FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended.................... SEPTEMBER 30, 1997
--------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 0-26584
FIRST SAVINGS BANK OF WASHINGTON BANCORP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 91-1691604
(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, 1997
--------------- ----------------------
COMMON STOCK, $.01 PAR VALUE 10,246,513 SHARES *
* Includes 752,573 shares held by employee stock ownership plan (ESOP) that have
not been released, committed to be released, or allocated to participant
accounts; and 321,568 unvested shares held in trust for management
recognition and development plan (MRP).
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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, 1997 and March 31, 1997............................... 2
Consolidated Statements of Income
for the Quarters and Six Months ended September 30, 1997 and 1996......... 3
Consolidated Statements of Changes in Stockholders' Equity
for the Six Months ended September 30, 1997 and 1996.......................4
Consolidated Statements of Cash Flows
for the Six Months ended September 30, 1997 and 1996..................... 5
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, 1997 and March 31,
1997..................................................................... 9
Comparison of Results of Operations for the Quarters and Six Months ended
September 30, 1997 and 1996............................................. 10
Asset Quality.............................................................14
Liquidity and Capital Resources.......................................... 15
Capital Requirements......................................................15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................ 16
Item 2. Changes in Securities............................................ 16
Item 3. Defaults upon Senior Securities.................................. 16
Item 4. Submission of Matters to a Vote of Stockholders.................. 16
Item 5. Other Information................................................ 16
Item 6. Exhibits and Reports on Form 8-K................................. 16
SIGNATURES.................................................................. 17
EXHIBIT 27- FINANCIAL DATA SCHEDULE..........................................18
1
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FIRST SAVINGS BANK OF WASHINGTON BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS)
SEPTEMBER 30, 1997 AND MARCH 31, 1997
(UNAUDITED)
ASSETS SEPTEMBER 30 March 31
1997 1997
------- -------
CASH AND DUE FROM BANKS $ 25,896 $ 24,488
SECURITIES AVAILABLE FOR SALE, cost $284,978 and
$288,142 287,822 287,516
SECURITIES HELD TO MATURITY, fair value $788 and $987 788 987
LOANS RECEIVABLE HELD FOR SALE, fair value $6,457 and
$2,940 6,457 2,940
LOANS RECEIVABLE, net of the allowance for losses of
$7,187 and $6,748 726,022 642,941
ACCRUED INTEREST RECEIVABLE 7,740 6,950
REAL ESTATE HELD FOR SALE, net 1,613 1,057
FEDERAL HOME LOAN BANK STOCK 15,067 12,807
PROPERTY AND EQUIPMENT, net 11,084 10,534
COSTS IN EXCESS OF NET ASSETS ACQUIRED 11,457 11,906
DEFERRED INCOME TAX ASSET 254 1,220
OTHER ASSETS 4,415 4,287
--------- ---------
$ 1,098,615 $ 1,007,633
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS:
Interest bearing $ 523,820 $ 508,258
Non-interest bearing 44,663 36,709
---------- ----------
568,483 544,967
ADVANCES FROM FEDERAL HOME LOAN BANK 277,207 231,515
OTHER BORROWINGS 83,652 62,185
ADVANCES BY BORROWERS FOR TAXES AND INSURANCE 3,661 4,112
ACCRUED EXPENSES AND OTHER LIABILITIES 10,457 11,086
DEFERRED COMPENSATION 3,475 2,814
INCOME TAXES PAYABLE 1,385 2,318
---------- ----------
948,320 858,997
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:
10,246,513 shares and 10,518,982 shares outstanding
at September 30, 1997 and March 31, 1997, respectively 109 109
Additional paid - in capital 108,445 107,844
Retained earnings 67,710 62,572
Valuation reserve for securities available for sale 1,872 (401)
Treasury stock, at cost: 664,112 shares at September
30, 1997 and 391,643 at March 31, 1997 (13,585) (6,954)
Unearned shares of common stock issued to employee
stock ownership plan trust 752,573 and 775,105 shares
outstanding but restricted at September 30, 1997 and
March 31,1997, respectively (7,526) (7,751)
Shares held in trust for stock-related compensation plans (6,730) (6,783)
---------- ----------
150,295 148,636
---------- ----------
$ 1,098,615 $ 1,007,633
========== ==========
2
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FIRST SAVINGS BANK OF WASHINGTON BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED) (IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)
Quarters Six Months
Ended September 30 Ended September 30
1997 1996 1997 1996
INTEREST INCOME: ------ ------ ------ ------
Loans receivable $ 16,178 $ 11,316 $ 31,100 $ 20,248
Mortgage-backed securities 3,173 3,219 6,315 6,331
Securities and deposits 1,960 2,113 3,958 3,854
------ ------ ------ ------
21,311 16,648 41,373 30,433
INTEREST EXPENSE:
Deposits 6,373 5,434 12,432 10,061
Federal Home Loan Bank advances 4,310 3,164 8,001 5,807
Other borrowings 1,071 409 2,042 705
------ ------ ------ ------
11,754 9,007 22,475 16,573
Net interest income before
provision for loan losses 9,557 7,641 18,898 13,860
PROVISION FOR LOAN LOSSES 400 407 755 920
------ ------ ------ ------
Net interest income 9,157 7,234 18,143 12,940
OTHER OPERATING INCOME:
Loan servicing fees 189 206 387 384
Other fees and service charges 640 381 1,204 545
Gain on sale of loans 301 187 503 274
Gain (loss) on sale of securities 1 (212) 2 (208)
Miscellaneous 14 32 32 54
------ ------ ------ ------
Total other operating income 1,145 594 2,128 1,049
OTHER OPERATING EXPENSES:
Salary and employee benefits 3,466 2,913 6,780 4,689
Less capitalized loan origination costs(491) (401) (997) (792)
Occupancy 383 324 769 601
Outside computer services 256 208 504 406
Real estate operations 1 2 -- 19
Advertising 111 144 233 194
Deposit insurance 69 2,605 139 2,819
Amortization of costs in excess
of net assets acquired 225 -- 449 --
Miscellaneous 1,148 1,066 2,230 1,089
------- ------ ------- ------
Total other operating expenses 5,168 6,861 10,107 9,745
------- ------ ------- ------
Income before provision for
income taxes 5,134 967 10,164 4,244
PROVISION FOR INCOME TAXES 1,837 164 3,622 1,048
------- ------ ------- ------
NET INCOME $ 3,297 $ 803 $ 6,542 $ 3,196
======= ======= ======= =======
Net income per common shares:
Primary $ .34 $ .08 $ .68 $ .33
Fully diluted $ .34 $ .08 $ .67 $ .33
Cumulative dividends declared per
common share: $ .07 $ .05 $ .14 $ .10
3
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FIRST SAVINGS BANK OF WASHINGTON BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED) (IN THOUSANDS)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Valuation
reserve for Shares Total
Common Stock Additional securities Unearned ESOP shares Treasury stock held in trust Stock-
Number of At par paid-in Retained available Number of Carrying Number of Carrying for deferred holders
shares value capital earnings for sale shares value shares value compensation equity
------ ----- ------- -------- -------- ------ -------- ------ -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, April 1,
1996 10,911 $ 109 $107,370 $ 55,343 $ 774 (833) $ (8,331) -- $ -- $ (1,123) $154,142
Net income 3,196 3,196
Change in valuation reserve for
securities available for sale,
net of income taxes (544) (544)
Cash dividends on common stock
(.10/share cumulative) (963) (963)
Purchase of treasury stock (436) (6,430) (6,430)
Reissuance of treasury stock for
deferred compensation plan 58 404 5,956 (6,014) --
Release of earned ESOP shares 94 18 178 272
Amortization of compensation related to MRP 301 301
Forfeiture or net change in the number and/or
carrying amount of shares held in trust for
compensation plans (325) (325)
------ ----- ------- -------- -------- ------ -------- ------ -------- ------------ --------
BALANCE, September 30,
1996 10,911 $ 109 $107,522 $ 57,576 $ 230 (815) $ (8,153) (32) $ (474) $ (7,161) $149,649
====== ===== ======= ======== ======== ====== ======== ====== ======== ========== ========
BALANCE, April 1,
1997 10,911 $ 109 $107,844 $ 62,572 $ (401) (775) $ (7,751) (392) $(6,954) $ (6,783) $148,636
Net income 6,542 6,542
Change in valuation reserve for
securities available for sale,
net of income taxes 2,273 2,273
Cash dividends on stock
($.14/share cumulative) (1,404) (1,404)
Purchase of treasury stock (272) (6,619) (6,619)
Purchase and sale of stock (2) (49) (49)
for incentive stock options exercised (19) 2 49 30
Release of earned ESOP shares 389 22 225 614
Recognition of tax benefit due to
vesting of MRP shares 231 231
Amortization of compensation related to MRP 611 611
Forfeiture or net change in number and/or
carrying amount of shares held in
trust for compensation plans (12) (558)
------ ----- ------- -------- -------- ------ -------- ------ -------- ------------ --------
BALANCE, SEPTEMBER 30,
1997 10,911 $ 109 $108,445 $ 67,710 $ 1,872 (753) $ (7,526) (664) $(13,585) $(6,730) $150,295
====== ===== ======= ======== ======== ====== ======== ====== ======== ============ ========
4
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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, 1997 AND 1996
1997 1996
------ ------
OPERATING ACTIVITIES
Net income $ 6,542 $ 3,196
Adjustments to reconcile net income to net cash
provided by operating activities:
Deferred taxes -- (950)
Depreciation 536 322
Loss (gain) on sale of securities (2) 208
Net amortization of (premiums) discounts on investments (3) (474)
Amortization of costs in excess of net assets acquired 449 140
Amortization of MRP liability 611 301
Loss (gain) on sale of loans (503) (274)
Loss (gain) on disposal of real estate held for sale 20 --
Net changes in deferred loan fees, premiums and discounts 453 480
Loss (gain) on disposal of equipment (5) --
Capitalization of mortgage servicing rights from sale of
mortgages with servicing retained (73) --
Amortization of mortgage servicing rights 35 38
Provision for losses on loans and real estate held for sale 745 981
FHLB stock dividend (541) (411)
Cash provided (used) in operating assets and liabilities:
Loans held for sale (3,517) (828)
Accrued interest receivable (790) (108)
Other assets (90) 173
Deferred compensation 130 98
Accrued expenses and other liabilities (611) 966
Income taxes payable (933) (1,628)
------- -------
Net cash provided by operating activities 2,453 2,230
------- -------
INVESTING ACTIVITIES:
Purchase of securities available for sale (80,735) (374,604)
Principal payments and maturities of securities
available for sale 82,904 413,173
Sales of securities available for sale 1,000 --
Principal payments and maturities of securities held
to maturity 199 198
Loans originated and closed - net (244,846) (135,304)
Purchase of loans and participating interest in loans (28,673) (37,937)
Sales of loans and participating interest in loans 27,324 17,410
Principal repayments on loans 160,597 88,929
Purchase of FHLB stock (1,719) (2,061)
Purchase of property and equipment (1,090) (200)
Proceeds from sale of property and equipment 9 --
Insurance proceeds on real estate held for sale-net of
capitalized costs 119 --
Basis of real estate held for sale acquired in settlement
of loans and disposed of during the period 1,127 365
Funds transferred to deferred compensation plan trusts (39) (37)
Acquisition of IEB, net of cash acquired -- (17,289)
------- -------
Net cash used by investing activities (83,823) (47,357)
------- -------
(CONTINUED ON NEXT PAGE)
5
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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, 1997 AND 1996
(CONTINUED FROM PRIOR PAGE)
1997 1996
------ ------
FINANCING ACTIVITIES
Increase (decrease) in deposits $ 23,516 $ 16,926
Proceeds from FHLB advances 424,345 293,362
Repayment of FHLB advances (378,653) (253,656)
Proceeds from reverse repurchase borrowings 24,877 16,111
Repayments of reverse repurchase borrowings (301) --
Decrease-net in other borrowings (3,109) (1,436)
Decrease in borrowers'advances for taxes and insurance (451) (377)
Compensation expense recognized for shares released
for allocation to participants of the ESOP:
Original basis of shares 225 178
Excess of fair value of released shares over basis 389 94
Cash dividends paid (1,422) (963)
Net cost to exercise stock options (19) --
Purchase of treasury stock (6,619) (6,430)
------- -------
Net cash provided by financing activities 82,778 63,809
------- -------
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS 1,408 18,682
CASH AND DUE FROM BANKS, BEGINNING OF PERIOD 24,488 9,026
------- -------
CASH AND DUE FROM BANKS, END OF PERIOD $ 25,896 $ 27,708
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 21,346 $ 16,107
Taxes paid $ 4,555 $ 3,626
Non-cash transactions:
Loans, net of discounts, specific loss allowances and
unearned income transferred to real estate owned $ 1,812 $ 444
Net change in accrued dividends payable $ (18) $ --
Net change in unrealized gain (loss) in deferred
compensation trust and related liability $ (538) $ 296
Treasury stock forfeited by MRP $ 12 $ --
Treasury stock reissued to MRP $ -- $ 6,014
Recognize tax benefit of vested MRP shares $ 231 $ --
6
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FIRST SAVINGS BANK OF WASHINGTON BANCORP, INC. AND SUBSIDIARIES
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND MARCH 31, 1997
NOTE 1: BASIS OF PRESENTATION
The unaudited consolidated financial statements of First Savings Bank of
Washington Bancorp, Inc. (the Company) included herein reflect all adjustments
which are, in the opinion of management, necessary to present fairly the
statement of financial position and the results of operations 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) (together, the Banks). The balance sheet data at March 31, 1997, is
derived from the Company's audited financial statements. Certain information
andnote 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
(SEC). 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, 1997
(File No. 0-26584), of the Company. Certain amounts in the prior period's
financial statements and/or schedules have been reclassified to conform to the
current period's presentation.
NOTE 2: ADDITIONAL INFORMATION REGARDING INTEREST-BEARING DEPOSITS AND
SECURITIES
The following table sets forth additional detail on the Company's
interest-bearing deposits and securities at the dates indicated (at carrying
value) (in thousands):
SEPTEMBER 30 March 31
1997 1997
Interest-bearing deposits included --------- ---------
in cash and due from banks $ 7,501 $ 8,849
--------- ---------
Mortgage-backed securities 186,650 174,375
Other securities-taxable 65,233 76,401
Other securities-tax exempt 34,096 33,969
Other stocks with dividends 2,631 3,758
--------- ---------
Total securities $ 288,610 $ 288,503
--------- ---------
Federal Home Loan Bank Stock 15,067 12,807
--------- ---------
$ 311,178 $ 310,159
========= =========
The following table provides additional detail on income from deposits and
securities for the periods indicated (in thousands):
Quarters ended Six Months ended
September 30 September 30
1997 1996 1997 1996
------ ------ ------ ------
Mortgage-backed securities $ 3,173 $ 3,219 $ 6,315 $ 6,331
------ ------ ------ ------
Taxable interest and dividends $ 1,149 $ 1,372 2,382 2,461
Tax-exempt interest 516 517 1,035 982
Federal Home Loan Bank stock-dividends 295 224 541 411
------ ------ ------ ------
$ 1,960 $ 2,113 3,958 3,854
------ ------ ------ ------
$ 5,133 $ 5,332 $10,273 $10,185
====== ====== ====== ======
7
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NOTE 3: CALCULATION OF WEIGHTED AVERAGE SHARES OUTSTANDING FOR EARNINGS PER
SHARE (EPS) AND CALCULATION OF OUTSTANDING SHARES.
Calculation of
Weighted Average Shares Outstanding
for Earnings Per Share
(in thousands)
Quarters ended Six Months ended
September 30 September 30
------------ ------------
1997 1996 1997 1996
------ ------ ------ ------
Total shares originally issued 10,911 10,911 10,911 10,911
Less treasury stock including
shares allocated to MRP (854) (436) (825) (342)
Less unallocated shares held by the ESOP (758) (821) (764) (825)
Plus MRP and stock option incremental
shares considered outstanding
for primary EPS calculations 346 153 332 76
------ ------ ------ ------
Primary weighted average shares
outstanding 9,645 9,807 9,654 9,820
Plus MRP and stock option incremental
shares considered outstanding for
fully diluted EPS calculations 32 -- 44 --
------ ------ ------ ------
Fully diluted weighted average
shares outstanding 9,677 9,807 9,698 9,820
====== ====== ====== ======
Calculation of
Outstanding Shares at
(in thousands)
SEPTEMBER 30 March 31
1997 1997
-------- --------
Total shares issued 10,911 10,911
Less treasury stock (664) (392)
-------- --------
Outstanding shares 10,247 10,519
======== ========
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share.
SFAS No. 128 specifies the computation, presentation and disclosure requirements
for earnings per share (EPS) for entities with publicly held common stock or
potential common stock such as options, warrants, convertible securities or
contingent stock agreements if those securities trade in a public market. This
standard specifies computation and presentation requirements for both basic EPS
and, for entities with complex capital structures, diluted EPS. SFAS No. 128 is
effective for reporting periods ending after December 15, 1997 and early
adoption of the standard is not permitted. The following table shows the
Company's pro forma basic and diluted earnings per share if calculated under
SFAS No. 128.
Quarters ended Six Months ended
September 30 September 30
------------ ------------
1997 1996 1997 1996
------ ------ ------ ------
Basic earnings per share $ .35 $ .08 $ .70 $ .33
Diluted earnings per share $ .34 $ .08 $ .68 $ .32
8
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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 Federal Deposit Insurance Corporation (FDIC) under the Savings
Association Insurance Fund (SAIF). FSBW conducts business from its main office
in Walla Walla, Washington and its 15 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 FDIC
under the Bank Insurance Fund (BIF). IEB conducts business from its main office
in Hermiston, 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,
1997, when compared to the same periods for the prior year. This increase in net
interest income was largely due to the substantial growth in average asset and
liability balances and the acquisition of IEB on August 1, 1996. 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 both the most recent quarter and six months increased $2.5
million and $3.4 million respectively, from the comparable periods ended
September 30, 1996. After adjusting for the special SAIF assessment of $2.4
million ($1.6 million after tax) that occurred in the second quarter of fiscal
year 1997 (quarter ended September 30, 1996), the increases were $808,000 and
$1.7 million for the most recent quarter and six months when compared to the
same periods in fiscal 1997. These increases reflected the rise in net interest
income and an increase in other operating income which were partially offset by
increases in operating expenses and the provision for income taxes. Operating
results for both the quarter and six months ended September 30, 1997, were
significantly affected by the acquisition of IEB. Because the acquisition of IEB
occurred on August 1, 1996, part way through the quarter and six months ended
September 30, 1996, the consolidated results for those periods, reflecting only
two months of IEB operating results, were less significantly affected by that
acquisition.
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.
RECENT DEVELOPMENTS AND SIGNIFICANT EVENTS
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income and
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information. SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. SFAS No. 131 establishes standards of reporting by
publicly-held business enterprises and disclosure of information about operating
segments in annual financial statements and, to a lesser extent, in interim
financial reports issued to shareholders. SFAS Nos. 130 and 131 are effective
for fiscal years beginning after December 15, 1997. As both SFAS Nos. 130 and
131 deal with financial statement disclosure matters, the Company does not
anticipate the adoption of these new standards will have a material impact on
its financial position or results of operations.
In October 1997, the Company adopted a dividend reinvestment and stock purchase
plan. Under the terms of the plan all registered stockholders with 100 or more
shares of stock may automatically reinvest all or a portion of their cash
dividends in additional shares of the Company's common stock. In addition
qualifying participants may also make optional monthly cash payments of $50 to
$1,500 to purchase additional shares of Company stock.
9
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COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30 AND MARCH 31, 1997
Total assets increased $91.0 million, or 9.0%, from $1.008 billion at March 31,
1997, to $1.099 billion at September 30, 1997. The increase generally reflected
growth in net loans receivable and was funded primarily with deposit growth,
advances from the FHLB and other borrowings. This growth represented a
continuation of management's plans to further leverage the Company's capital.
Loans receivable (gross loans less loans in process, deferred fees and
discounts, and allowance for loan losses) grew $86.6 million, or 13.4%, from
$645.9 million at March 31,1997, to $732.5 million at September 30, 1997. The
increase in gross loans of $89.3 million from $707.8 million at March 31, 1997,
to $797.1 million at September 30, 1997, consists of $25.1 million of mortgages
secured by commercial and multi-family real estate, $33.9 million of residential
mortgages, $13.2 million of construction and land loans and $17.1 million of
non-mortgage loans such as commercial, agricultural and consumer loans. A little
more than half of the increase in assets was funded by a net increase of $45.7
million, or 19.7%, in FHLB advances from $231.5 million at March 31, 1997, to
$277.2 million on September 30, 1997. Asset growth was also funded by increased
deposits, other borrowings and net income from operations. Deposits grew $23.5
million, or 4.3%, from $545.0 million at March 31, 1997, to $568.5 million at
September 30, 1997. Other borrowings, primarily reverse repurchase agreements
with securities dealers, grew $21.5 million, or 34.5%, from $62.2 million at
March 31, 1997, to $83.7 million at September 30, 1997. Funds also were used to
purchase $6.6 million of treasury stock during this six month period. Securities
available for sale and held to maturity did not significantly change from
balances at March 31, 1997. Federal Home Loan Bank Stock increased $2.3 million
as the Company was required to purchase more stock as a result of its increased
use of FHLB advances. Real estate held for sale increased $556,000, primarily as
a result of foreclosure actions completed on certain non-performing loans.
COMPARISON OF OPERATING RESULTS FOR THE QUARTERS AND SIX MONTHS ENDED SEPTEMBER
30, 1997 AND 1996
GENERAL. Net income for the second quarter of fiscal 1998 was $3.3 million, an
increase of $2.5 million from the comparable quarter in fiscal 1997. Net income
for the first six months of fiscal 1998 was $6.5 million, or $.68 per share,
compared to net income of $3.2 million, or $.33 per share, recorded in the
comparable period of fiscal 1997. Net income for the second quarter and six
months ended September 30, 1996 was significantly affected by the $2.4 million
($1.6 million after tax) SAIF assessment. In addition, the first six months of
fiscal 1998 included $1.5 million of net income from a full six months of
operations at IEB, which the Company acquired on August 1, 1996, compared to
$400,000 for two months in the comparable fiscal 1997 period.
The Company's improved operating results reflect the significant growth of
assets and liabilities. Compared to year ago levels, total assets increased 16%
to $1.10 billion at September 30, 1997, total loans rose 28% to $732.5 million,
deposits grew 8.2% to $568.5 million and borrowings increased 42% to $360.9
million. The substantial increase in these balances during the year since
September 30, 1996, resulted from the continued 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. This growth helped to increase the
Company's return on average equity from 6.43% (excluding the SAIF assessment of
$1.6 million after tax) for the six months ended September 30, 1996, to 8.63%
for the six months ended September 30, 1997.
INTEREST INCOME. Interest income for the quarter ended September 30, 1997, was
$21.3 million compared to $16.6 million for the quarter ended September 30,
1996, an increase of $4.7 million, or 28.0%. The increase in interest income was
a result of a $190.0 million or 22.3% growth in average balances of
interest-earning assets combined with a 36 basis point increase in the average
yield on those assets, which rose from 7.75% in the quarter ended September
1996, to 8.11% in September 1997. Average loans receivable for the second
quarter of fiscal 1998 increased by $201.4 million, or 38.0%, when compared to
the same quarter in fiscal 1997. Interest income on loans increased by $4.9
million, or 43.0%, compared to the same quarter a year earlier, reflecting the
impact of the increase in average loan balances and a 31 basis point increase in
the yield on those balances primarily resulting from the inclusion of higher
yielding loans held by IEB. The average balance of mortgage-backed and
investment securities and FHLB stock for the second quarter of fiscal 1998
decreased by $11.4 million compared to the second quarter of fiscal 1997, and
the yield on those balances decreased 2 basis points. Interest and dividend
income from those investments decreased by $199,000 for the September 1997
quarter compared to September 1996.
Interest income for the six months ended September 30, 1997 increased $10.94
million, or 35.9%, from the comparable period in fiscal 1997. Interest income
from loans increased $10.85 million, or 53.6%, from the comparable period in
fiscal 1997. The majority of the increase from loan interest income reflected
the impact of a $223.1 million growth in average loans receivable balances
combined with a 41 basis point increase in the yield on the loan balances.
Interest income from mortgage-backed and investment securities and FHLB stock
for the six months ended September 30, 1997, increased a modest $88,000 from
$10.2 million in fiscal 1996, to $10.3 million in fiscal 1997, reflecting a
$433,000 increase in average balances combined with a 5 basis point increase in
yield. The yield on average earning assets increased from 7.67% for the six
months ended September 30, 1996, to 8.13% for the six months ended September 30,
1997.
10
<PAGE>
<PAGE>
INTEREST EXPENSE. Interest expense for the quarter ended September 30, 1997, was
$11.8 million compared to $9.0 million for the comparable period in 1996, an
increase of $2.8 million, or 30.5%. The increase in interest expense was due to
the $198.3 million growth in average interest-bearing liabilities. The increase
in average interest-bearing liabilities in the quarter ended September 1997 was
largely due to a $107.2 million increase in the average balance of FHLB advances
and other borrowings combined with a $91.1 million growth in average deposits.
Average FHLB advances totaled $280.0 million during the quarter ended September
30, 1997, as compared to $215.8 million during the quarter ended September
30,1996, resulting in a $1.1 million increase in related interest expense. The
average rate paid on those advances increased from 5.82% for the quarter ended
September 1996, to 6.11% for the comparable period in 1997, adding to the
increase in interest expense. Other borrowings consist of retail repurchase
agreements with customers and repurchase agreements with investment banking
firms secured by certain investment securities. The average balance for other
borrowings increased $43.0 million from $30.8 million for the quarter ended
September 30, 1996, to $73.8 million for the same period in 1997, and the
related interest expense increased $662,000, from $409,000 to $1.1 million for
the respective periods. The majority of this growth in other borrowings reflects
an increase in repurchase agreements with investment banking firms which totaled
$67.7 million at September 30, 1997. Deposit interest expense increased $939,000
for the quarter ended September 30, 1997. Average deposit balances increased
from $473.3 million for the quarter ended September 1996, to $564.4 million for
the comparable period in 1997 while, at the same time, the average rate paid on
deposit balances decreased 7 basis points. The decline in the rate paid on
deposits primarily reflects the acquisition of IEB's $32.1 million of
non-interest-bearing deposits as well as generally lower rates paid on
interest-bearing accounts of IEB. In addition the average balances of
non-interest and low-interest (savings and NOW) deposits have grown at both
Banks. The percentage of these non or low-interest deposits to total average
deposits increased for the most recent quarter and six month period when
compared to the same period a year earlier.
A comparison of total interest expense for the six months ended September 30,
1997, shows an increase of $5.9 million, or 35.6%, from the comparable period in
September 1996. The increased interest expense reflects the increase in average
deposits of $131.9 million combined with a $106.4 million increase in FHLB
advances and other borrowings. The effect on interest expense of the increase in
average interest-bearing liabilities was slightly reduced by a 4 basis point
decrease in the interest rate paid on those liabilities.
11
<PAGE>
<PAGE>
The following tables provide additional comparative data on the Company's
operating performance (in thousands):
Quarters ended Six Months ended
September 30 September 30
AVERAGE BALANCES 1997 1996 1997 1996
- ---------------- ------ ------ ------ ------
Investment securities and deposits $107,753 $124,551 $110,905 $115,538
Mortgage-backed obligations 187,862 186,011 185,157 183,590
Loans 732,216 530,785 704,555 481,411
FHLB stock 14,640 11,135 13,891 10,392
------ ------ ------ ------
Total average interest-earning asset 1,042,471 852,482 1,014,508 790,931
Non-interest-earning assets 44,073 25,840 41,830 21,231
------ ------ ------ ------
Total average assets $1,086,544 $878,322 $1,056,338 $812,162
========= ======= ========= =======
Deposits $564,406 $473,317 $554,691 $422,777
Advances from FHLB 280,034 215,772 263,992 203,281
Other borrowings 73,758 30,817 70,711 25,045
------ ------ ------ ------
Total average interest-bearing liabilities 918,198 719,906 889,394 651,103
Non-interest-bearing liabilities 16,213 13,687 15,719 12,951
------ ------ ------ ------
Total average liabilities 934,411 733,593 905,113 664,054
Equity 152,133 144,729 151,225 148,108
------ ------ ------ ------
Total average liabilities and equity $1,086,544 $878,322 $1,056,338 $812,162
======= ======= ======= =======
INTEREST RATE YIELD/EXPENSE (RATES ARE ANNUALIZED)
- --------------------------------------------------
Interest Rate Yield:
Investment securities and deposits 6.13% 6.02% 6.15% 5.94%
Mortgage-backed obligations 6.70% 6.87% 6.80% 6.88%
Loans 8.77% 8.46% 8.80% 8.39%
FHLB stock 7.99% 7.98% 7.77% 7.89%
Total interest rate yield on ------ ------ ------ ------
interest-earning assets 8.11% 7.75% 8.13% 7.67%
------ ------ ------ ------
Interest Rate Expense:
Deposits 4.48% 4.55% 4.47% 4.75%
Advances from FHLB 6.11% 5.82% 6.04% 5.70%
Other borrowings 5.76% 5.27% 5.76% 5.61%
Total interest rate expense on ------ ------ ------ ------
interest-bearing liabilities 5.08% 4.96% 5.04% 5.08%
------ ------ ------ ------
Interest spread 3.03% 2.79% 3.09% 2.59%
Net interest margin on interest ------ ------ ------ ------
earning assets 3.64% 3.56% 3.72% 3.50%
ADDITIONAL KEY FINANCIAL RATIOS (RATIOS ARE ANNUALIZED)
- -------------------------------------------------------
Return on average assets 1.20% 0.36% 1.24% 0.78%
Return on average equity 8.60% 2.20% 8.63% 4.30%
Average equity / average assets 14.00% 16.48% 14.32% 18.24%
Average interest-earning assets/interest-
bearing liabilities 113.53% 118.42% 114.07% 121.48%
Non-interest [other operating] expenses/
average assets 1.89% 3.10% 1.91% 2.39%
Efficiency ratio [non-interest
(other operating) expenses/revenues] 48.29% 83.32% 48.07% 65.36%
12
<PAGE>
<PAGE>
PROVISION FOR LOAN LOSSES. During the quarter ended September 30, 1997, the
provision for loan losses was $400,000, compared to $407,000 for the quarter
ended September 30, 1996, a decrease of $7,000. A comparison of the provision
for loan losses for the six month period shows a decrease of $165,000 to
$755,000 for the six months ended September 30, 1997, from $920,000 for the
comparable period in fiscal 1996. The decrease in the provision for loan losses
reflects management's current estimate of a reduction of the inherent risk in
the Company's loan portfolio due to continuing favorable actual loss experience
and the strength and anticipated growth in the Northwest economy. The allowance
for loan losses net of charge-offs (recoveries) increased by $439,000, to $7.2
million at September 30, 1997, compared to $6.8 million at March 31, 1997. 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 judgments 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 (in thousands):
SEPTEMBER 30 March 31
1997 1997
Loans (including loans held for sale): -------- --------
Gross principal $ 797,108 $ 707,816
Less loans in process 54,214 52,412
Less deferred fees and discounts 3,228 2,775
Less allowance for loan losses 7,187 6,748
-------- --------
Total net loans at end of period $ 723,479 $ 645,881
======== ========
Allowance for loan losses as a percentage of
gross principal of loans outstanding 0.90% 0.95%
Quarters ended Six Months ended
September 30 September 30
1997 1996 1997 1996
Change in allowance for loan losses: ------ ------ ------ ------
Balance at beginning of the period $6,955 $4,434 $6,748 $4,051
Acquisition of IEB -- 1,416 -- 1,416
Provision for loan losses 400 407 755 920
Recoveries 3 32 10 32
Charge-offs (171) (19) (326) (149)
------ ------ ------ ------
Balance at end of the period $7,187 $6,270 $7,187 $6,270
====== ====== ====== ======
Charge-offs as a percentage of average net book
value of loans outstanding for the period. 0.02% 0.00% 0.05% 0.03%
OTHER OPERATING INCOME. Other operating income increased $551,000 from $594,000
for the quarter ended September 30, 1996, to $1.1 million for the quarter ended
September 30, 1997. The increase resulted primarily from a $259,000 increase in
other fees and service charges due largely to IEB operations earning higher fees
as a commercial bank, combined with an increase in fee income at FSBW reflecting
deposit growth and pricing adjustments. There also was a $114,000 increase in
net gains on loans sold in the quarter ended September 30, 1997, as compared to
the same period in 1996. This increase primarily reflects the inclusion of, and
increases in, IEB's residential mortgage banking operations, which increased the
volume of loans sold in the secondary market over the comparable period in the
prior year, and slightly increased sales of loans by First Savings Bank. In
addition other operating income was reduced in the 1996 quarter by $212,000 in
net losses on the sale of securities as compared to a $1,000 net gain recorded
in the quarter ended September 30, 1997.
14
<PAGE>
<PAGE>
Other operating income for the six months ended September 30, 1997, increased
$1.1 million from the comparable period in 1996. The $659,000 increase in fee
income was due largely to the addition of six months of IEB's operations in the
current fiscal 1997 period compared to only two months in 1996. The $439,000
increase in gains from the sale of loans and securities for the six months ended
September 30, 1997 also reflects the inclusion of IEB's operations as well as
the previously noted net loss on securities sales reported in the comparable
period in 1996.
OTHER OPERATING EXPENSES. Other operating expenses decreased $1.7 million from
$6.9 million for the quarter ended September 30, 1996, to $5.2 million for the
quarter ended September 30, 1997. The decrease in other expenses was due to a
$2.5 million reduction in deposit insurance in the September 1997 quarter from
$2.6 million for the quarter ended September 30, 1996, to $69,000 for the
quarter ended September 30, 1997. The majority of the decrease from the
September 1996 quarter was due to the $2.4 million special SAIF assessment in
1996. The decrease in deposit insurance was somewhat offset by a $549,000
increase in salary and employee benefits from the inclusion of a full quarter of
IEB's operations versus two months in 1996, combined with Company growth.
Included in the Company's operating expenses for the quarter ended September 30,
1997, was $225,000 for amortization of costs in excess of net assets acquired
resulting from the purchase of IEB. Other increases also reflect growth of the
Company including increased personnel costs and increases in legal, accounting
and insurance costs relating to operating as a public company. The cost of
deposit insurance declined despite a significant increase in deposits as a
result of reduced premium levels subsequent to the special SAIF assessment
incurred in September 1996. Other operating expenses for the six months ended
September 30, 1997 increased $362,000 from the comparable period in 1996. The
$2.7 million decrease in deposit insurance was more than offset by a $3.0
million increase in other operating expenses of which $2.0 million of the
increase was due to the acquisition of IEB and the balance of the increase was
related to the growth in FSBW's operations.
INCOME TAXES. Income tax expense was $1.8 million for the quarter ended
September 30, 1997, compared to $164,000 for the comparable quarter in 1996. The
$1.6 million increase in the provision for income taxes reflects the higher
level of income being taxed at higher effective rates due to the phase out of
the 34% surtax exemption; the net effect of IEB paying Oregon state income
taxes; and the fact that the expenses from the amortization of costs in excess
of net assets acquired in purchasing IEB and part of the expense recorded in the
release of employee stock ownership plan (ESOP) shares are not deductible for
tax purposes. The Company's effective tax rates for the quarters ended September
30, 1997 and 1996, were 36% and 16%, respectively. Income tax expense for the
six months ended September 30, 1997 increased $2.6 million from $1.0 million for
the six months ended September 30, 1996, to $3.6 million for the comparable
period in 1997. The Company's effective tax rate increased to 36% for the six
months ended September 30, 1997 from 25% for the comparable period in 1996. This
increase was due to the same reasons the income tax provision for the quarter
increased.
ASSET QUALITY
The following tables are provided to disclose additional details on asset
quality (in thousands):
SEPTEMBER 30 March 31
1997 1997
-------- --------
Non-performing assets at end of the period:
Non-performing loans:
Delinquent loans on non-accrual status $ 800 $ 2,082
Delinquent loans on accrual status 189 30
-------- --------
Total non-performing loans 989 2,112
REO 1,613 1,057
-------- --------
Total non-performing assets at end of the period $2,602 $3,169
Non-performing loans as a percentage of total
net loans at end of the period 0.14% 0.33%
Ratio of allowance for loan losses to non-performing
loans at end of the period 727% 320%
<PAGE>
Non-performing assets as a percentage of total
assets at end of the period. 0.24% 0.31%
Troubled debt restructuring [TDR's]
at end of the period $ 372 $ 238
Troubled debt restructuring as a percentage of:
Total gross principal of loans outstanding at end
of the period 0.05% 0.03%
Total assets at end of the period 0.03% 0.02%
14
<PAGE>
<PAGE>
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, and the maturity
of, and interest income on mortgage-backed and investment securities. While
maturities and scheduled amortization of loans and mortgage-backed and
investment securities are a predictable source of funds, deposit flows and
mortgage prepayments are greatly influenced by market interest rates, general
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, 1997, the Banks closed or
purchased loans in the amount of $273.5 million. In addition, during this six
month period, funds were used to purchase $6.6 million of treasury stock. These
activities were 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, 1997, principal repayments on loans totaled
$160.6 million and the Banks' proceeds from the sale of mortgage loans totaled
$27.3 million. FHLB advances and other borrowings increased $67.2 million and
$12.1 million, respectively, for the same period, and net deposit growth was
$23.5 million.
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, 1997, the Banks had undisbursed loans in process
totaling $54.2 million. The Banks generally maintain sufficient cash and readily
marketable securities to meet short term liquidity needs. FSBW also 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,
1997, would give FSBW a total credit line of $360.6 million. Advances under this
credit facility totaled $277.2 million, or 30.8% of FSBW's assets at September
30, 1997. IEB also maintains credit facilities with various financial
institutions, including the FHLB of Seattle, that would allow it to borrow up to
$6.9 million.
At September 30, 1997, savings certificates amounted to $350.4 million, or 62%,
of the Banks' total deposits, including $198.0 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, other borrowings 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, 1997, 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%; Tier 1 (or core) capital of at least 6.00% of risk-weighted
assets; and total capital of at least 10.00% 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 for bank holding
companies that generally parallel the capital requirements of the FDIC for banks
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 actual regulatory capital ratios calculated for the Company along with the
minimum capital amounts and ratios for capital adequacy purposes were as follows
(dollars in thousands):
<PAGE>
Minimum for capital
Actual adequacy purposes
Amount Ratio Amount Ratio
SEPTEMBER 30, 1997: ------ ----- ------ -----
The Company-consolidated
Total capital to risk-weighted assets $144,112 23.31% $49,460 8.00%
Tier 1 capital to risk-weighted assets 136,926 22.15 24,730 4.00
Tier 1 leverage capital to average assets 136,926 12.61 42,941 4.00
15
<PAGE>
<PAGE>
PART II - OTHER 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 is 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 18,
1997. The results of the votes on the matters presented at the Meeting are as
follows:
1. The following individuals were elected as directors, each for a
three-year term:
Votes for Votes withheld
--------- ----------
David Casper 9,694,337 39,005
Morris Ganguet 9,695,302 38,040
Marvin Sundquist 9,688,393 44,949
The terms of Directors Dean Mitchell, R.R. "Pete" Reid, Gary Sirmon,
Wilber Pribilsky, Jess Foster and Robert D. Adams continued.
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 - Financial data schedule - see page 18
Report (s) on Form 8-K filed during the six months ended September 30, 1997,
are as follows:
Date Filed Purpose
---------- -------
Not Applicable
16
<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 12, 1997 /s/ Gary Sirmon
---------------
Gary Sirmon
President and Chief Executive Officer
November 12, 1997 /s/ D. Allan Roth
------------------
D. Allan Roth
Secretary and Treasurer
17
<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<CASH> 25896
<INT-BEARING-DEPOSITS> 1501
<FED-FUNDS-SOLD> 6000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 287822
<INVESTMENTS-CARRYING> 788
<INVESTMENTS-MARKET> 788
<LOANS> 732479
<ALLOWANCE> 7187
<TOTAL-ASSETS> 1098615
<DEPOSITS> 568483
<SHORT-TERM> 83652
<LIABILITIES-OTHER> 18978
<LONG-TERM> 277207
0
0
<COMMON> 109
<OTHER-SE> 150186
<TOTAL-LIABILITIES-AND-EQUITY> 1098615
<INTEREST-LOAN> 31100
<INTEREST-INVEST> 10147
<INTEREST-OTHER> 126
<INTEREST-TOTAL> 41373
<INTEREST-DEPOSIT> 12432
<INTEREST-EXPENSE> 22475
<INTEREST-INCOME-NET> 18898
<LOAN-LOSSES> 755
<SECURITIES-GAINS> 2
<EXPENSE-OTHER> 10107
<INCOME-PRETAX> 10164
<INCOME-PRE-EXTRAORDINARY> 6542
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6542
<EPS-PRIMARY> 0.68
<EPS-DILUTED> 0.67
<YIELD-ACTUAL> 3.72
<LOANS-NON> 800
<LOANS-PAST> 189
<LOANS-TROUBLED> 372
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6748
<CHARGE-OFFS> 326
<RECOVERIES> 10
<ALLOWANCE-CLOSE> 7187
<ALLOWANCE-DOMESTIC> 3439
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3748
</TABLE>
