FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
[X] EXCHANGE ACT OF 1934
For the quarterly period ended . . . . . . . . . . . September 30, 1996
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
[X] EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission File Number 0-26584
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FIRST SAVINGS BANK OF WASHINGTON BANCORP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 19-1691604
---------- -----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 S. First Avenue Walla Walla , Washington 99362
--------------------------------------------------------
(Address of principal executive offices and zip code)
(509) 527-3636
---------------
(Registrant's telephone number, including area code)
----------------------
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
(1) Yes [X] No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Title of class: As of October 31, 1996
--------------- ----------------------
Common stock, $.01 par value 10,878,482 shares *
* Includes 815,273 shares held by employee stock ownership plan
that have not been released, committed to be released, or
allocated to participant accounts; and 402,282 unvested
shares held in trust for management recognition plan.
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First Savings Bank of Washington Bancorp, Inc. and Subsidiaries
Table of Contents
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements. The Consolidated Financial Statements of First
Savings Bank of Washington Bancorp, Inc. and Subsidiaries filed as a
part of the report are as follows:
Consolidated Statements of Financial Condition
as of September 30, 1996 and March 31, 1996. . . . . . . . . . . . . . 1
Consolidated Statements of Income
for the Quarter and Six months ended September 30, 1996 and 1995 . . . 2
Consolidated Statements of Changes in Stockholders' Equity
for the Six months ended September 30, 1996 and 1995. . . . . . . . . 3
Consolidated Statements of Cash Flows
for the Six months ended September 30, 1996 and 1995. . . . . . . . . 4
Selected Notes to Consolidated Financial Statements. . . . . . . . . . 6
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operation
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Recent Developments and Significant Events . . . . . . . . . . . . . . 9
Comparison of Financial Condition at September 30 and March 31, 1996 . 9
Comparison of Operating Results for the Quarter and Six months ended
September 30, 1996 and 1995. . . . . . . . . . . . . . . . . . . . . 10
Asset Quality. . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Liquidity and Capital Resources. . . . . . . . . . . . . . . . . . . .15
Capital Requirements . . . . . . . . . . . . . . . . . . . . . . . . .16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . .17
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . .17
Item 3. Defaults upon Senior Securities . . . . . . . . . . . . . . .17
Item 4. Submission of Matters to a Vote of Stockholders . . . . . . .17
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . .18
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . .18
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
EXHIBIT 27- FINANCIAL DATA SCHEDULE . . . . . . . . . . . . . . . . . . .20
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FIRST SAVINGS BANK OF WASHINGTON BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands except for shares)
September 30, 1996 and March 31, 1996
(Unaudited)
ASSETS September 30, March 31,
1996 1996
-------------- -----------
CASH AND DUE FROM BANKS $ 27,708 $ 9,026
SECURITIES AVAILABLE FOR SALE,
cost $298,648 and $290,515 298,989 291,687
SECURITIES HELD TO MATURITY,
fair value $1,872 and $2,059 1,872 2,059
LOANS RECEIVABLE HELD FOR SALE,
fair value $4,434 and $1,558 4,434 1,558
LOANS RECEIVABLE, net of the
allowance for losses of $6,270 and $4,051 567,491 413,737
ACCRUED INTEREST RECEIVABLE 6,723 4,627
REAL ESTATE HELD FOR SALE, net 730 712
FEDERAL HOME LOAN BANK STOCK 11,502 9,030
PROPERTY AND EQUIPMENT, net 9,697 6,582
COSTS IN EXCESS OF NET ASSETS ACQUIRED 12,243 - -
DEFERRED INCOME TAX ASSET 1,369 240
OTHER ASSETS 4 ,228 3,918
-------- -----------
$ 946,986 $ 743,176
========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS:
Interest bearing $ 492,597 $367,248
Non-interest bearing 33,003 6,816
--------- ---------
525,600 374,064
ADVANCES FROM FEDERAL HOME LOAN BANK 219,125 179,419
OTHER BORROWINGS 34,947 19,652
ADVANCES BY BORROWERS FOR TAXES AND INSURANCE 3,186 3,563
ACCRUED EXPENSES AND OTHER LIABILITIES 11,629 8,319
DEFERRED COMPENSATION 2,471 1,618
FEDERAL INCOME TAXES PAYABLE 680 2,399
------ --------
797,638 589,034
STOCKHOLDERS' EQUITY:
Preferred stock - $0.01 par value, 500,000
shares authorized, no shares issued
Common stock - $0.01 par value, 25,000,000
shares authorized,10,910,625 shares
issued; 9,658,927 shares and 10,077,498
shares outstanding & unrestricted at
September 30, 1996 and March 31,
1996 respectively 109 109
Additional paid - in capital 107,522 107,370
Retained earnings 57,576 55,343
Unrealized gain (loss) on securities
available for sale 230 774
Unearned shares of common stock issued
to employee stock ownership plan trust
815,273 and 833,127 shares outstanding
but restricted at September 30, 1996 and
March 31,1996, respectively (8,153) (8,331)
Treasury stock: 32,143 shares at September
30, 1996 and none at March 31, 1996 (474) - -
Shares held in trust for deferred
compensation plans (7,462) (1,123)
-------- -------
149,348 154,142
-------- -------
$ 946,986 $ 743,176
========= ==========
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FIRST SAVINGS BANK OF WASHINGTON BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (in thousands except per share amounts)
Quarter Six months
Ended September 30 Ended September 30
1996 1995 1996 1995
---- ----- ----- -----
INTEREST INCOME:
Loans receivable $11,316 $ 6,501 $20,248 $12,780
Mortgage-backed
obligations 3,219 1,472 6,331 2,989
Securities and deposits 2,113 1,337 3,854 2,711
------ ------ ----- ------
16,648 9,310 30,433 18,480
INTEREST EXPENSE:
Deposits 5,434 4,659 10,061 9,128
Federal Home Loan
Bank advances 3,164 943 5,807 1,931
Other borrowings 409 108 705 217
----- ----- ----- -----
9,007 5,710 16,573 11,276
Net interest income
before provision
for loan losses 7,641 3,600 13,860 7,204
PROVISION FOR
LOAN LOSSES 407 75 920 112
------ ------ ------ ------
Net interest income 7,234 3,525 12,940 7,092
OTHER OPERATING INCOME:
Loan servicing fees 206 209 384 420
Other fees and
service charges 381 115 545 212
Gain on sale of loans 187 143 274 348
Gain (loss) on sale
of securities (212) -- (208) --
Miscellaneous 32 5 54 34
---- ---- --- ----
Total other operating
income 594 472 1,049 1,014
OTHER OPERATING EXPENSES:
Salary and employee
benefits 2,913 1,519 4,689 3,012
Less capitalized loan
origination costs (401) (339) (792) (567)
Occupancy 324 256 601 496
Outside computer
services 208 177 406 355
Real estate operations 2 (175) 19 (80)
Advertising 144 611 941 56
Deposit insurance 2,605 209 2,819 414
Miscellaneous 1,066 694 1,809 1,281
----- ---- ------ -----
Total other operating
expenses 6,861 2,402 9,745 5,067
----- ----- ------ -----
Income before
income taxes 967 1,595 4,244 3,039
INCOME TAXES 164 442 1,048 811
----- ----- ----- ------
NET INCOME $ 803 $ 1,153 $ 3,196 $ 2,228
======= ========== ======= =======
Net income per
common share:
Primary $ .08 $ N/A $ .33 $ N/A
Fully diluted $ .08 $ N/A $ .33 $ N/A
Primary weighted
average shares
outstanding 9,807 N/A 9,820 N/A
Cumulative dividends
declared per
common share: $ .05 $ N/A $ .10 $ N/A
PAGE
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FIRST SAVINGS BANK OF WASHINGTON BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited) (in thousands except for shares)
For the Six months ended September 30, 1996, and 1995
Unrealized Shares
gain on Unearned ESOP Shares Treasury Stock held in trust
Common Stock Additional securities Number Number for deferred
Number of At par paid-in Retained available of Carrying of Carrying compensation Total
Shares Value capital earnings for sale Shares Value Shares Value plans Equity
------ ----- ------- -------- -------- ------ -------- ------ -------- ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, April 1, 1995 -- $ -- $ -- $ 50,099 $ 152 -- $ -- -- $ -- $ -- $50,251
Net income 2,228 2,228
Change in unrealized gain
on securities available
for sale, net of federal
income taxes 430 430
------ ----- ------- -------- -------- ------ -------- ------ -------- ------------ ------
BALANCE, September 30,
1995 -- $ -- $ -- $ 52,327 $ 582 -- $ -- -- $ -- $ -- $52,909
====== ===== ======= ======== ======== ====== ======== ====== ======== ============ =======
BALANCE, April 1,1996 10,910,625 $ 109 $107,370 $ 55,343 $ 774 (833,127) $(8,331) -- $ -- $ (1,123) $154,142
Net income 3,196 3,196
Change in unrealized gain
on securities available
for sale, net of federal
income taxes (544) (544)
Cash dividends on stock
($.05/share cumulative) (963) (963)
Purchase of treasury stock (436,425) $(6,430) (6,430)
Reissuance of treasury stock
for deferred compensation plan 58 404,282 $ 5,956 (6,014) --
Release of earned ESOP shares 94 17,854 178 272
Net change in number and/or
carrying amount of shares
held in trust for deferred
compensation plans (325) (325)
------ ----- ------- -------- -------- ------ -------- ------ -------- ------------ ------
BALANCE, September 30,
1996 10,910,625 $ 109 $107,522 $ 57,576 $ 230 (815,273) $(8,153) (32,143) $ (474) $ (7,462) $149,348
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FIRST SAVINGS BANK OF WASHINGTON BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (in thousands)
For the Six months ended September 30, 1996 and 1995
1996 1995
---- ----
OPERATING ACTIVITIES
Net income $ 3,196 $ 2,228
Adjustments to reconcile net
income to net cash provided
by operating activities:
Deferred taxes (950) --
Depreciation 322 305
Loss (gain) on sale of securities 208 --
Amortization of costs in excess
of net assets acquired 140 --
Loss (gain) on sale of loans (274) (348)
Loss (gain) on sale of real estate owned -- (192)
Net changes in deferred loan fees,
premiums and discounts 480 (148)
Amortization of purchased mortgage
servicing rights 38 --
Net amortization of premiums and
discounts on investments (474) 36
Provision for loan and real estate
owned losses 981 217
FHLB stock dividend (411) (123)
Cash provided (used) in operating
assets and liabilities:
Loans held for sale (828) (1,256)
Accrued interest receivable (108) (337)
Other assets 173 (1,453)
Deferred compensation 98 108
Accrued expenses and other
liabilities 1,267 3,142
Federal income taxes payable (1,628) (223)
------- ------
Net cash provided by
operating activities 2,230 1,956
------ ------
INVESTING ACTIVITIES:
Purchase of securities available
for sale (374,604) (6,579)
Principal payments and maturities
of securities available for sale 413,173 6,621
Principal payments and maturities
of securities held to maturity 198 2,766
Purchase of FHLB stock (2,061) --
Loans closed and purchase of loans
and participating interest
in loans (173,241) (91,184)
Sale of loans and participating
interest in loans 17,410 26,608
Principal repayments on loans 88,929 54,336
Purchase of property & equipment (200) (1,054)
Basis of REO acquired in settlement
of loans and disposed of during the
period, net of gain 365 215
Funds transferred to deferred
compensation trust (37) --
Acquisition of IEB, net of
cash acquired (17,289) --
------- -------
Net cash used by
investing activities (47,357) (8,271)
------- -------
(Continued on next page)
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FIRST SAVINGS BANK OF WASHINGTON BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (in thousands)
For the Six months ended September 30, 1996 and 1995
(Continued from prior page)
1996 1995
------ ------
FINANCING ACTIVITIES
Increase (decrease) in deposits $ 16,926 $21,371
Proceeds from FHLB advances 293,362 198,684
Repayment of FHLB advances (253,656) (211,789)
Increase in reverse repurchase
borrowings 16,111 --
Decrease in other borrowings (1,436) (62)
Decrease in borrowers' advances for
taxes and insurance (377) (628)
Compensation expense recognized
for shares released for allocation
to participants of the ESOP:
Original basis of shares 178 --
Excess of fair value of released
shares over basis 94 --
Cash dividend paid (963) --
Purchase of treasury stock (6,430) --
------ -----
Net cash provided by financing
activities 63,809 7,576
------ ------
NET INCREASE (DECREASE) IN CASH
AND DUE FROM BANKS 18,682 1,261
CASH AND DUE FROM BANKS, BEGINNING
OF PERIOD 9,026 5,497
------- ------
CASH AND DUE FROM BANKS, END OF PERIOD $ 27,708 $ 6,758
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 16,107 $ 7,937
Taxes paid $ 3,626 $ 1,037
Non-cash transactions:
Loans, net of discounts, specific
loss allowances and unearned
income transferred to real
estate owned $ 444 $ --
Net change in accrued dividends
payable $ -- $ --
Net change in unrealized gain
(loss) in deferred compensation
trust and related liability $ 296 $ --
Treasury stock reissued to MRDP $ 6,014 $ --
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FIRST SAVINGS BANK OF WASHINGTON BANCORP, INC. AND SUBSIDIARIES
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996 and March 31, 1996
Note 1: Basis of Presentation
The unaudited consolidated financial statements of First Savings Bank of
Washington, (the Company) included herein reflect all adjustments which are,
in the opinion of management, necessary to present a fair statement of the
results for the interim periods presented. All such adjustments are of a
normal recurring nature. The consolidated financial statements include the
Company's wholly owned subsidiaries, First Savings Bank of Washington (FSBW)
and Inland Empire Bank (IEB). The balance sheet data at March 31, 1996, is
derived from the Company's audited financial statements. Certain information
and note disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to the rules and regulations of the Securities and Exchange
Commission. It is suggested that these consolidated financial statements be
read in conjunction with the consolidated financial statements and notes
thereto included in the Annual Report on Form 10-K for the year ended March
31, 1996 (File No. 0-26584) of the Company. Certain amounts in the prior
period's financial statements have been reclassified to conform to the current
period's presentation.
Effective April 1, 1996 the Company's subsidiary banks adopted SFAS No. 122,
Accounting for Mortgage Servicing Rights, which amended SFAS No. 65. SFAS
No. 122 requires the Banks to allocate the total cost of all mortgage loans
sold, whether originated or purchased, to mortgage servicing rights and the
loans (without the mortgage servicing rights ) based on their relative fair
values if it is practicable to estimate those fair values. If such allocation
is not deemed practicable, the entire cost of acquiring the loans should be
allocated to the loans with no cost allocated to mortgage servicing rights.
SFAS No. 122 is applied prospectively. The adoption of this statement has not
materially impacted the Company's results of operation or financial condition.
Note 2: Earnings Per Share
Earnings per share for the quarter and six months ended September 30, 1996 are
based on weighted average common shares outstanding of 9,806,868 and 9,820,364
respectively. The total issued shares of 10,910,625 have been adjusted for
the weighted average unallocated shares under the ESOP plan of 820,691 shares
for the quarter and 825,132 shares for the six months ended September 30, 1996
and for the net reduction of outstanding shares reissued from treasury stock
for the Management Recognition Development Plan of 141,064 shares for the
quarter and 71,336 shares for the six months ended September 30, 1996. The
weighted average shares for the quarter ended September 30, 1996 was also
reduced for the weighted average shares held in treasury stock of 142,002
shares for the quarter and 193,793 shares for the six months ended September
30, 1996.
Earnings per share information is not meaningful for any periods prior to
December 31,1995, inclusive, since the Company's stock was issued on October
31, 1995. Earnings per share are not presented for periods prior to
conversion to stock form, as FSBW was a wholly-owned subsidiary of a mutual
holding company.
Note 3: Securities, Investments; Securities and Deposits Interest Income
The following table sets forth the Company's securities portfolio at the dates
indicated (in thousands):
September 30, March 31,
1996 1996
------------ --------
Mortgage-backed obligations $ 179,900 $177,185
Other securities-taxable 81,624 84,080
Other securities-tax exempt 35,713 29,365
Other stocks with dividends 3,624 3,116
------------ ---------
Total Securities $ 300,861 $ 293,746
============ =========
Securities classified as "available for sale" are carried at estimated fair
value; securities classified as "held to maturity" are carried at cost net of
unamortized premiums and discounts.
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Note 3: Securities, Investments; Securities and Deposits Interest Income
(continued)
The following table sets forth income from securities for the periods
indicated (in thousands):
Quarter ended Six months ended
September 30 September 30
1996 1995 1996 1995
----- ----- ----- -----
Taxable interest $ 1,316 $ 765 $ 2,362 $ 1,575
Tax-exempt interest 517 463 982 926
Other stock -dividends 56 42 99 87
Federal Home Loan Bank
stock-dividends 224 67 411 123
----- ----- ------ ------
$ 2,113 $ 1,337 $ 3,854 $ 2,711
====== ======= ====== ======
Note 4: Significant Events
During the quarter ended September 30, 1996 the US Congress passed legislation
requiring that all financial institutions with deposits insured by the Savings
Association Insurance Fund (SAIF) pay a special assessment to recapitalize the
SAIF. This assessment resulted in the Company's SAIF insured subsidiary,
First Savings Bank of Washington (FSBW), recording a $2.4 million expense
representing the Company's share of an industry-wide special assessment to
recapitalize the SAIF, which is administered by the Federal Deposit Insurance
Corporation (FDIC). The assessment was calculated at .657% of insured
deposits as of March 31, 1995. The special assessment, charged to every
depository institution in the country with deposits insured by SAIF, was
contained in the US Congressional omnibus appropriations package passed on
September 30, 1996. The legislation empowers the FDIC to lower the insurance
premium from $.23 per $100 of deposits to $.065 per $100 of deposits beginning
January 1997. The $2.4 million assessment ($1.6 million after tax) was
recorded as part of the Company's non-interest expense this quarter.
Excluding the special assessment, the Company's net income would have been
approximately $2.4 million, or $.25 per share compared with net income of $1.2
million in the second quarter of fiscal 1996. Management estimates that this
special assessment expense will be offset during the next three to four years
through anticipated lower depository insurance costs.
At the Company's annual stockholders meeting held on July 26, 1996 the
shareholders approved adoption of the Management Recognition and Development
Plan (MRDP) and Stock Option Plan (SOP). Under the MRDP the Company is
authorized to grant up to 436,425 shares of restricted stock to directors,
officers and employees of the Bank. The initial grant of 404,282 shares with
a total cost of $6.3 million vests over a five year period starting from the
July 26, 1996 MRDP approval date. The consolidated statements of income for
the quarter and six months ended September 30, 1996 reflect an accrual of
$321,000 of compensation expense for the MRDP including $20,000 of expense for
dividends on the allocated, restricted stock. The Company has reserved an
aggregate of 1,091,063 shares for issuance pursuant to the exercise of stock
options which may be granted under the SOP to employees and directors. The
exercise price of the option was set at 100% of the fair market value of the
stock price at date of grant. The initial grant of approximately 854,000
options vests over a five year period following the date of grant and any
unexercised options will expire after ten years.
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The Company completed the acquisition of Inland Empire Bank (IEB) of
Hermiston Oregon effective August 1, 1996. The Company paid the former
shareholders of IEB $60.8951 per share, in cash, for a total acquisition price
of $32.8 million. IEB has five full service branches, a remote drive-up
facility and two loan production offices located in northeast Oregon. The
acquisition of IEB was treated as a purchase for accounting purposes.
Accordingly, under generally accepted accounting principles, the assets and
liabilities of IEB have been recorded on the books of the Company at their
respective fair market values at the effective date the acquisition was
consummated. Goodwill, the excess of the purchase price (cost) over the net
fair value of the assets and liabilities, was recorded at $12.4 million.
Amortization of goodwill over a 14 year period will result in a charge to
earnings of approximately $884,000 per year. Because of the amount of assets
of IEB acquired by the Company, the financial results for September 30, 1996,
are not generally comparable to those of a year ago. The combined organization
at September 30, 1996, is significantly larger than it was a year ago.
The accompanying financial statements include the operations of the two
institutions from August 1, 1996, to September 30, 1996. The following pro
forma information present the results of operations for the quarter and six
months ended September 30, 1996 and 1995, as though the acquisition had
occurred on April 1, 1995. The pro forma results do not necessarily indicate
the actual results that would have been obtained, nor are they necessarily
indicative of the future operations of the combined companies. The unaudited
pro forma results of operations were as follows.
(in thousands except per share amounts)
(Unaudited) (Unaudited)
(pro forma) (pro forma)
Quarter ended Six months ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
Net interest income $ 8,385 $ 5,812 $ 16,667 $ 11,187
Net income 953 1,530 3,759 3,010
Net income per share $ .10 N/A $ .38 N/A
A summarized, unaudited, balance sheet of IEB as of August 1, 1996, date of
acquisition, reflecting the allocation of the total purchase price and closing
costs of $32.8 million to IEB's assets and liabilities follows:
(Unaudited)
(in thousands)
August 1, 1996
Cash and due from banks $ 15,543
Securities available for sale 46,068
Loans receivable net of allowance
for losses of $1,416 90,470
Property and equipment, net 3,238*
Costs in excess of net assets acquired 12,383
Deferred tax asset 179*
Other assets 2,514
---------
Total Assets $ 170,395
=========
Deposits ($30,804-non-interest bearing) $ 134,610
Other borrowing 620
Federal income tax payable 51
Other liabilities 2,516
---------
Total Liabilities $ 137,797
==========
Common stock and paid in capital 32,832
Unrealized loss on securities available
for sale net of taxes (234)
----------
Total Equity 32,598
----------
Total Liabilities and Equity $ 170,395
===========
* - Includes an allocation of $850,000 to property for fair market value in
excess of book value on August 1, 1996 and a reduction in the deferred
tax asset for the related liability for deferred taxes of $326,000 on
the $850,000 allocation.
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ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
First Savings Bank of Washington Bancorp, Inc. (the Company),a Delaware
corporation, is primarily engaged in the business of planning, directing and
coordinating the business activities of its wholly owned subsidiaries, First
Savings Bank of Washington (FSBW) and Inland Empire Bank (IEB) (together, the
Banks). FSBW is a Washington-chartered savings bank the deposits of which are
insured by the FDIC under the Savings Association Insurance Fund (SAIF). FSBW
conducts business from its main office in Walla Walla , Washington and its 16
branch offices and three loan production offices located in southeast,
central, north central and western Washington. IEB is an Oregon-chartered
commercial bank whose deposits are insured by the Federal Deposit Insurance
Corporation (FDIC) under the Bank Insurance Fund (BIF). IEB conducts
business from its main office in Hermistion, Oregon and its five branch
offices and two loan production offices located in northeast Oregon.
The operating results of the Company depend primarily on its net interest
income, which is the difference between interest income on interest-earning
assets, consisting of loans and investment securities, and interest expense
on interest-bearing liabilities, composed primarily of savings deposits and
Federal Home Loan Bank (FHLB) advances. Net interest income is primarily a
function of the Company's interest rate spread, which is the difference
between the yield earned on interest-earning assets and the rate paid on
interest-bearing liabilities, as well as a function of the average balance of
interest earning assets as compared to the average balance of interest-bearing
liabilities. As more fully explained below, the Company's net interest income
significantly increased for both the most recent quarter and six months ended
September 30, 1996 when compared to the same the periods for the prior year.
This increase in net interest income was largely due to the substantial
growth in average asset and liability balances. The Company's net income also
is affected by provisions for loan losses and the level of its other income,
including deposit service charges, loan origination and servicing fees, and
gains and losses on the sale of loans and securities, as well as its
non-interest operating expenses and income tax provisions. As further
explained below, net income for the six months also increased reflecting the
rise in net interest income and a slight increase in other operating income
which was somewhat offset by increases in operating expenses and provision for
income taxes. Operating results and in particular non-interest operating
expenses were significantly affected by the special, one-time, assessment to
recapitalize SAIF.
Management's discussion and analysis of results of operations is intended to
assist in understanding the financial condition and results of operations of
the Company. The information contained in this section should be read in
conjunction with the Consolidated Financial Statements and accompanying
Selected Notes to Consolidated Financial Statements.
Significant Events
The Company instituted a stock repurchase program during the quarter ended
June 30, 1996, which authorized the repurchase of approximately 546,000 shares
of its outstanding common stock, and as of June 30, 1996, the Company
repurchased 436,425 shares at an average price of $14.74 per share. During the
quarter ended September 30, 1996 the Company reissued 404,282 treasury shares
purchased during the quarter ended June 30, 1996 to the MRDP (see Note 4 to
financial statements).
The Company completed the acquisition of Inland Empire Bank (IEB) of
Hermiston, Oregon effective August 1, 1996. (see Note 4 to financial
statements).
During the quarter ended September 30, 1996 the US Congress passed legislation
requiring that all financial institutions with deposits insured by the Savings
Association Insurance Fund (SAIF) pay a special assessment to recapitalize the
SAIF. This assessment resulted in the Company's SAIF insured subsidiary,
First Savings Bank of Washington (FSBW) recording a $2.4 million non-interest
expense. (see Note 4 to financial statements).
Comparison of Financial Condition at September 30 and March 31, 1996
Total assets increased $203.8 million, or 27.4%, from $743.2 million at March
31, 1996 to $947.0 million at September 30, 1996. The majority of the growth,
$157.6 million, was from the August, 1996 acquisition of IEB. The balance of
the increase generally reflected growth in net loans receivable and was funded
primarily with advances from the FHLB. This growth represented a continuation
of management's plans to leverage the Company's strong capital position.
<PAGE>
<PAGE>
Loans receivable grew $156.6 million, or 37.7%, from $415.3 million at March
31,1996 to $571.9 million at September 30, 1996. The acquisition of IEB
contributed $90.5 million of the increase and the remaining increase in loans
of $66.1 million was funded primarily by a net increase of $55.0 million, or
27.6%, in FHLB advances from $179.4 million at March 31, 1996 to $219.1
million on September 30, 1996.
Securities available for sale and held to maturity increased $7.2 million to
$300.9 million at September 30, 1996 from $293.7 million at March 31,1996.
During the September 1996 quarter the Company used $32.9 million of cash and
proceeds from maturing short term securities to fund the acquisition of the
outstanding stock of IEB which held $46.1 million of securities on the date of
acquisition. Borrowings under reverse repurchase agreements increased $16.1
million from $9.9 million at March 31, 1996 to $26.0 million at September 30,
1996. Federal Home Loan Bank Stock increased $2.5 million as the Company was
required to purchase more stock as a result of its increased use of FHLB
advances.
Deposits grew $151.5 million or 40.5%, from $374.1 million at March 31, 1996
to $525.6 million at September 30, 1996. The acquisition of IEB contributed
$134.6 million of the increase.
Comparison of Operating Results for the Quarter and Six months Ended September
30, 1996 and 1995
General. Net income for the second quarter of fiscal 1997 was $803,000,
after recording a $2.4 million ($1.6 million after tax) non-interest expense
representing the Company's share of an industry-wide special assessment to
recapitalize SAIF. The assessment was calculated at .657% of insured deposits
as of March 31, 1995. Net income for the first six months of fiscal
1996 was $3.2 million, or $.33 per share, compared to net income of $2.2
million recorded in the like period of fiscal 1996. The special assessment,
charged to every depository institution in the country with deposits insured
by SAIF, was contained in the US Congressional omnibus appropriations package
passed on September 30, 1996. The legislation empowers the FDIC to lower the
insurance premium from $.23 per $100 of deposits to $.065 per $100 of deposits
beginning January 1997. The Company's net income without the special
assessment, would have been approximately $4.8 million for the six months and
$2.4 million for the second quarter of fiscal 1996. In addition, the second
quarter ended September 30, 1996 included two months of combined operations of
First Savings Bank of Washington and Inland Empire Bank. The Company acquired
Inland Empire Bank (IEB) on August 1, 1996. The acquisition significantly
affected the Company's operating results for both the quarter and the six
months ended September 30, 1996.
Excluding the special assessment, the Company's increased operating results
reflect the significant growth of assets, liabilities and stockholders'
equity. Compared to year ago levels, total assets increased 87% to $947
million at September 30, 1996, total loans rose 84% to $572 million and total
deposits climbed 38% to $526 million. Assets were 27% higher than at March
31, 1996, total loans rose 38%, and deposits grew 41% in the first two
quarters of fiscal 1997. The substantial increase in these balances resulted
from the deployment and leveraging of the $98.6 million in net proceeds raised
in the Company's conversion from mutual to stock ownership on October 31, 1995
and the recent acquisition of IEB.
The Company's return on average equity decreased from 8.60% for the quarter
ended September 30, 1995, to 2.20% for the quarter ended September 30, 1996,
which was expected due to the large increase in equity from the October 31,
1995 stock offering combined with the reduction in earnings due to the special
one time SAIF assessment. Return on equity for the six months ended September
30, 1996 decreased to 4.30% as compared to 8.51% for the same period in
September 1995.
Interest Income. Interest income for the quarter ended September 30, 1996,
was $16.6 million compared to $9.3 million for the quarter ended September 30,
1995, an increase of $7.3 million, or 78.8%. The increase in interest income
was a result of a $370.2 million or 76.8% growth in average balances of
interest earning assets combined with a 7 basis point increase in the average
yield on those assets from 7.68% in the quarter ended September 30, 1995 to
7.75% in 1996. Average loans receivable increased by $173.8 million, or
56.5%, in 1996. Interest income on loans increased by $4.8 million or 74.1%,
reflecting the impact of the increase in average loan balances and an
increase in the yield on those balances. Loans yielded 8.46% for the quarter
ended September 30, 1996, compared to 8.35% for the quarter ended September
30, 1995. Interest income on loans for the six months ended September 30,
1996 increased $7.5 million or 58.44% from the comparable period in September
1995. The increase reflects a $173.8 million increase in the average balance
of loans receivable. The August 1996 acquisition of $90.5 million of loans
held by IEB contributed a significant portion of the increase.
<PAGE>
<PAGE>
The average balance of mortgage-backed securities, investment securities,
daily interest-bearing deposits and FHLB stock increased by $149.3 million in
the quarter ended September 30, 1996, and interest and dividend income from
those investments rose by $2.5 million for the September 1996 quarter compared
to 1995. The average yield on mortgage-backed securities rose from 6.55% in
September 1995 to 6.87% in 1996. The average yield on other investment
securities, on the other hand, declined from 6.41% in September 1995 to 6.18%
in 1996, which reflects the temporary investment of a portion of the
conversion proceeds in lower yielding short term investments as well as
generally lower prevailing market rates. Earnings on FHLB stock increased by
$156,000 reflecting an increase of $7.3 million in the average balance of FHLB
stock for the quarter ended September 1996 and a 84 basis point increase in
the dividend yield on that stock. Interest income on interest bearing
securities and deposits for the six months ended September 30, 1996 increased
$4.5 million or 79.23% from the comparable period in September 1995. The
increase reflects a $136.8 million growth in the average balance of
securities. This is due to the August 1996 acquisition of $46.1 million of
securities held by IEB. The remaining growth is in line with managements'
plans to leverage the Company's strong capital position.
Interest Expense. Interest expense for the quarter ended September 30, 1996,
was $9.0 million compared to $5.7 million for the comparable period in 1995,
an increase of $3.3 million, or 57.7%. The increase in interest expense was
due to the $285.0 million growth in average interest-bearing liabilities. The
increase in average interest-bearing liabilities in the quarter ended
September 1996 was largely due to a $154.0 million increase in the average
balance of FHLB advances combined with a $107.2 million growth in average
deposits coming primarily from the acquisition of IEB. Average FHLB advances
totaled $215.8 million during the quarter ended September 30, 1996, as
compared to $61.8 million during the quarter ended September 30, 1995,
resulting in a $2.2 million increase in related interest expense. The average
rate paid on those advances decreased from 6.07% for the quarter ended
September 1995 to 5.82% for the comparable period in 1996. Average deposit
balances increased from $366.1 million for the quarter ended September 1995,
to $473.3 million for the comparable period in 1996 while at the same time,
the average rate paid on deposit balances decreased 51 basis points. The
sharp decline in the rate paid on deposits primarily reflects the acquisition
of IEB's $32.1 million of non-interest bearing deposits. Deposit interest
expense increased a modest $755,000 for the quarter ended September 30, 1996.
Other borrowings consists of retail repurchase agreements with customers, and
reverse repurchase agreements with investment banking firms secured by certain
investment securities. The average balance for other borrowings, increased
$23.8 million from $7.0 million for the quarter ended September 30, 1995, to
$30.8 million for the same period in 1996, and the related interest expense
increased $301,000, from $108,000 to $409,000 for the respective periods. The
bulk of this growth in other borrowings, reflects an increase in reverse
repurchase agreements with investment banking firms. A comparison of total
interest expense for the six months ended September 30, 1996 shows an increase
of $5.3 million or 46.98% from the comparable period in September 1995. The
majority of this increase is due to the $158.6 million growth in the average
balances of FHLB and other borrowings which are being used to leverage the
Company's growth in interest earning assets.
<PAGE>
<PAGE>
The following tables provide additional comparative data on the Company's
operating performance (in thousands):
Quarter Six months
ended September 30, ended September 30,
Average Balances
- ----------------
1996 1995 1996 1995
----- ---- ---- -----
Investment securities
and deposits $ 124,551 $ 79,137 $ 115,538 $ 79,091
Mortgage-backed
obligations 186,011 89,468 183,590 89,845
Loans 530,785 309,885 481,411 307,580
FHLB stock 11,135 3,791 10,392 3,763
-------- ------- -------- -------
Total average
interest-earning
asset 852,482 482,281 790,931 480,279
Non-interest earning
assets 25,840 16,771 21,231 15,825
--------- ------- ------- ------
Total average
assets $ 878,322 $499,052 $ 812,162 $ 496,104
========= ========= ======== ========
Deposits $ 473,317 $366,099 $ 422,777 $ 363,264
Advances from FHLB 215,772 61,817 203,281 62,667
Other borrowings 30,817 6,989 25,045 7,106
-------- ------- -------- --------
Total average interest-
bearing
liabilities 719,906 434,905 651,103 433,037
Non-interest-bearing
liabilities 13,687 10,800 12,951 10,720
Total average
liabilities 733,593 445,705 664,054 443,757
Equity 144,729 53,347 148,108 52,347
-------- ------- ------- ------
Total average
liabilities
and equity $878,322 $499,052 $ 812,162 $ 496,104
======== ======== ========= =========
Interest Rate Yield/Expense [rates are annualized]
--------------------------------------------------
Interest Rate Yield:
Investment securities
and deposits 6.02% 6.38% 5.94% 6.54%
Mortgage-backed
obligations 6.87% 6.55% 6.88% 6.65%
Loans 8.46% 8.35% 8.39% 8.31%
FHLB stock 7.98% 7.14% 7.89% 6.54%
----- ---- ---- ----
Total interest rate
yield on interest-
earning assets 7.75% 7.68% 7.67% 7.70%
----- ----- ---- ----
Interest Rate Expense:
Deposits 4.55% 5.06% 4.75% 5.03%
Advances from FHLB 5.82% 6.07% 5.70% 6.16%
Other borrowings 5.27% 6.15% 5.61% 6.11%
----- ---- ---- ----
Total interest rate
expense on interest-
bearing
liabilities 4.96% 5.22% 5.08% 5.21%
---- ----- ---- ----
Interest spread 2.79% 2.46% 2.59% 2.49%
==== ==== ==== ====
Net interest margin
on interest earning
assets 3.56% 2.97% 3.50% 3.00%
----- ----- ---- ----
Additional Key Financial Ratios [ratios are annualized]
-------------------------------------------------------
Return on average
assets 0.36% 0.92% 0.78% 0.90%
Return on average
equity 2.20% 8.60% 4.30% 8.51%
Average equity /
average assets 16.48% 10.69% 18.24% 10.55%
Average interest-
earning assets /
interest-bearing
liabilities 118.42% 110.89% 121.48% 110.91%
Non-interest
[other operating]
expenses /
average assets 3.10% 1.91% 2.39% 2.04%
Efficiency ratio
[non-interest
(other operating)
expenses /
revenues] 83.32% 58.99% 65.36% 61.66%
<PAGE>
<PAGE>
Provision for Loan Losses. During the quarter ended September 30, 1996, the
provision for loan losses was $407,000, compared to $75,000 for the quarter
ended September 30, 1995, an increase of $332,000. The increase in the
provision for estimated loan losses is primarily attributable to the overall
increase in net loans receivable excluding loans acquired in the acquisition
of IEB. Net loans increased $37.7 million, for the quarter ended September
30, 1996 versus $25.4 million for the comparable period in 1995. The
allowance for loan losses, net of charge-offs (recoveries) increased by $2.2
million, including a $1.4 million allowance for loan losses associated with
the August 1st acquisition of IEB, to $6.3 million at September 30, 1996
compared to $4.1 million at March 31, 1996. A comparison of the provision for
loan losses for the six months ended September 30, 1996 shows an increase of
$808,000 to $920,000 for the six months ended September 30, 1996 from $112,000
for the comparable period in 1995. This increase is primarily due to the
$66.2 million growth in loans receivable for the 1996 six month period
(excluding the acquisition of IEB's $90.5 million loan portfolio) as compared
to the $11.6 million growth in loans receivable for the same period in 1995.
The allowance for losses on loans is maintained at a level sufficient to
provide for estimated losses based on evaluating known and inherent risks in
the loan portfolio and upon management's continuing analysis of the factors
underlying the quality of the loan portfolio. These factors include changes
in the size and composition of the loan portfolio, actual loan loss
experience, current and anticipated economic conditions, detailed analysis of
individual loans for which full collectibility may not be assured, and
determination of the existence and realizable value of the collateral and
guarantees securing the loans. Additions to these allowances are charged to
earnings. Provisions for losses that are related to specific assets are
usually applied as a reduction of the carrying value of the assets and charged
immediately against the income of the period. The reserve is based upon
factors and trends identified by management at the time financial statements
are prepared. In addition, various regulatory agencies, as an integral part
of their examination process, periodically review the Banks' allowance for
loan losses. Such agencies may require the Banks' to provide additions to the
allowance based upon judgements different from management. Although
management uses the best information available, future adjustments to the
allowance may be necessary due to economic, operating, regulatory and other
conditions beyond the Banks' control.
The following tables are provided to disclose additional detail on the
Company's loans and allowance for loan losses (dollars in thousands):
September 30, March 31,
1996 1996
----------- ----------
Loans [ including loans held for sale]:
Gross principal $ 637,820 $ 456,466
Less loans in process 51,171 35,244
Less deferred fees and discounts 2,454 1,876
Less allowance for loan losses 6,270 4,051
--------- --------
Total net loans at end
of period $ 571,925 $ 415,295
=========== ==========
Allowance for loan losses as a
percentage of gross principal
of loans outstanding 0.98% 0.89%
Quarter ended Six months ended
September 30, September 30,
1996 1995 1996 1995
----- ---- ---- -----
Change in allowance
for loan losses:
Balance at beginning
of the period $ 4,434 $ 3,586 $ 4,051 $ 3,549
Acquisition of IEB 1,416 0 1,416 0
Provision for loan
losses 407 75 920 112
Recoveries 32 0 32 0
Charge-offs (19) 0 (149) 0
-------- ------- ------ ------
Balance at end of
the period $ 6,270 $ 3,661 $ 6,270 $ 3,661
========= ========= ========== ========
Net charge-offs as a
percentage of average
net book value of loans
outstanding for
the period. 0.00% 0.00% 0.03% 0.00%
<PAGE>
<PAGE>
Other Operating Income. Other operating income increased from $472,000 for
the quarter ended September 30, 1995 to $594,000 for the quarter ended
September 30, 1996. The increase was primarily due to a $266,000 increase in
other fees and service charges due largely from IEB operations earning higher
fees as a commercial bank. The increase in fee income was offset by $212,000
of net losses on securities sold in the quarter ended September 30, 1996.
Other operating income for the six months ended September 30, 1996 increased a
moderate $35,000 from the comparable period in 1995. The $333,000 increase in
fee income during the six month period ended September, 1996 was due largely
from IEB operations and was offset by $282,000 decrease in net gains on the
sale of loans and securities.
Other Operating Expenses. Other operating expenses increased $4.5 million
from $2.4 million for the quarter ended September 30, 1995, to $6.9 million
for the quarter ended September 30, 1996. The increase in non-interest
operating expense for the quarter ended September 1996, was primarily due to
the $2.4 million SAIF assessment and $1.1 million of IEB operating expenses
for two months. The increase also reflects growth of the Company including
increased personnel costs and increases in legal accounting and insurance
costs relating to operating as a public company. These increases were
somewhat offset by a $62,000 increase in capitalized loan origination costs
reflecting a $19.0 million increase in loan origination volume compared to the
quarter ended September 30, 1995. Other operating expenses for the six months
ended September 30, 1996 increased $4.7 million from the comparable period in
1995. The majority of the increase was related to the SAIF assessment,
acquisition of IEB and Company growth as discussed above. This increase was
offset by a $225,000 increase in capitalized loan origination costs reflecting
a $48.3 million increase in loan origination volume compared to the same
period in 1995.
Income Taxes. Income tax expense was $164,000 for the quarter ended September
30, 1996, compared to $442,000 for the quarter ended September 30, 1995. The
decreased provision for income taxes reflects the lower level of income
combined with an increase in the percentage relationship of tax exempt income
to total income in the September 1996 quarter. The Company's effective tax
rates for the quarters ended September 30, 1996 and 1995 was 16.96% and
27.71%, respectively. Income tax expense for the six months ended September
30, 1996 increased $237,000 from the comparable period in 1995. The Company's
effective tax rate decreased to 24.69% for the six months ended September 30,
1996 from 26.69% for the comparable period in 1995. The expected increase in
income taxes due to the $1.2 million increase in before tax income was reduced
due to the greater percentage of tax exempt income to total income during the
1996 six month period as compared to 1995.
<PAGE>
Asset Quality
The following tables are provided to disclose additional details on asset
quality (dollars in thousands).
At At
September 30, March 31,
1996 1996
------------- ----------
Non-performing assets at
end of the period:
Non-performing loans:
Delinquent loans on
non-accrual status $ 813 $ 526
Delinquent loans on
accrual status 491 12
---- ----
Total non-performing
loans 862 538
REO 730 712
---- ----
Total non-performing assets
at end of the period $ 1,592 $ 1,250
========== ==========
Non-performing loans as a
percentage of total net loans
at end of the period 0.15% 0.13%
Ratio of allowance for loan
losses to non-performing loans
at end of the period 727.38% 752.97%
Non-performing assets as a percentage
of total assets at end of the period. 0.17% 0.17%
Troubled debt restructuring [TDR's]
at end of the period $ 423 $ 156
---- ----
Troubled debt restructuring as a
percentage of:
total gross principal of loans
outstanding at end of the period 0.07% 0.03%
total assets at end of the period 0.04% 0.02%
Liquidity and Capital Resources
The Company's primary sources of funds are deposits, FHLB advances, proceeds
from loan principal and interest payments and sales of loans, the maturity of
and interest income on mortgage-backed and investment securities. While
maturities and scheduled amortization of loans and mortgage-backed securities
are a predictable source of funds, deposit flows and mortgage prepayments are
greatly influenced by general interest rates, economic conditions and
competition.
The primary investing activity of the Company is the origination and purchase
of mortgage, consumer, and commercial loans through its subsidiary Banks, IEB
and FSBW. During the six months ended September 30, 1996, the subsidiary
Banks closed or purchased loans in the amounts of $173.2 million. This
activity was funded primarily by principal repayments on loans and securities,
sales of loans, increases in FHLB advances, and deposit growth. For the six
months ended September 30, 1996, principal repayments on loans totaled $88.9
million and the Banks proceeds from the sale of mortgage loans totaled
$17.4 million. FHLB advances increased $39.7 million for the same period and
net deposit growth was $16.9 million excluding $134.6 million of deposits
acquired with IEB.
The Banks must maintain an adequate level of liquidity to ensure the
availability of sufficient funds to support loan growth and deposit
withdrawals, to satisfy financial commitments and to take advantage of
investment opportunities. At September 30, 1996, the Banks had undisbursed
loans in process totaling $57.2 million. The Banks generally maintain
sufficient cash and readily marketable securities to meet short term liquidity
needs. In addition, FSBW maintains a credit facility with the FHLB of
Seattle, which provides for advances which in aggregate may equal up to 40% of
FSBW's total assets, which as of September 30, 1996, could give a total credit
line of $303.2 million. Advances under this credit facility totaled $219.1
million, or 28.91% of FSBW's assets at September 30, 1996.
PAGE
<PAGE>
At September 30, 1996, savings certificates amounted to $315.2 million, or
60.0%, of the Banks' total deposits, including $206.7 million which were
scheduled to mature within one year. Historically, the Banks have been able
to retain a significant amount of their deposits as they mature. Management
believes it has adequate ability to fund all loan commitments by using
deposits, FHLB of Seattle advances and the sale of mortgage loans or
securities, and that it can adjust the offering rates of savings certificates
to retain deposits in changing interest rate environments.
Capital Requirements
Federally-insured state-chartered banks are required to maintain minimum
levels of regulatory capital. Under current FDIC regulations, insured
state-chartered banks generally must maintain (I) a ratio of Tier 1 leverage
capital to total assets of at least 3.0% (4.0% to 5.0% for all but the most
highly rated banks), (ii) a ratio of Tier 1 capital to risk weighted assets of
at least 4.0% and (iii) a ratio of total capital to risk weighted assets of at
least 8.0%. At September 30, 1996, the Company's banking subsidiaries
exceeded all current regulatory capital requirements to be classified as well
capitalized institutions, the highest regulatory standard. In order to be
categorized as a well capitalized institution, the FDIC requires banks it
regulates to maintain a leverage ratio, defined as Tier 1 capital divided by
total regulatory assets, of at least 5.00%; total capital of at least 10.00%
of risk-weighted assets; and Tier 1 (or core) capital of at least 6.00% of
risk-weighted assets.
The Company, as a bank holding company is regulated by the Federal Reserve
Board (FRB). The FRB has established capital requirements that generally
parallel the capital requirements of the FDIC for the Banks that are applied
to bank holding companies with $150 million or more in total consolidated
assets. The Company's total regulatory capital must equal 8% of risk-weighted
assets and one half of the 8% (4%) must consist of Tier 1 (core) capital.
The following table reflects the Company's applicable regulatory requirements
and the actual level of regulatory capital at September 30, 1996.
Required Actual
---------------------- -------------------------
Percent Amount Percent Amount
------- ------ ------- -------
(dollars in thousands)
Risk-based capital ratios
Tier 1 4.00% $ 20,838 26.27 $1136,837
Total 8.00 41,676 27.47 $ 143,107
<PAGE>
PART II - FINANCIAL INFORMATION
Item 1. Legal Proceedings
From time to time the Company or its subsidiaries are engaged in legal
proceedings in the ordinary course of business, none of which are considered
to have a material impact on the Company's financial position or results of
operations.
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Stockholders
The Annual meeting of stockholders of the Company (Meeting) was held on July
26, 1996. The results of the votes on the matters presented at the Meeting is
as follows:
1. The following individuals were elected as directors, each for a
three-year term:
Vote For Vote Withheld
--------- --------------
Dean W. Mitchell 9,703,717 82,988
R.R. "Pete" Reid 9,696,082 90,623
The terms of Directors David Casper, Morris Ganguet, Marvin Sundquist, Gary L.
Sirmon, Wilber Pribilsky and Robert D. Adams continued.
2. The First Savings Bank of Washington Bancorp, Inc. 1996 Stock
Option Plan was approved by stockholders by the following vote:
FOR - 6,667,093; AGAINST - 911,319; ABSTAIN - 169,967; Brokers
non-votes totaled 2,038,326.
3. The First Savings Bank of Washington Bancorp, Inc. 1996 Management
Recognition and Development Plan was approved by stockholders by
the following vote:
FOR - 6,571,035; AGAINST - 988,926; ABSTAIN - 218,894; Brokers
non-votes totaled 2,007,850.
PAGE
<PAGE>
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 - Financial data schedule - see page 20
Reports on Form 8-k filed during the quarter ended September 30, 1996 are
as follows:
Date Filed Purpose
--------------- --------
August 16, 1996 Announcing the completed acquisition of Inland
Empire Bank by First Savings Bank of Washington,
Bancorp. Inc. on August 1, 1996.
October 15, 1996 Submissal of additional required financial
information on acquisition of Inland Empire
Bank by First Savings Bank of Washington,
Bancorp, Inc.
<PAGE> <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.
First Savings Bank of Washington
Bancorp, Inc.
November 14, 1996 /s/ Gary L. Sirmon
-----------------------------
Gary L. Sirmon
President and Chief Executive Officer
November 14, 1996 /s/ D. Allan Roth
------------------------------
D. Allan Roth
Secretary and Treasurer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> SEP-30-1996
<CASH> 27708
<INT-BEARING-DEPOSITS> 23
<FED-FUNDS-SOLD> 15475
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 298989
<INVESTMENTS-CARRYING> 1872
<INVESTMENTS-MARKET> 1872
<LOANS> 571925
<ALLOWANCE> 6270
<TOTAL-ASSETS> 946986
<DEPOSITS> 525600
<SHORT-TERM> 34947
<LIABILITIES-OTHER> 17966
<LONG-TERM> 219125
0
0
<COMMON> 109
<OTHER-SE> 149239
<TOTAL-LIABILITIES-AND-EQUITY> 946986
<INTEREST-LOAN> 20248
<INTEREST-INVEST> 6331
<INTEREST-OTHER> 3854
<INTEREST-TOTAL> 30433
<INTEREST-DEPOSIT> 10061
<INTEREST-EXPENSE> 16573
<INTEREST-INCOME-NET> 13860
<LOAN-LOSSES> 920
<SECURITIES-GAINS> (208)
<EXPENSE-OTHER> 9745
<INCOME-PRETAX> 4244
<INCOME-PRE-EXTRAORDINARY> 3196
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3196
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0.33
<YIELD-ACTUAL> 3.50
<LOANS-NON> 813
<LOANS-PAST> 49
<LOANS-TROUBLED> 149
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4051
<CHARGE-OFFS> 149
<RECOVERIES> 32
<ALLOWANCE-CLOSE> 6270
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 6270
</TABLE>
