OAK HARBOR, Wash., July 24, 2008 (PRIME NEWSWIRE) -- Washington Banking Company (Nasdaq:WBCO), the holding company for Whidbey Island Bank, today reported steady loan growth, a diversified loan portfolio, and disciplined expense control produced consistent net income in the second quarter of 2008. For the second quarter of 2008, net income was $2.4 million, or $0.25 per diluted share, up 4% from $2.3 million, or $0.25 per diluted share in the first quarter of 2008, and just slightly below $2.5 million, or $0.26 per diluted share in the second quarter 2007. Net income totaled $4.7 million, or $0.50 per diluted share, in the first six months of both 2008 and 2007.
"As described in an earlier press release, we terminated the proposed merger with Frontier," said Michal Cann, President and CEO. "We retained our core senior and middle management banking team, and we continue to be a solidly profitable independent bank. I can retire knowing my successors are well positioned for the future, and that the entire staff is looking forward to continuing to serve our customers and communities just as we have done so successfully in the past."
"Although the merger process was distracting for our staff and our customers, we are moving quickly to regain our momentum in the market," said Jack Wagner, incoming President and CEO. "We expect to be adding selectively to our retail banking team, while continuing to closely monitor expenses, and moving forward now with several new products and services that have been in the planning stages for almost a year. We believe we have a very strong operating franchise in a great market, and are committed to building shareholder value."
Conference Call Information
Management will host a conference call today, July 24, 2008, at 9:00 a.m. PDT (12:00 p.m. EDT) to discuss the quarterly results. The live call can be accessed by dialing (303) 262-2083 or on the web at www.wibank.com. The replay, which will be available for a month beginning shortly after the call concludes, can be heard at (303) 590-3000 using access code 11116523#, or on the web at www.wibank.com.
Second Quarter 2008 Financial Highlights
Second quarter 2008 highlights include:
* Earnings were steady at $2.4 million, or $0.25 per diluted share. * Total loans increased 8% to $813 million. * Return on average assets was 1.09% and return on equity was 12.74%. * The efficiency ratio improved to 56.88% from 59.88% a year ago. * Book value per share grew 11% to $8.17 compared to $7.37 a year ago. * The cash dividend, paid on May 8, 2008, increased 8% to $0.065 per share. * Total Risk-Based Capital to Risk-Weighted Assets was 12.79%, well above the well-capitalized minimum. * Asset quality remained solid with nonperforming assets (NPAs) of $3.7 million, or 0.41% of assets.
Balance Sheet
At June 30, 2008, total assets increased 6% to $904 million compared to $852 million a year ago. Total net loans grew 8% to $813 million from $754 million at June 30, 2007. "Our loan portfolio remains diversified and continues to perform well, given the current market environment," said Joe Niemer, Chief Credit Officer. "Our construction loan portfolio comprises only 18% of our total loan portfolio and remains within our footprint primarily in north Snohomish, Whatcom, Island and Skagit counties. We are diversified by borrower, loan type and geography within our operating area."
Deposits were up slightly to $733 million at June 30, 2008, from $730 million a year ago, and down slightly from $746 million at March 31, 2008.
Credit Quality
Nonperforming assets were $3.7 million, or 0.41% of total assets at June 30, 2008, up slightly from $3.3 million, or 0.37% of total assets at March 31, 2008, and $2.4 million, or 0.28% of assets at June 30, 2007. Nonperforming loans totaled $2.5 million, or 0.30% of loans, compared to $2.4 million, or 0.31% of loans a year ago. "We believe our reserves are adequate and that we have identified current issues in our portfolio. We continue to operate in a difficult environment which is anticipated to remain challenging over the next few quarters," Niemer said. "We do feel that our consistent approach to loan underwriting allows us to better manage credit risk in a negative credit cycle, as evidenced by our recent regulatory exam."
The allowance for loan losses increased to $11.6 million at June 30, 2008, from $10.5 million a year ago. At quarter end, the allowance totaled 1.40% of loans and 312% of NPAs.
Net charge-offs in the second quarter totaled $869,000, or 0.42% of average loans on an annualized basis, compared to $536,000, or 0.28% of average loans, in the second quarter a year ago. In the first half of 2008, net charge-offs were $1.6 million, or 0.40% of average loans, compared to $922,000, or 0.25% of average loans in the like period of 2007.
Capital
The Company's estimated total risk-based capital as of June 30, 2008 was 12.79%, compared to 12.63% as of March 31, 2008, and is in excess of the regulatory definition of "well-capitalized" of 10.00%. The level as of June 30, 2008, is an estimate pending filing of the Company's regulatory reports.
Shareholders' equity increased 12% to $78 million at June 30, 2008, from $69 million a year ago. Book value per share increased 11% to $8.17 from $7.37 per share. Washington Banking increased its quarterly cash dividend 8% to $0.065 per common share, which was paid on May 8, 2008. "We continue to view cash dividends as an important component of building shareholder value and review our capital management choices carefully each quarter," Wagner noted.
Review of Operations
Revenues were down 3% in the second quarter of 2008 and up 1% year-to-date reflecting both lower interest income and lower interest expense this year. In the second quarter of 2008, revenues totaled $11.1 million, with interest income down 6% and interest expense down 15% from a year ago. In the first half of 2008, revenues totaled $22.6 million with interest income flat and interest expense falling 5% from the year ago period.
Second quarter net interest income was $9.3 million compared to $9.4 million in the second quarter of 2007. Year-to-date, net interest income was $18.9 million compared to $18.3 million in the first half of 2007.
The provision for loan losses increased to $1.0 million in the second quarter compared to $850,000 in the second quarter of 2007. The provision for loan losses increased to $2.1 million year-to-date compared to $1.4 million in the first half of 2007. "While our loan portfolio continues to perform well, we are increasing reserves in light of current market conditions," said Rick Shields, Chief Financial Officer.
In the second quarter of 2008, the yield on earning assets was 7.02% compared to 7.61% for the immediate prior quarter and 8.12% a year ago. In the first six months of 2008, the yield on earning assets was 7.31% compared to 8.09% a year ago. The cost of interest-bearing liabilities was 2.90% in the quarter, down 49 basis points sequentially and 85 basis points relative to the second quarter of last year. Net interest margin was 4.54 % in the second quarter, compared to 4.95% in the second quarter of 2007. Year-to-date, net interest margin was 4.62% compared to 4.96% in the first six months of 2007.
Noninterest income for the second quarter decreased 16% to $1.6 million, versus $2.0 million a year ago. In the first half of 2008, noninterest income was $3.4 million compared to $3.8 million in the first six months of 2007. The declines in 2008 are primarily due to lower income from secondary market loan sales.
Noninterest expense fell 8% in the second quarter of 2008 to $6.3 million from $6.9 million a year ago. Noninterest expense in the first six months of the year was down 4% to $13.2 million from $13.8 million in the year ago period. Expenses of $185,000 relating to the terminated merger are included in the 2008 year-to-date noninterest expense. "As we begin to ramp things up to regain our traction, it's reasonable to expect our noninterest expense to increase moderately in the second half of the year," said Wagner. The efficiency ratio was 56.88% in the second quarter of 2008 compared to 59.98% in the first quarter of 2008. Year-to-date, the efficiency ratio improved to 58.46% from 61.55%.
ABOUT WASHINGTON BANKING COMPANY
Washington Banking Company is a bank holding company based in Oak Harbor, Washington, that operates Whidbey Island Bank, a state-chartered full-service commercial bank. Founded in 1961, Whidbey Island Bank provides various deposit, loan and investment services to meet customers' financial needs. Whidbey Island Bank operates 19 full-service branches located in five counties in Northwestern Washington. In September 2007, Ryan Beck & Co. ranked WBCO #33 on its list of the Top 100 U.S. Banks and Thrifts, based on 5-year total return.
This news release may contain forward-looking statements that are subject to risks and uncertainties. These forward-looking statements describe management's expectations regarding future events and developments such as future operating results, growth in loans and deposits, credit quality and loan losses, and continued success of the Company's business plan. Readers should not place undue reliance on forward-looking statements, which reflect management's views only as of the date hereof. The words "anticipate," "expect," "will," "believe," and words of similar meaning are intended, in part, to help identify forward-looking statements. Future events are difficult to predict, and the expectations described above are subject to risk and uncertainty that may cause actual results to differ materially. In addition to discussions about risks and uncertainties set forth from time to time in the Company's filings with the Securities and Exchange Commission, factors that may cause actual results to differ materially from those contemplated in these forward-looking statements include, among others: (1) local and national general and economic condition; (2) changes in interest rates and their impact on net interest margin; (3) competition among financial institutions; (4) legislation or regulatory requirements; and (5) the ability to realize the efficiencies expected from investment in personnel and infrastructure. Washington Banking Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made. Any such statements are made in reliance on the safe harbor protections provided under the Securities Exchange Act of 1934, as amended.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
-------------------------------------------------
($ in thousands, except per share data)
Quarter Quarter Quarter
Ended Ended Three Ended One
June 30, March 31, Month June 30, Year
2008 2008 Change 2007 Change
---------------------------------------------------------------------
Interest Income
Loans $ 14,383 $ 15,360 -6% $ 15,185 -5%
Taxable Investment
Securities 96 110 -13% 136 -30%
Tax Exempt Securities 51 51 0% 68 -25%
Other 3 5 -42% 67 -96%
---------------------------------------------------------------------
Total Interest Income 14,533 15,526 -6% 15,456 -6%
Interest Expense
Deposits 4,542 5,295 -14% 5,480 -17%
Other Borrowings 359 304 18% 137 163%
Junior Subordinated
Debentures 284 405 -30% 484 -41%
---------------------------------------------------------------------
Total Interest
Expense 5,185 6,004 -14% 6,100 -15%
Net Interest Income 9,348 9,522 -2% 9,356 0%
Provision for Loan
Losses 1,050 1,025 2% 850 24%
---------------------------------------------------------------------
Net Interest Income
after Provision for
Loan Losses 8,298 8,497 -2% 8,506 -2%
Noninterest Income
Service Charges and
Fees 711 726 -2% 797 -11%
Income from the Sale
of Loans 51 90 -43% 211 -76%
Other Income 876 979 -11% 945 -7%
---------------------------------------------------------------------
Total Noninterest
Income 1,638 1,795 -9% 1,953 -16%
Noninterest Expense
Compensation and
Employee Benefits 3,798 3,990 -5% 4,132 -8%
Occupancy and Equipment 902 949 -5% 980 -8%
Office Supplies and
Printing 120 119 1% 179 -33%
Data Processing 153 161 -5% 167 -8%
Consulting and
Professional Fees 147 215 -32% 99 48%
Other 1,208 1,445 -16% 1,313 -8%
---------------------------------------------------------------------
Total Noninterest
Expense 6,328 6,879 -8% 6,870 -8%
Income Before Income
Taxes 3,608 3,413 6% 3,589 1%
Provision for Income
Taxes 1,187 1,076 10% 1,129 5%
---------------------------------------------------------------------
Net Income $ 2,421 $ 2,337 4% $ 2,460 -2%
=====================================================================
Earnings per Common
Share
---------------------------------------------------------------------
Net Income per Share,
Basic $ 0.25 $ 0.25 0% $ 0.26 -4%
=====================================================================
---------------------------------------------------------------------
Net Income per Share,
Diluted $ 0.25 $ 0.25 0% $ 0.26 -4%
=====================================================================
Average Number of Common
Shares Outstanding 9,464,000 9,432,000 9,363,000
Fully Diluted Average
Common and Equivalent
Shares Outstanding 9,519,000 9,514,000 9,486,000
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
-------------------------------------------------
($ in thousands, except per share data)
Six Months Ended One
June 30, Year
2008 2007 Change
---------------------------------------------------------------------
Interest Income
Loans $ 29,744 $ 29,614 0%
Taxable Investment Securities 206 269 -23%
Tax Exempt Securities 102 138 -26%
Other 8 99 -92%
---------------------------------------------------------------------
Total Interest Income 30,060 30,120 0%
Interest Expense
Deposits 9,837 10,803 -9%
Other Borrowings 663 170 290%
Junior Subordinated Debentures 689 822 -16%
---------------------------------------------------------------------
Total Interest Expense 11,189 11,795 -5%
Net Interest Income 18,871 18,325 3%
Provision for Loan Losses 2,075 1,400 48%
---------------------------------------------------------------------
Net Interest Income after
Provision for Loan Losses 16,796 16,925 -1%
Noninterest Income
Service Charges and Fees 1,437 1,614 -11%
Income from the Sale of Loans 141 366 -61%
Other Income 1,854 1,778 4%
---------------------------------------------------------------------
Total Noninterest Income 3,432 3,758 -9%
Noninterest Expense
Compensation and Employee Benefits 7,788 8,543 -9%
Occupancy and Equipment 1,851 1,936 -4%
Office Supplies and Printing 240 309 -22%
Data Processing 314 308 2%
Consulting and Professional Fees 362 270 34%
Other 2,653 2,428 9%
---------------------------------------------------------------------
Total Noninterest Expense 13,208 13,794 -4%
Income Before Income Taxes 7,020 6,889 2%
Provision for Income Taxes 2,262 2,161 5%
---------------------------------------------------------------------
Net Income $ 4,758 $ 4,728 1%
=====================================================================
Earnings per Common Share
---------------------------------------------------------------------
Net Income per Share, Basic $ 0.50 $ 0.50 0%
=====================================================================
---------------------------------------------------------------------
Net Income per Share, Diluted $ 0.50 $ 0.50 0%
=====================================================================
Average Number of Common Shares
Outstanding 9,445,000 9,403,000
Fully Diluted Average Common and
Equivalent Shares Outstanding 9,511,000 9,548,000
CONSOLIDATED BALANCE SHEETS (unaudited)
--------------------------------------
($ in thousands except per share data)
Three One
June 30, March 31, Month June 30, Year
2008 2008 Change 2007 Change
---------------------------------------------------------------------
Assets
Cash and Due from Banks $ 22,783 $ 21,377 7% $ 24,563 -7%
Interest-Bearing
Deposits with Banks 515 404 28% 319 61%
Fed Funds Sold 3,280 2,415 36% -- 100%
---------------------------------------------------------------------
Total Cash and Cash
Equivalents 26,578 24,196 10% 24,882 7%
Investment Securities
Available for Sale 11,310 12,494 -9% 17,019 -34%
FHLB Stock 2,880 1,984 45% 1,984 45%
Loans Held for Sale 562 453 24% 4,835 -88%
Loans Receivable 824,600 814,993 1% 764,438 8%
Less: Allowance for
Loan Losses (11,585) (11,404) 2% (10,526) 10%
---------------------------------------------------------------------
Loans, Net 813,015 803,589 1% 753,912 8%
Premises and Equipment,
Net 24,662 24,906 -1% 23,167 6%
Bank Owned Life Insurance 16,739 16,618 1% 16,177 3%
Other Real Estate Owned 1,198 1,890 -37% -- 100%
Other Assets 6,933 6,879 1% 10,080 -31%
---------------------------------------------------------------------
Total Assets $ 903,877 $ 893,009 1% $ 852,056 6%
=====================================================================
Liabilities and
Shareholders' Equity
Deposits:
Noninterest-Bearing
Demand $ 91,764 $ 98,003 -6% $ 107,543 -15%
NOW Accounts 126,307 140,568 -10% 152,722 -17%
Money Market 122,724 130,044 -6% 120,476 2%
Savings 41,406 42,682 -3% 45,200 -8%
Time Deposits 350,667 334,449 5% 303,645 15%
---------------------------------------------------------------------
Total Deposits 732,868 745,746 -2% 729,586 0%
FHLB Overnight Borrowings 34,000 11,500 196% 11,000 209%
Other Borrowed Funds 30,000 30,000 0% 10,000 200%
Junior Subordinated
Debentures 25,774 25,774 0% 25,774 0%
Other Liabilities 3,699 4,277 -14% 6,575 -44%
---------------------------------------------------------------------
Total Liabilities 826,341 817,297 1% 782,935 6%
Shareholders' Equity:
Common Stock (no par
value)
Authorized 13,679,757
Shares:
Issued and Outstanding
9,487,560 at 6/30/2008,
9,476,360 at 3/31/08
and 9,380,486 at
6/30/07 33,208 33,077 0% 32,117 3%
Retained Earnings 44,226 42,421 4% 37,108 19%
Other Comprehensive
Income (Loss) 102 214 -53% (104) 198%
---------------------------------------------------------------------
Total Shareholders'
Equity 77,536 75,712 2% 69,121 12%
---------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity $ 903,877 $ 893,009 1% $ 852,056 6%
=====================================================================
FINANCIAL STATISTICS (unaudited)
--------------------------------
($ in thousands, except per share data)
Quarter Quarter Quarter
Ended Ended Ended Six Months Ended
June 30, March 31, June 30, June 30,
2008 2008 2007 2008 2007
---------------------------------------------------------------------
Revenues (1) (2) $ 11,125 $ 11,470 $ 11,472 $ 22,595 $ 22,413
--------
Averages
--------
Total Assets $890,997 $880,282 $827,636 $885,639 $812,447
Loans and Loans
Held for Sale 823,052 811,128 747,645 817,090 735,756
Interest Earning
Assets 838,140 826,659 771,779 832,399 758,709
Deposits 736,991 742,678 717,400 739,835 712,130
Shareholders'
Equity $ 76,203 $ 74,264 $ 68,377 $ 75,234 $ 67,774
Financial Ratios
----------------
Return on Average
Assets, Annualized 1.09% 1.06% 1.19% 1.08% 1.17%
Return on Average
Equity, Annualized 12.74% 12.62% 14.43% 12.68% 14.07%
Average Equity to
Average Assets 8.55% 8.44% 8.26% 8.49% 8.34%
Efficiency
Ratio (2) 56.88% 59.98% 59.88% 58.46% 61.55%
Yield on Earning
Assets (2) 7.02% 7.61% 8.12% 7.31% 8.09%
Cost of Interest
Bearing Liabilities 2.90% 3.39% 3.75% 3.14% 3.72%
Net Interest Spread 4.12% 4.22% 4.37% 4.17% 4.37%
Net Interest
Margin (2) 4.54% 4.69% 4.95% 4.62% 4.96%
Cash Dividends
Per Share $ 0.065 0.060 0.060 0.125 0.110
June 30, March 31, June 30,
2008 2008 2007
---------------------------------------------------------------------
Period End
Book Value Per Share $ 8.17 $ 7.99 $ 7.37
Total Risk-Based
Capital Ratio 12.79%(3) 12.63% 12.43%
Tier 1 Risk-Based
Capital Ratio 11.54%(3) 11.38% 10.95%
---------------------------------------------------------------------
(1) Revenues is the fully tax-equivalent net interest income before
provision for loan losses plus noninterest income.
(2) Fully tax-equivalent is a non-GAAP performance measurement that
management believes provides investors with a more accurate
picture of the net interest margin, revenues and efficiency ratio
for comparative purposes. The calculation involves grossing up
interest income on tax-exempt loans and investments by an amount
that makes it comparable to taxable income.
(3) Capital ratios for the most recent period are an estimate pending
filing of the Company's regulatory reports.
ASSET QUALITY (unaudited)
-------------------------
($ in thousands, except per share data)
---------------------------------------------------------------------
Quarter Quarter Quarter
Ended Ended Ended Six Months Ended
June 30, March 31, June 30, June 30,
2008 2008 2007 2008 2007
---------------------------------------------------------------------
Allowance for Loan
Losses Activity:
Balance at Beginning
of Period $ 11,404 $ 11,126 $ 10,212 $ 11,126 $ 10,048
Indirect Loans:
Charge-offs (331) (363) (263) (693) (398)
Recoveries 117 171 62 288 117
---------------------------------------------------------------------
Indirect Net
Charge-offs (214) (192) (201) (405) (281)
Other Loans:
Charge-offs (773) (659) (442) (1,432) (901)
Recoveries 118 104 107 221 260
---------------------------------------------------------------------
Other Net
Charge-offs (655) (555) (335) (1,211) (641)
Total Net
Charge-offs (869) (747) (536) (1,616) (922)
Provision for loan
losses 1,050 1,025 850 2,075 1,400
---------------------------------------------------------------------
Balance at End of
Period $ 11,585 $ 11,404 $ 10,526 $ 11,585 $ 10,526
=====================================================================
Net Charge-offs
to Average Loans:
Indirect Loans Net
Charge-offs, to Avg
Indirect Loans,
Annualized (1) 0.77% 0.68% 0.77% 0.73% 0.54%
Other Loans Net
Charge-offs, to Avg
Other Loans,
Annualized (1) 0.37% 0.32% 0.21% 0.34% 0.20%
Net Charge-offs to
Average Total
Loans (1) 0.42% 0.37% 0.28% 0.40% 0.25%
June 30, March 31, June 30,
2008 2008 2007
---------------------------------------------------------------------
Nonperforming Assets
--------------------
Nonperforming Loans (2) $ 2,515 $ 1,373 $ 2,379
Other Real Estate Owned 1,198 1,890 --
---------------------------------------------------------------------
Total Nonperforming Assets $ 3,713 $ 3,263 $ 2,379
=====================================================================
Nonperforming Loans to Loans (1) 0.30% 0.17% 0.31%
Nonperforming Assets to Assets 0.41% 0.37% 0.28%
Allowance for Loan Losses to
Nonperforming Loans 460.64% 830.59% 442.46%
Allowance for Loan Losses to
Nonperforming Assets 312.01% 349.49% 442.46%
Allowance for Loan Losses to Loans 1.40% 1.40% 1.38%
Loan Composition
----------------
Commercial $ 97,572 $105,641 $ 99,132
Real Estate Mortgages
One-to-Four Family Residential 56,796 55,129 53,896
Commercial 322,943 311,188 262,855
Real Estate Construction
One-to-Four Family Residential 104,597 102,742 101,131
Commercial 45,359 41,335 47,855
Consumer
Indirect 109,167 112,351 112,991
Direct 85,603 84,052 84,157
Deferred Fees 2,563 2,555 2,421
---------------------------------------------------------------------
Total Loans $824,600 $814,993 $764,438
=====================================================================
(1) Excludes Loans Held for Sale.
(2) Nonperforming loans includes nonaccrual loans plus accruing loans
90 or more days past due.