,631 650,371
Interest receivable 7,635 7,778
Premises and equipment, net 28,269 30,089
Core deposit intangible 3,741 4,518
Goodwill 15,096 15,762
Cash surrender value of life insurance policies 6,916 6,705
Other assets 4,350 5,472
---------- ----------
Total assets $1,007,349 $1,022,136
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 645,549 $ 636,441
Repurchase agreements 6,702 6,233
Borrowed funds 244,483 248,953
Advances from borrowers for taxes and insurance 3,302 4,052
Income taxes - current and deferred 1,552 2,289
Accrued interest payable 6,156 4,480
Accrued expenses and other liabilities 8,456 9,988
---------- ----------
Total liabilities 916,200 912,436
---------- ----------
Stockholders' Equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized;
none outstanding -- --
Common stock, $.01 par value, 10,000,000 shares authorized;
4,538,557 shares outstanding at June 30, 1999, and
5,585,303 outstanding at June 30, 1998 56 56
Paid-in capital 69,572 68,923
Common stock acquired by ESOP/RRP (2,216) (2,520)
Treasury stock, at cost (25,319) (3,461)
Net unrealized gain (loss) on securities available-for-sale (1,717) 23
Retained earnings 50,773 46,679
---------- ----------
Total stockholders' equity 91,149 109,700
---------- ----------
Total liabilities and stockholders' equity $1,007,349 $1,022,136
========== ==========
Book value per share $ 20.08 $ 19.64
========== ==========
Tangible book value per share $ 15.93 $ 16.01
========== ==========
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
WESTERFED FINANCIAL CORPORATION AND SUBSIDIARIES
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
June 30, June 30,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Interest income:
Loans receivable $ 13,115 $ 14,073 $ 53,773 $ 56,261
Mortgage-backed securities 2,249 2,248 8,033 9,676
Investment securities 1,917 2,009 8,048 7,580
Interest-bearing deposits 99 155 606 675
Other 88 80 338 332
--------- --------- --------- ---------
Total interest income 17,468 18,565 70,798 74,524
--------- --------- --------- ---------
Interest expense:
NOW and money market demand 869 841 3,379 3,321
Savings 522 646 2,264 2,658
Certificates of deposit 4,768 5,476 20,444 21,824
--------- --------- --------- ---------
6,159 6,963 26,087 27,803
Borrowed funds 3,284 3,497 13,157 14,483
--------- --------- --------- ---------
Total interest expense 9,443 10,460 39,244 42,286
--------- --------- --------- ---------
Net interest income 8,025 8,105 31,554 32,238
Provision for loan losses 445 210 1,300 840
--------- --------- --------- ---------
Net interest income after provision for loan losses 7,580 7,895 30,254 31,398
--------- --------- --------- ---------
Non-interest income:
Loan origination fees on loans sold 645 665 2,633 2,268
Service fees 989 1,105 4,471 4,486
Net gain on sale of loans available-for-sale 293 261 1,060 956
Net gain on sale of securities available-for-sale 64 91 89 97
Other 551 178 1,045 574
--------- --------- --------- ---------
Total non-interest income 2,542 2,300 9,298 8,381
--------- --------- --------- ---------
Non-interest expenses:
Compensation and employee benefits 3,850 3,164 13,695 13,149
Net occupancy expense of premises 493 548 2,035 2,153
Equipment and furnishings expense 626 598 2,313 1,846
Data processing expense 403 427 1,627 1,644
Deposit insurance premium 85 90 344 358
Intangibles amortization 337 373 1,443 1,391
Marketing and advertising 125 162 616 789
Other 1,397 1,548 6,153 6,429
--------- --------- --------- ---------
Total non-interest expense 7,316 6,910 28,226 27,759
--------- --------- --------- ---------
Income before income taxes 2,806 3,285 11,326 12,020
Income taxes 1,050 1,292 4,403 4,760
--------- --------- --------- ---------
Net income $ 1,756 $ 1,993 $ 6,923 $ 7,260
========= ========= ========= =========
Net income per common share:
Basic $ 0.40 $ 0.37 $ 1.43 $ 1.37
========= ========= ========= =========
Diluted $ 0.39 $ 0.35 $ 1.37 $ 1.29
========= ========= ========= =========
Dividends per share $ 0.200 $ 0.180 $ 0.620 $ 0.540
========= ========= ========= =========
Dividend payout ratio - basic 50.00% 48.65% 43.36% 39.42
========= ========= ========= =========
Average common and common equivalent shares outstanding:
Basic 4,337,573 5,361,682 4,830,068 5,317,577
========= ========= ========= =========
Diluted 4,467,867 5,656,659 5,071,563 5,627,318
========= ========= ========= =========
</TABLE>
<PAGE>
WESTERFED FINANCIAL CORPORATION AND SUBSIDIARIES
Selected Financial Ratios and Other Data:
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
June 30, June 30,
------------------- -------------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Performance Ratios:
Return on assets (ratio of net income to average total assets (1) 0.70% 0.79% 0.70% 0.72%
Return on equity (ratio of net income to average equity)(1) 7.63 7.28 6.93 6.73
Interest rate spread information:
Average during period 3.35 3.22 3.26 3.19
End of period 3.16 2.99 3.16 2.99
Net interest margin (1) (2) 3.50 3.48 3.46 3.46
Ratio of non-interest expense to average total assets (1) 2.93 2.72 2.84 2.74
Asset Quality Ratios:
Non-performing assets to total assets, at end of period 0.42 0.49 0.42 0.49
Total allowance for loan losses to total non-performing
assets (3) 121.13 97.44 121.13 97.44
Capital Ratios:
Stockholders' equity to total assets, at end of period 9.05 10.73 9.05 10.73
Tangible stockholders' equity to tangible assets, at end of period 7.32 8.93 7.32 8.93
Ratio of average interest-earning assets to average
interest-bearing liabilities 103.56 105.66 104.69 105.74
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</TABLE>
(1) Annualized
(2) Net interest income divided by average interest-earning assets
(3) Includes non-performing and foreclosed assets
<PAGE>
WESTERFED FINANCIAL CORP
<TABLE>
<CAPTION>
------------------------------------- ------------------------------------
JUNE 30, 1999 - QTD JUNE 30, 1998 - QTD
------------------------------------- ------------------------------------
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance (5) Paid Rate Balance (5) Paid Rate
------------------------------------- ------------------------------------
INTEREST EARNING ASSETS: (Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Loans receivable (1) (2) $634,751 $13,115 8.26% $660,324 $14,073 8.52%
Mortgage-backed securities (2) 145,613 2,249 6.18% 129,467 2,248 6.95%
Investments (2) 125,537 1,917 6.11% 130,451 2,009 6.16%
Other interest-earning assets (3) 4,874 99 8.12% 5,494 155 11.29%
Cash surrender value of life insurance 6,889 88 5.11% 6,681 80 4.79%
------------------------------------- ------------------------------------
Total Interest-Earning Assets 917,664 17,468 7.61% 932,417 18,565 7.96%
===================================== ====================================
INTEREST-BEARING LIABILITIES:
Certificates of deposits 368,717 4,768 5.17% 381,844 5,476 5.74%
Savings accounts 89,443 522 2.33% 94,552 646 2.73%
Demand and now accounts 114,254 195 0.68% 105,346 284 1.08%
Money market accounts 71,049 674 3.79% 54,334 557 4.10%
------------------------------------- ------------------------------------
Total deposits 643,463 6,159 3.83% 636,076 6,963 4.38%
FHLB advances and other borrowed money 242,646 3,284 5.41% 246,432 3,497 5.68%
------------------------------------- ------------------------------------
Total Interest-Bearing Liabilities 886,109 9,443 4.26% 882,508 10,460 4.74%
===================================== ====================================
Net interest income $8,025 $8,105
====== ======
Net interest rate spread 3.35% 3.22%
===== =====
Net interest earning assets $31,555 $49,909
======= =======
Net interest margin (4) 3.50% 3.48%
===== =====
Average interest-earning assets
to average interest-bearing liabilities 103.56% 105.66%
======= =======
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
------------------------------------- ------------------------------------
JUNE 30, 1999 - YTD JUNE 30, 1998 - YTD
------------------------------------- ------------------------------------
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance (5) Paid Rate Balance (5) Paid Rate
------------------------------------- ------------------------------------
INTEREST EARNING ASSETS: (Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Loans receivable (1) (2) $641,001 $53,773 8.39% $662,536 $56,261 8.49%
Mortgage-backed securities (2) 126,339 8,033 6.36% 140,994 9,676 6.86%
Investments (2) 128,920 8,048 6.24% 113,412 7,580 6.68%
Other interest-earning assets (3) 9,090 606 6.67% 8,702 675 7.76%
Cash surrender value of life insurance 6,842 338 4.94% 6,540 332 5.08%
------------------------------------- ------------------------------------
Total Interest-Earning Assets $912,191 $70,798 7.76% 932,183 74,524 7.99%
===================================== ====================================
INTEREST-BEARING LIABILITIES:
Certificates of deposits $374,155 $20,444 5.46% 380,726 21,824 5.73%
Savings accounts 90,586 2,264 2.50% 96,966 2,658 2.74%
Demand and now accounts 112,744 876 0.78% 106,392 1,209 1.14%
Money market accounts 64,481 2,503 3.88% 52,496 2,112 4.02%
------------------------------------- ------------------------------------
Total deposits 641,966 26,087 4.06% 636,581 27,803 4.37%
FHLB advances and other borrowed money 229,389 13,157 5.74% 244,964 14,483 5.91%
------------------------------------- ------------------------------------
Total Interest-Bearing Liabilities $871,355 $39,244 4.50% 881,545 42,286 4.80%
===================================== ====================================
Net interest income $31,554 $32,238
======= =======
Net interest rate spread 3.26% 3.19%
===== =====
Net interest earning assets $40,836 $50,638
======= =======
Net interest margin (4) 3.46% 3.46%
===== =====
Average interest-earning assets
to average interest-bearing liabilities 104.69% 105.74%
======= =======
</TABLE>
(1) Calculated net of deferred loan fees, loan discounts, loans in process and
loss reserves
(2) Includes held and available for sale categories
(3) Includes primarily short term liquid assets
(4) Net interest income divided by average interest earning assets
(5) Based on average monthly balances
<PAGE>
WESTERFED FINANCIAL CORPORATION
Non-Performing Assets
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
- ----------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C>
Non-accruing loans:
Real Estate:
One-to-four family $ 521 $1,967
Multi-family - 89
Nonresidential property (except land) - 35
Land - -
Construction 112 362
Agriculture 106 -
Commercial - non real estate 1,098 32
Consumer 1,212 1,504
- ----------------------------------------------------------------------------------------------
Total 3,049 3,989
- ----------------------------------------------------------------------------------------------
Accruing loans delinquent
90 days or more:
Real Estate:
One-to-four family 426 442
Multi-family - -
Nonresidential property (except land) - -
Construction 344 -
Agriculture - -
Commercial - non real estate - 10
Consumer 5 174
- ----------------------------------------------------------------------------------------------
Total 775 626
- ----------------------------------------------------------------------------------------------
Foreclosed assets:
Real Estate:
One-to-four family 238 279
Multi-family - -
Commercial - -
Land 26 28
Construction - -
Consumer 106 114
- ----------------------------------------------------------------------------------------------
Total 370 421
- ----------------------------------------------------------------------------------------------
Total non-performing assets $4,194 $5,036
==============================================================================================
</TABLE>
<PAGE>
WESTERFED FINANCIAL CORPORATION
Allowance for Loan Losses
<TABLE>
<CAPTION>
For the Three Month For the Twelve Month
Period Ended Period Ended
June 30, June 30,
------------------- --------------------
1999 1998 1999 1998
--------- ------- ------- ------
(In Thousands) (In Thousands)
-------------------- -----------------
<S> <C> <C> <C> <C>
Balance at beginning of period....................................... $5,009 $5,044 $4,907 $4,651
------ ------ ------ ------
Charge-Offs:
Real Estate:
One- to four-family............................................... (47) -- (177) --
Commerical........................................................ -- -- -- --
Other:
Commerical........................................................ -- (26) (49) (26)
Consumer.......................................................... (365) (347) (1,002) (611)
------ ------ ------ ------
Total charge-offs.................................................... (412) (373) (1,228) (637)
------ ------ ------ ------
Recoveries:
Other:
Commerical........................................................ 2 -- 6 3
Consumer.......................................................... 36 26 95 50
------ ------ ------ ------
Total recoveries..................................................... 38 26 101 53
------ ------ ------ ------
Net charge-offs...................................................... (374) (347) (1,127) (584)
Provisions charged to operations..................................... 445 210 1,300 840
------ ------ ------ ------
Balance at end of period............................................. $5,080 $4,907 $5,080 $4,907
====== ====== ====== ======
Ratio of net charge-offs during the period to average loans
outstanding during the period..................................... 0.06% 0.05% 0.18% 0.09%
====== ====== ====== ======
Ratio of net charge-offs during the period to average non-
performing assets during the period............................... 9.21% 5.98% 25.21% 11.92%
====== ====== ====== ======
Ratio of allowance for loan losses to net loans before
allowance......................................................... 0.80% 0.74% 0.80% 0.74%
====== ====== ====== ======
</TABLE>
<PAGE>
WESTERFED FINANCIAL CORPORATION ANNOUNCES
FOURTH QUARTER AND ANNUAL EARNINGS
STOCK BUY BACK PROGRAM AND
ANNUAL MEETING DATE
Missoula, Montana - July 26, 1999 - WesterFed Financial Corporation
(the "Company") (NASDAQ-WSTR), the holding company for Western Security Bank
(the "Bank"), announced earnings for the fourth quarter ended June 30, 1999 of
$1.8 million, or $0.39 per share (cash earnings of $0.47 per share), as compared
to $2.0 million, or $0.35 per share (cash earnings of $0.43 per share) for the
same period last year. Earnings for the year ended June 30, 1999 were $6.9
million, or a record $1.37 per share (cash earnings of $1.68 per share), as
compared to $7.3 million, or $1.29 per share (cash earnings of $1.62 per share),
for the same period last year. All per share amounts are diluted earnings per
share as calculated under SFAS No. 128. Cash earnings, which represent the
amount by which tangible equity changes each period due to operating results,
include reported earnings plus the non-cash charges for goodwill amortization
and amortization relating to core deposit intangible and certain employee stock
plans and related tax benefit.
The Company previously announced on June 24 that it will pay a regular
cash dividend of $0.15 per share for the quarter ended June 30, 1999 plus a
special cash dividend of $0.05 reflecting a 8.8% addition to the $0.57 per share
declared during the fiscal year just ended. The total of $0.20 per share was
paid on July 21, 1999 to stockholders of record on July 7, 1999. The regular
quarterly cash dividend of $0.15 represents an increase of 3.4% over the prior
quarter's regular cash dividend of $0.145 per share. The Company has increased
regular cash dividends every quarter since becoming a public company.
The Board of Directors of the Company has also authorized a plan to
repurchase up to 5.0% of its outstanding shares of common stock in the open
market during a twelve month period depending upon market conditions. The
program will be conducted through the use of certain registered broker-dealers
with repurchases to be made from time-to-time at market prices. At June 30, 1999
there were 4,538,557 shares of common stock outstanding. In addition, the
Company announced its Annual Meeting of Stockholders will be held at 9:00 a.m.
on October 26, 1999 at the Missoula Southgate Branch of Western Security Bank
located at 2601 Garfield Street, Missoula, Montana.
Company President Lyle R. Grimes stated, "The Company is pleased to be
able to pay a special dividend to shareholders, announce record annual earnings
per share and announce a stock repurchase program. With my retirement from the
Bank on June 30, 1999, Mr. Ralph Holliday became the new President/CEO of the
1
<PAGE>
Bank. Since Mr. Holliday's employment on April 19, 1999 as President/CEO-Elect
of the Bank, he has directed the development of new strategic plans with senior
management. A new organizational chart has been implemented to streamline the
Bank's management structure to ensure results oriented and accountable
management. In order to facilitate these changes, the Bank has charged earnings
during this current quarter for early retirement incentives for certain
executive officers. In addition, after a review of certain products and services
the bank has sold the credit card loan portfolio and is phasing out the dealer
finance auto lending program as these two programs were not returning desired
levels of profitability and were hindering the return on equity and assets.
During the year, the Bank finished the successful implementation of a new data
processing system and substantially completed our preparedness for potential
year 2000 issues. In addition, in December 1998 the Company completed a Modified
Dutch Tender Offer in which 19.4% of the Company's stock was repurchased."
Western Security Bank President Ralph Holliday stated, "I am pleased to
be a member of the Western Security Bank management team as we embark upon the
challenge of significantly improving the Bank's financial performance. Our new
management team is very committed to improving return on equity and revenue
growth while significantly reducing our efficiency ratio. The management team
has identified strategic objectives in the areas of financial results, sales
culture and service quality. We all look forward to this next year as we accept
the responsibilities for our future success."
Total assets decreased to $1.007 billion at June 30, 1999 as compared
to $1.022 billion at June 30, 1998. Loans receivable and loans
available-for-sale decreased $25.9 million and investment securities, Federal
Home Loan Bank stock and all other interest earning assets decreased $16.1
million, while mortgage-backed securities increased $25.3 million. The $25.9
million decrease in loans receivable and loans-available-for sale is primarily
the result of a $33.9 million decrease in residential loans and a $6.0 million
decrease in consumer related loans, while commercial and agriculture loans
increased $16.7 million. Total deposits increased $9.1 million as a result of
savings, money market and checking accounts increasing $23.8 million while
certificates of deposit decreased $14.7 million. Stockholders' equity decreased
$18.6 million to $91.1 million due to the repurchase of 1,082,854 shares of
common stock at $20.00 per share for a total of $21.9 million.
Net income decreased $237,000 to $1.8 million for the quarter ended
June 30, 1999 from $2.0 million for the same period last year due primarily to
increases in provision for loan losses and non-interest expense. Net interest
income before provision for loan losses for the quarter ended June 30, 1999
2
<PAGE>
decreased $80,000 to $8.0 million as compared to $8.1 million over the same
period last year. The provision for loan losses was increased $235,000 to
$445,000 during the quarter ended June 30, 1999 from $210,000 during the same
period last year. The $445,000 provision for the quarter is an increase of
$100,000 from the prior quarter. These provisions reflect management's desire to
maintain the allowance for loan losses at a level which is considered adequate
to absorb losses inherent in the loan portfolio, especially related to
charge-offs incurred with dealer finance loans and the classification of one
commercial real estate loan. Total non-interest income increased $242,000 to
$2.5 million during the quarter ended June 30, 1999 from $2.3 million during the
same period last year. Included in non-interest income for the quarter ended
June 30, 1999 is a net gain of $314,000 from the sale of the Bank's credit card
program, the sale of a building and life insurance proceeds, reduced by the
write down of purchased servicing values. Non-interest expenses increased
$406,000 to $7.3 million for the quarter ended June 30, 1999 from $6.9 million
for the same period last year. Included in non-interest expense for the quarter
ended June 30, 1999 is $519,000 related to payment of early retirement
incentives and other non-recurring expenses.
Net income decreased $337,000 to $6.9 million for the fiscal year ended
June 30, 1999 as compared to $7.3 million for the fiscal year ended June 30,
1998. The $337,000 decrease in net income was comprised of a decrease in net
interest income of $684,000, a $467,000 increase in non-interest expense and a
$460,000 increase in provision for loan losses, offset by an increase in
non-interest income of $917,000 and a decrease in income tax expense of
$357,000. The interest rate spread increased to 3.16% at June 30, 1999 from
2.99% at June 30, 1998.
Interest income decreased $3.7 million to $70.8 million for the
fiscal year ended June 30, 1999 from $74.5 million for the fiscal year ended
June 30, 1998. This decrease resulted from a decrease in the average balance of
interest earning assets of $20.0 million to $912.2 million during fiscal 1999
from $932.2 million during fiscal 1998 and a decrease in the average yield on
interest-earning assets to 7.76% during fiscal 1999 from 7.99% during fiscal
1998.
Interest expense decreased $3.1 million to $39.2 million in fiscal
1999 from $42.3 million in fiscal 1998. This decrease resulted from a decrease
in the average balance of interest-bearing liabilities of $10.1 million to
$871.4 million during fiscal 1999 from $881.5 million during fiscal 1998 and a
decrease in the average rate paid on interest-bearing liabilities to 4.50%
during fiscal 1999 from 4.80% during fiscal 1998.
The provision for loan losses increased $460,000 to $1.3 million for
fiscal year 1999 from $840,000 for the same period last year. The increased
provision for loan losses is primarily related to the consumer loan dealer
3
<PAGE>
finance program. At June 30, 1999, the Company had $4.2 million of
non-performing assets (representing 0.42% of total assets) compared to $5.0
million at June 30, 1998 (representing 0.49% of total assets). The 0.42% is
substantially less than the national composite for thrifts of 0.73% at March 31,
1999, which is the latest available information reported by the Office of Thrift
Supervision. At June 30, 1999, the Company had allowance for loan losses to
non-performing assets of 121.13% as compared to 97.44% at June 30, 1998.
Management's evaluation of the adequacy of its loan loss reserves, the quality
of the loan portfolio and economic conditions in Montana resulted in the $1.3
million provision for loan losses. Future additions to the Company's allowance
for loan losses and any change in the related ratio of the allowance for loan
losses to non-performing loans are dependent upon the performance and
composition of the Company's loan portfolio, the economy, inflation, changes in
real estate values and interest rates and the view of the regulatory authorities
toward adequate reserve levels.
Non-interest income increased $917,000 to $9.3 million in fiscal 1999
from $8.4 million during 1998. The $917,000 increase resulted primarily from
increases in fees and service fees, net gain on sale of loans and securities
available-for-sale and other operating income of $350,000, $96,000 and $471,000
respectively. The low interest rate environment that existed during fiscal 1999
produced strong mortgage loan refinance activity which resulted in $3.7 million
of loan origination fees and gains on sale of loans available-for-sale as
compared to $3.2 million for the same period last year. Seasonal fluctuations in
loan volume and a decline in loan volume due to increased interest rates could
adversely affect origination fees and gains on sale loans available-for- sale.
Included in non-interest income for fiscal 1999 is a net gain of $314,000 from
the sale of the Bank's credit card program, the sale of a building, life
insurance proceeds and the write down of mortgage servicing rights that reduced
servicing fee income on loans serviced for others.
Non-interest expense increased $467,000 to $28.2 million in fiscal
1999 from $27.8 million in fiscal 1998. Compensation and employee benefits and
equipment and furnishings expense increased $546,000 and $467,000 respectively
while occupancy, marketing and other expense decreased $118,000, $173,000 and
$276,000 respectively. Included in non-interest expense for fiscal 1999 is
$834,000 related to year 2000 readiness expenditures, early retirement
incentives for certain executive officers, non-recurring professional fees and
data center conversion costs.
4
<PAGE>
Income tax expenses decreased $357,000 to $4.4 million for fiscal 1999
from $4.8 million for fiscal 1998. The $357,000 decrease in income tax expense
was primarily the result of the decrease in income before income tax expense of
$694,000 and the non-tax deductibility of $666,000 of goodwill amortization for
fiscal 1999.
FORWARD LOOKING STATEMENTS
When used in this press release or other public shareholder
communications, or in oral statements made with the approval of an authorized
executive officer, the words or phrases "will likely result," "are expected to,"
"will continue," "is anticipated," "estimate," "project," "significantly" or
similar expressions are intended to identify "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. The Company
wishes to caution readers not to place undue reliance on any forward-looking
statements, which speak only as of the date made, and to advise readers that
various factors including regional and national economic conditions, changes in
levels of market interest rates, credit risks of lending activities ,
competitive and regulatory factors and unforseen business risks related to year
2000 computer issues could affect the Bank's financial performance and could
cause the Company's actual results for future periods to differ materially from
those anticipated or projected.
The Company does not undertake, and specifically disclaims, any
obligation to publicly release the result of any revisions which may be made to
any forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.
WesterFed Financial Corporation's only subsidiary, Western Security
Bank, which is Montana's largest savings bank, operates thirty-four offices in
twenty Montana communities.
CONTACT: James A. Salisbury, Executive Vice President/Treasurer and Chief
Financial Officer (406) 721-5254
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