OAK HARBOR, Wash., April 21, 2009 (GLOBE NEWSWIRE) -- Washington Banking Company (Nasdaq:WBCO), the holding company for Whidbey Island Bank, today reported that core deposit growth, efficient operating metrics and strong capital ratios contributed to first quarter 2009 profitability. Washington Banking earned $1.6 million before its first preferred stock dividend of $359,000. Income available to common shareholders was $1.2 million, or $0.13 per diluted common share, in the quarter ended March 31, 2009, compared to $1.7 million, or $0.18 per diluted common share, in the fourth quarter of 2008 and $2.3 million, or $0.25 per diluted common share, in the first quarter a year ago.
"We generated another solid quarterly profit while building capital, increasing reserves and paying our first dividend to the U.S. Treasury on its investment in our institution," said Jack Wagner, President and CEO. "While profits did not reach the record levels of a few years ago, we are delighted with our deposit growth, which contributed to a stable net interest margin, and our credit quality continues to be above average."
Conference Call Information and Annual Meeting
Management will host a conference call tomorrow, April 22, 2009, at 12:00 p.m. PDT (3:00 p.m. EDT) to discuss the quarterly results. The live call can be accessed by dialing (303) 275-2170 or on the web at www.wibank.com. The replay, which will be available for 90 days beginning shortly after the call concludes, can be heard at (303) 590-3000 with access code 11129004#, or on the web at www.wibank.com. Washington Banking will hold its annual shareholders meeting on April 23, 2009, at 3:00 p.m. PDT at the Whidbey Island Bank Operations Center in Oak Harbor. Shareholders and interested investors are welcome to attend.
First Quarter 2009 Financial Highlights (March 31, 2009 compared to March 31, 2008)
* Capital ratios remained well above the regulatory requirements for well-capitalized institutions, with Tier 1 Capital to risk-adjusted assets of 14.94% compared to 11.38%. Tangible common equity to assets stood at 9.03% compared to 8.48% a year earlier. * Produced relatively good asset quality in a very difficult economic environment with nonperforming assets to total assets at 1.12%, up from 0.37%. * Reserves grew to 1.61% of total loans, up 12 basis points during the quarter and 21 basis points year-over-year. * Total loans increased 2% to $829 million from $815 million. * Book value per common share increased 9% to $8.71 compared to $7.99. * Core deposits, consisting of transaction accounts and CDs under $100,000, grew 4% to $583 million and accounted for 76% of total deposits. * Efficiency improved with the efficiency ratio dropping 291 basis points to 57.07%.
Credit Quality
"While our asset quality remains above that of the national and regional peers, our credit metrics are following the national trend with nonperforming loans increasing in the quarter," said Joe Niemer, Chief Credit Officer. "With limited concentrations in the portfolio by borrower or loan type, the increase in nonperforming loans was primarily for construction projects in our market area and a few commercial real estate properties." Nonperforming assets totaled $10.3 million, or 1.12% of total assets at March 31, 2009, compared to $4.1 million, or 0.46% of total assets at December 31, 2008, and $3.3 million, or 0.37% of total assets, a year ago. Nonperforming assets consist of nonaccrual loans, accruing loans 90 days or more past due, restructured loans and other real estate owned (OREO).
The allowance for loan losses increased to $13.3 million, or 1.61% of total loans at quarter end, compared to $11.4 million or 1.40% at March 31, 2008, boosted by the $2.5 million provision for loan losses booked in the first quarter. "Over the past year, we have booked more than $6.5 million in provisions to augment reserves in anticipation of continued stress in the loan portfolio," said Niemer.
Net charge-offs in the first quarter were $1.4 million, or 68 basis points of average loans, compared to $747,000, or 37 basis points of average loans for the same period a year ago. Net charge-offs in the indirect auto lending portfolio were $445,000 in the first quarter, up from $192,000 a year ago, reflecting the continued rise in unemployment.
Capital
Washington Banking's capital ratios were very strong at the end of the first quarter, which included the $26.4 million raised from the sale of preferred shares to the U.S. Treasury. "While our capital levels were healthy before the capital investment by the government, we determined it was in the best interest of our shareholders, customers and employees to accept the Treasury capital infusion," Wagner noted. "We are using these funds to continue to lend to businesses and consumers in our market, and we paid our first preferred dividend this quarter. Our goal is to continue to prudently deploy these funds and to repay the Treasury when it makes sense to do so. Until we have better clarity on the economy, however, we plan to retain these funds."
Tier 1 capital ratio was 14.94% at March 31, 2009, compared with 11.98% from the linked quarter and 11.38% at March 31, 2008. The total risk-based ratio was 16.19% at March 31, 2009, compared with 13.23% from the previous quarter and 12.63% at March 31, 2008. All regulatory ratios continue to exceed the "well-capitalized" requirements established by regulators. Washington Banking's tangible common equity at quarter end was equal to 9.03% of total assets.
"Thursday, the board of directors will review our dividend payment on common shares, and I expect the dividend rate will remain unchanged this quarter," said Wagner. "Our directors review dividend payments each quarter in light of earnings, the regional economic outlook and capital requirements. With the issuance of the preferred shares last quarter, the board will also determine the prudence of conserving capital in order to redeem preferred shareholders on an accelerated schedule. This consideration may alter the amount of dividends available to common shareholders for a period of time. Washington Banking has paid a quarterly cash dividend since its 1998 initial public offering, and any alteration of our dividend policy will be carefully weighed."
Balance Sheet
At March 31, 2009, total assets increased 3% to $919 million compared to $893 million a year ago. Total net loans also grew 2% to $816 million from $804 million a year ago, and up 1% from $811 million at the end of 2008.
Total deposits were up 2% in the quarter and year-over-year at $763 million at March 31, 2009 compared to $747 million at the end of 2008 and $746 million a year ago. Year-over year, money market accounts increased 9% and account for 19% of total deposits. Time deposits continue to be evenly balanced between certificates under $100,000 and certificates over $100,000 with a very small component of brokered deposits. "We are generating new accounts at a higher pace than any time in the past few years, which we believe is a result of many of our customers returning to Whidbey Island Bank, now that we have demonstrated our ability and resolve to remain independent," stated Rick Shields, Chief Financial Officer.
Retained earnings increased 12% to $47.4 million, bringing common shareholder equity to $8.71 per share at March 31, 2009, compared to $7.99 per share a year ago. Following the $26.38 million capital infusion from the preferred shares issued to the U.S. Treasury, total shareholders' equity was $107.7 million.
Operating Results
Bolstered by loan sales and investment income, revenue was $11.5 million in the first quarter of 2009, compared to $11.2 million for the fourth quarter and $11.5 million a year ago. Net interest income, before the provision for loan losses, decreased 2% to $9.3 million in the first quarter of 2009 from $9.5 million in both the previous and year ago quarters. Noninterest income rose to $2.0 million in the first quarter, up 27% from the prior quarter at $1.6 million and up 12% from $1.8 million a year ago. "With the low mortgage interest rates, we are seeing an increased demand for home loans," Shields noted.
Net interest margin was 4.51% in the first quarter of 2008 compared to 4.50% in the fourth quarter of 2008 and 4.71% in the same quarter a year ago.
Noninterest expense for the first quarter declined to $6.5 million from $6.7 million in the preceding quarter and down 5% from $6.9 million in the first quarter last year. "We have always emphasized watching overhead costs closely and it is even more important in this economic climate," Wagner concluded.
The efficiency ratio during the first quarter of 2009 improved to 57.07%, compared to 60.21% reported in the linked quarter, and 59.98% a year ago. Return on average assets and return on average common equity were 0.71% and 6.10%, respectively, for the first quarter of 2009 and 1.07% and 12.66%, respectively, for the first quarter of 2008.
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 18 full-service branches located in five counties in Northwestern Washington.
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
March 31, Dec. 31, Month March 31, Year
2009 2008 Change 2008 Change
----------------------------------------------------------------------
Interest Income
Loans $ 13,000 $ 13,968 -7% $ 15,360 -15%
Taxable Investment
Securities 136 103 33% 110 24%
Tax Exempt Securities 67 52 30% 51 31%
Other 2 22 -91% 5 -60%
----------------------------------------------------------------------
Total Interest Income 13,205 14,145 -7% 15,526 -15%
Interest Expense
Deposits 3,519 4,195 -16% 5,295 -34%
Other Borrowings 133 199 -33% 304 -56%
Junior Subordinated
Debentures 224 279 -20% 405 -45%
----------------------------------------------------------------------
Total Interest Expense 3,876 4,673 -17% 6,004 -35%
Net Interest Income 9,329 9,472 -2% 9,522 -2%
Provision for Loan
Losses 2,450 1,900 29% 1,025 139%
----------------------------------------------------------------------
Net Interest Income
after Provision for
Loan Losses 6,879 7,572 -9% 8,497 -19%
Noninterest Income
Service Charges and Fees 858 841 2% 726 18%
Electronic Banking
Income 310 316 -2% 314 -1%
Investment Products 170 78 118% 129 32%
Bank Owned Life
Insurance Income 94 73 29% 101 -7%
Income from the Sale of
Loans 270 46 491% 90 200%
SBA Premium Income 18 20 -12% 144 -88%
Other Income 283 205 38% 291 -3%
----------------------------------------------------------------------
Total Noninterest
Income 2,003 1,579 27% 1,795 12%
Noninterest Expense
Compensation and
Employee Benefits 3,424 3,644 -6% 3,990 -14%
Occupancy and Equipment 1,033 966 7% 949 9%
Office Supplies and
Printing 171 170 0% 119 44%
Data Processing 131 156 -16% 161 -19%
Merger Related Expense -- 18 -100% 81 -100%
Employee Separation
Expense -- 58 -100% -- 0%
Consulting and
Professional Fees 278 325 -14% 215 29%
Other 1,509 1,398 8% 1,364 11%
----------------------------------------------------------------------
Total Noninterest
Expense 6,546 6,735 -3% 6,879 -5%
Income Before Income
Taxes 2,336 2,416 -3% 3,413 -32%
Provision for Income
Taxes 762 746 2% 1,076 -29%
----------------------------------------------------------------------
Net Income Before
Preferred Dividends 1,574 1,670 -6% 2,337 -33%
Preferred Dividends 359 -- 100% -- 100%
----------------------------------------------------------------------
Net Income Available to
Common Shareholders $ 1,215 $ 1,670 -27% $ 2,337 -48%
======================================================================
Earnings per Common Share
----------------------------------------------------------------------
Net Income per Common
Share, Basic $ 0.13 $ 0.18 -28% $ 0.25 -48%
======================================================================
----------------------------------------------------------------------
Net Income per Common
Share, Diluted $ 0.13 $ 0.18 -28% $ 0.25 -48%
======================================================================
Average Number of Common
Shares Outstanding 9,507,000 9,486,000 9,432,000
Fully Diluted Average
Common and Equivalent
Shares Outstanding 9,527,000 9,513,000 9,514,000
CONSOLIDATED BALANCE SHEETS (unaudited)
---------------------------------------
($ in thousands, except per share data)
Three One
March 31, Dec. 31, Month March 31, Year
2009 2008 Change 2008 Change
----------------------------------------------------------------------
Assets
Cash and Due from Banks $ 17,019 $ 13,609 25% $ 21,377 -20%
Interest-Bearing Deposits
with Banks 275 381 -28% 404 -32%
Fed Funds Sold 7,675 -- 100% 2,415 218%
----------------------------------------------------------------------
Total Cash and Cash
Equivalents 24,968 13,990 78% 24,196 3%
Investment Securities
Available for Sale 20,481 17,798 15% 12,494 64%
FHLB Stock 2,430 2,430 0% 1,984 22%
Loans Held for Sale 2,665 2,896 -8% 453 488%
Loans Receivable 829,142 823,068 1% 814,993 2%
Less: Allowance for Loan
Losses (13,323) (12,250) 9% (11,404) 17%
----------------------------------------------------------------------
Loans, Net 815,819 810,818 1% 803,589 2%
Premises and Equipment, Net 25,365 24,971 2% 24,906 2%
Bank Owned Life Insurance 16,916 16,822 1% 16,618 2%
Other Real Estate Owned 1,799 2,226 -19% 1,890 -5%
Other Assets 8,227 7,680 7% 6,879 20%
----------------------------------------------------------------------
Total Assets $918,671 $899,631 2% $893,009 3%
======================================================================
Liabilities and
Shareholders' Equity
Deposits:
Noninterest-Bearing Demand $ 98,563 $ 91,482 8% $ 98,003 1%
NOW Accounts 124,736 119,115 5% 140,568 -11%
Money Market 142,176 143,855 -1% 130,044 9%
Savings 43,024 41,161 5% 42,682 1%
Time Deposits 354,490 351,546 1% 334,449 6%
----------------------------------------------------------------------
Total Deposits 762,989 747,159 2% 745,746 2%
FHLB Overnight Borrowings -- 11,640 -100% 11,500 -100%
Other Borrowed Funds 20,000 30,000 -33% 30,000 -33%
Junior Subordinated
Debentures 25,774 25,774 0% 25,774 0%
Other Liabilities 2,187 4,498 -55% 4,277 -53%
----------------------------------------------------------------------
Total Liabilities 810,950 819,071 -1% 817,297 -1%
Shareholders' Equity:
Preferred Stock (no par
value) 26,380 shares
authorized Series A
(Liquidation preference
$1,000 per share); 26,380
issued and outstanding at
3/31/09; none in 2008 24,744 -- 100% -- 100%
Common Stock (no par value)
13,679,757 shares
authorized 9,529,322 issued
and outstanding at 3/31/09;
9,510,007 at 12/31/08; and
9,476,360 at 3/31/08 35,468 33,701 5% 33,077 7%
Retained Earnings 47,247 46,567 2% 42,421 12%
Other Comprehensive Income 263 292 -10% 214 23%
----------------------------------------------------------------------
Total Shareholders' Equity 107,721 80,560 34% 75,712 42%
----------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity $918,671 $899,631 2% $893,009 3%
======================================================================
ASSET QUALITY (unaudited)
-------------------------
($ in thousands, except per share data)
Quarter Quarter Quarter
Ended Ended Ended
March 31, Dec. 31, March 31,
2009 2008 2008
----------------------------------------------------------------------
Allowance for Loan Losses Activity:
Balance at Beginning of Period $ 12,250 $ 11,488 $ 11,126
Indirect Loans:
Charge-offs (649) (691) (363)
Recoveries 204 184 171
----------------------------------------------------------------------
Indirect Net Charge-offs (445) (507) (192)
Other Loans:
Charge-offs (1,132) (1,151) (659)
Recoveries 200 520 104
----------------------------------------------------------------------
Other Net Charge-offs (932) (631) (555)
Total Net Charge-offs (1,377) (1,138) (747)
Provision for Loan Losses 2,450 1,900 1,025
----------------------------------------------------------------------
Balance at End of Period $ 13,323 $ 12,250 $ 11,404
======================================================================
Net Charge-offs to Average Loans:
Indirect Loans Net Charge-Offs, to Avg
Indirect Loans, Annualized(1) 1.68% 1.82% 0.68%
Other Loans Net Charge-Offs, to Avg
Other Loans, Annualized(1) 0.53% 0.35% 0.32%
Net Charge-offs to Average Total
Loans(1) 0.68% 0.55% 0.37%
March 31, Dec. 31, March 31,
2009 2008 2008
----------------------------------------------------------------------
Nonperforming Assets
--------------------
Nonperforming Loans(2) $ 8,474 $ 1,918 $ 1,373
Other Real Estate Owned 1,799 2,226 1,890
----------------------------------------------------------------------
Total Nonperforming Assets $ 10,273 $ 4,144 $ 3,263
======================================================================
Nonperforming Loans to Loans(1) 1.02% 0.23% 0.17%
Nonperforming Assets to Assets 1.12% 0.46% 0.37%
Allowance for Loan Losses to
Nonperforming Loans 157.22% 638.67% 830.59%
Allowance for Loan Losses to Loans 1.61% 1.49% 1.40%
Loan Composition
----------------
Commercial $ 98,503 $ 94,522 $105,641
Real Estate Mortgages
One-to-Four Family Residential 61,946 58,099 55,129
Commercial 334,236 327,704 311,188
Real Estate Construction
One-to-Four Family Residential 93,587 101,022 102,742
Commercial 44,206 44,401 41,335
Consumer
Indirect 106,139 108,266 112,351
Direct 87,877 86,364 84,052
Deferred Fees 2,648 2,690 2,555
----------------------------------------------------------------------
Total Loans $829,142 $823,068 $814,993
======================================================================
Time Deposit Composition
------------------------
Time Deposits $100 and greater 162,698 164,724 187,504
All Other Time Deposits 172,188 164,095 136,945
Brokered Deposits
CDARS (Certificate of Deposit Account
Registry Service) 12,104 12,727 --
Non-CDARS 7,500 10,000 10,000
----------------------------------------------------------------------
Total Time Deposits $354,490 $351,546 $334,449
======================================================================
(1) Excludes Loans Held for Sale.
(2) Nonperforming loans includes nonaccrual loans plus accruing loans
90 or more days past due.
FINANCIAL STATISTICS (unaudited)
--------------------------------
($ in thousands, except per share data)
Quarter Quarter Quarter
Ended Ended Ended
March 31, Dec. 31, March 31,
2009 2008 2008
----------------------------------------------------------------------
Revenues(1)(2) $ 11,473 $ 11,184 $ 11,470
--------
Averages
--------
Total Assets $904,437 $901,487 $880,282
Loans and Loans Held for Sale 825,694 823,217 811,128
Interest Earning Assets 851,100 849,210 826,659
Deposits 750,807 766,362 742,678
Common Shareholders' Equity $ 80,897 $ 79,402 $ 74,264
Financial Ratios
----------------
Return on Average Assets, Annualized 0.71% 0.74% 1.07%
Return on Average Common Equity,
Annualized(3) 6.10% 8.37% 12.66%
Efficiency Ratio(2) 57.07% 60.21% 59.98%
Yield on Earning Assets(2) 6.36% 6.67% 7.63%
Cost of Interest Bearing Liabilities 2.23% 2.54% 3.40%
Net Interest Spread 4.13% 4.13% 4.23%
Net Interest Margin(2) 4.51% 4.50% 4.71%
Book Value Per Common Share $ 8.71 $ 8.47 $ 7.99
Cash Dividends Per Common Share $ 0.065 $ 0.065 $ 0.06
Regulatory
Requirements
----------------
Adequately- Well-
March 31, Dec. 31 March 31, capital- capital-
2009 2008 2008 ized ized
-------------------------------------------------- -------------------
Period End
Total Risk-Based
Capital Ratio -
Consolidated 16.19%(4) 13.23% 12.63% 8.00% N/A
Tier 1 Risk-Based
Capital Ratio -
Consolidated 14.94%(4) 11.98% 11.38% 4.00% N/A
Tier 1 Leverage Ratio
- Consolidated 14.66%(4) 11.68% 11.43% 4.00% N/A
--------------------------------------------------
Total Risk-Based
Capital Ratio -
Whidbey Island Bank 16.01%(4) 13.10% 12.29% 8.00% 10.00%
Tier 1 Risk-Based
Capital Ratio -
Whidbey Island Bank 14.76%(4) 11.85% 11.04% 4.00% 6.00%
Tier 1 Leverage Ratio
- Whidbey Island Bank 14.48%(4) 11.54% 11.08% 4.00% 5.00%
--------------------------------------------------
(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) Return on average common equity is adjusted for preferred stock
dividends.
(4) Capital ratios for the most recent period are an estimate pending
filing of the Company's regulatory reports.