OAK HARBOR, Wash., Jan. 23, 2008 (PRIME NEWSWIRE) -- Washington Banking Company (Nasdaq:WBCO), the holding company for Whidbey Island Bank, today reported that solid loan and deposit growth and strong asset quality contributed to profitability in the fourth quarter of 2007. Expenses associated with the previously announced merger agreement with Frontier Financial reduced profits by $513,000 pre-tax, or $0.04 per share after tax, for both the fourth quarter and full year. For the quarter ended December 31, 2007, net income was $1.9 million, or $0.19 per diluted share, compared to $1.8 million, or $0.19 per diluted share, in the fourth quarter a year ago. In 2007, net income was $9.4 million, or $0.99 per diluted share, approaching last year's level of $9.5 million, or $1.00 per share.
"Strong loan and deposit growth helped offset margin compression and merger related costs to deliver a profitable year," stated Michal Cann, President and CEO. "We continue to work towards the closing of our merger with Frontier Financial. In the meantime, we continue to operate as a profitable, independent bank for the benefit of our customers, employees and shareholders."
Fourth quarter 2007 financial highlights, compared to the like period last year, include:
* Revenues increased 3% to $11.4 million. * Total loans increased 12% to $806 million. * Total deposits grew 8% to $758 million, with noninterest-bearing deposits up 5% and money market balances up 31%. * Book value per share grew 10% to $7.78. * Nonperforming Assets (NPA) to total assets was just 0.49% compared to 0.50% last year.
At December 31, 2007, total assets increased 11% to $882 million compared to $795 million a year ago. Total loans grew 12% to $806 million from $720 million at December 31, 2006. Business, or C&I, loans grew 23%, commercial real estate loans increased 19%, and residential construction loans grew 6% while commercial construction shrank 4% over the past twelve months. "In addition to strong commercial loan activity we are generating good growth in consumer lending, both direct and indirect," said Cann.
"Asset quality remained strong during the quarter, with nonperforming assets up slightly from last year and higher than at the end of September," stated Rick Shields, Executive Vice President and CFO. "There are less than a dozen loans in the nonperforming category, and we believe we are well secured on these loans." Nonperforming assets totaled $4.3 million, or 0.49% of total assets at December 31, 2007, compared to $2.7 million, or 0.31% of total assets at September 30, 2007, and $4.0 million, or 0.50% of total assets a year ago. The allowance for loan losses increased to $11.1 million, or 395% of nonperforming loans and 1.38% of total loans as of December 31, 2007, as compared to $10.0 million, or 276% of nonperforming loans and 1.40% of total loans a year ago. Net charge-offs decreased to $429,000, or 0.21% of average loans in the fourth quarter and $1.9 million, or 0.25% of average loans for the full year in 2007.
"We continue to fund our loan growth with good deposit growth, supplemented with low cost funds from the Federal Home Loan Bank," Shields said. "Deposits grew 8% over the past year, with noninterest-bearing deposits up 5% and money market balances growing 31%. In light of the sharp cuts by the Federal Reserve in the second half of 2007, our net interest margin for the fourth quarter was down 23 basis points from the third quarter and off 28 basis points from the fourth quarter a year ago." On a fully tax-equivalent basis, the net interest margin was 4.71% in the fourth quarter of 2007, compared to 4.94% in the preceding quarter and 4.99% in the fourth quarter of 2006. For the full year, the net interest margin was 4.89% compared to 5.25% in 2006.
In the fourth quarter, the yield on earning assets was 7.92%, down 24 basis points on a sequential-quarter basis and 10 basis points from the fourth quarter of 2006. The cost of interest-bearing liabilities was 3.77% in the quarter, down 3 basis points sequentially and up 21 basis points relative to the fourth quarter of last year. Year to date, the yield on earning assets increased 21 basis points to 8.07% and the cost of interest-bearing liabilities increased 62 basis points to 3.75%.
Interest income increased 8% in the fourth quarter and 13% year to date, compared to the respective year-ago periods. Higher cost of funds, however, offset these increases, with interest expense up 17% over the fourth quarter of 2006, and 35% in 2007. Loan growth helped generate a 3% increase in net interest income, which totaled $9.5 million, up from $9.2 million in the fourth quarter of 2006. In 2007, net interest income was up 2% to $37.6 million, from $36.7 million in 2006.
In the 2007 fourth quarter, noninterest income increased 2% to $1.8 million from $1.7 million a year ago, reflecting increased income from Bank Owned Life Insurance. Noninterest income in 2007 increased 3% to $7.5 million from $7.3 million in 2006. Reflecting the costs associated with the merger, noninterest expense grew to $7.9 million in the fourth quarter of 2007 compared to $6.8 million in the prior quarter and $7.7 million in the fourth quarter a year ago. In 2007, operating expense increased 3% to $28.5 million from $27.5 million a year ago. The efficiency ratio was 68.61% in the fourth quarter of 2007 compared to 69.25% in the fourth quarter of 2006. For 2007, the efficiency ratio was 62.31% compared to 62.07% a year ago.
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 20 full-service branches located in five counties in Northwestern Washington.
www.wibank.com
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; (5) the ability to realize the efficiencies expected from investment in personnel and infrastructure; and (6) successful completion of our previously announced merger with Frontier Financial, the closing of which remains subject to customary closing conditions. 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
-------------------------------------
($ in thousands, Quarter Quarter Quarter
except per share Ended Ended Three Ended One
data) Dec. 31, Sept. 30, Month Dec. 31, Year
(unaudited) 2007 2007 Change 2006 Change
---------------------------------------------------------------------
Interest Income
Loans $ 15,812 $ 15,959 -1% $ 14,561 9%
Taxable Investment
Securities 135 143 -5% 126 8%
Tax Exempt
Securities 59 65 -9% 71 -17%
Other 21 54 -62% 17 20%
---------------------------------------------------------------------
Total Interest
Income 16,028 16,221 -1% 14,775 8%
Interest Expense
Deposits 6,017 5,849 3% 5,128 17%
Other Borrowings 62 147 -58% 124 -50%
Junior
Subordinated
Debentures 471 469 0% 342 38%
---------------------------------------------------------------------
Total Interest
Expense 6,550 6,465 1% 5,594 17%
Net Interest Income 9,478 9,756 -3% 9,181 3%
Provision for Loan
Losses 800 800 0% 625 28%
---------------------------------------------------------------------
Net Interest
Income after
Provision for
Loan Losses 8,678 8,956 -3% 8,556 1%
Noninterest Income
Service Charges
and Fees 772 749 3% 815 -5%
Income from the
Sale of Loans 109 192 -43% 210 -48%
Other Income 927 982 -6% 744 25%
---------------------------------------------------------------------
Total Noninterest
Income 1,808 1,923 -6% 1,769 2%
Noninterest Expense
Compensation and
Employee Benefits 4,373 4,166 5% 4,313 1%
Occupancy and
Equipment 938 932 1% 940 0%
Office Supplies
and Printing 103 146 -29% 169 -39%
Data Processing 170 185 -8% 139 22%
Merger Related
Expense 513 -- 100% -- 100%
Consulting and
Professional Fees 294 172 71% 298 -1%
Other 1,460 1,226 19% 1,839 -21%
---------------------------------------------------------------------
Total Noninterest
Expense 7,851 6,826 15% 7,698 2%
Income Before
Income Taxes 2,636 4,053 -35% 2,626 0%
Provision for
Income Taxes 785 1,232 -36% 816 -4%
---------------------------------------------------------------------
Net Income $ 1,851 $ 2,820 -34% $ 1,811 2%
=====================================================================
Earnings per Common
Share
Basic
Net Income per
Share $ 0.19 $ 0.30 -37% $ 0.20 -5%
Impact of Merger
Related Expense 0.04 -- 100% -- 100%
---------------------------------------------------------------------
Adjusted Net
Income per
Share (a) $ 0.23 $ 0.30 -23% $ 0.20 15%
=====================================================================
Diluted
Net Income per
Share $ 0.19 $ 0.30 -37% $ 0.19 0%
Impact of Merger
Related Expense 0.04 -- 100% -- 100%
---------------------------------------------------------------------
Adjusted Net
Income per
Share (a) $ 0.23 $ 0.30 -23% $ 0.19 21%
=====================================================================
Average Number of
Common Shares
Outstanding 9,365,000 9,323,000 9,256,000
Fully Diluted
Average Common and
Equivalent Shares
Outstanding 9,500,000 9,435,000 9,529,000
(a) Earnings information excluding the merger related expense
represent non-GAAP (Generally Accepted Accounting Principles)
financial measures. Management has presented these non-GAAP
financial measures in this earnings release because it believes
that they provide more useful and comparative information to
assess trends in the Company's core operations reflected in the
current quarter and year-to-date results. Where applicable, the
Company has also presented comparable earnings information using
GAAP financial measures.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
-------------------------------------------------
($ in thousands, except per share data) Twelve Months Ended One
December 31, Year
2007 2006 Change
---------------------------------------------------------------------
Interest Income
Loans $ 61,385 $ 54,240 13%
Taxable Investment Securities 547 457 20%
Tax Exempt Securities 263 310 -15%
Other 173 178 -3%
---------------------------------------------------------------------
Total Interest Income 62,368 55,185 13%
Interest Expense
Deposits 22,669 16,557 37%
Other Borrowings 379 547 -31%
Junior Subordinated Debentures 1,762 1,337 32%
---------------------------------------------------------------------
Total Interest Expense 24,810 18,441 35%
Net Interest Income 37,558 36,744 2%
Provision for Loan Losses 3,000 2,675 12%
---------------------------------------------------------------------
Net Interest Income after
Provision for Loan Losses 34,558 34,069 1%
Noninterest Income
Service Charges and Fees 3,135 3,296 -5%
Income from the Sale of Loans 667 709 -6%
Other Income 3,688 3,245 14%
---------------------------------------------------------------------
Total Noninterest Income 7,490 7,250 3%
Noninterest Expense
Compensation and Employee Benefits 17,082 16,807 2%
Occupancy and Equipment 3,805 3,596 6%
Office Supplies and Printing 558 640 -13%
Data Processing 663 479 38%
Merger Related Expense 513 -- 100%
Consulting and Professional Fees 735 769 -4%
Other 5,115 5,238 -2%
---------------------------------------------------------------------
Total Noninterest Expense 28,471 27,530 3%
Income Before Income Taxes 13,577 13,789 -2%
Provision for Income Taxes 4,179 4,298 -3%
---------------------------------------------------------------------
Net Income $ 9,398 $ 9,491 -1%
=====================================================================
Earnings per Common Share
Basic
Net Income per Share $ 1.00 $ 1.03 -3%
Impact of Merger Related Expense 0.04 -- 100%
---------------------------------------------------------------------
Adjusted Net Income per Share (a) $ 1.04 $ 1.03 1%
=====================================================================
Diluted
Net Income per Share $ 0.99 $ 1.00 -1%
Impact of Merger Related Expense 0.04 -- 100%
---------------------------------------------------------------------
Adjusted Net Income per Share (a) $ 1.03 $ 1.00 3%
=====================================================================
Average Number of Common
Shares Outstanding 9,365,000 9,217,000
Fully Diluted Average Common
and Equivalent Shares Outstanding 9,493,000 9,490,000
(a) Earnings information excluding merger related expenses
represent non-GAAP (Generally Accepted Accounting
Principles) financial measures. Management has presented
these non-GAAP financial measures in this earnings release
because it believes that they provide more useful and
comparative information to assess trends in the Company's
core operations reflected in the current quarter and
year-to-date results. Where applicable, the Company has also
presented comparable earnings information using GAAP financial
measures.
CONSOLIDATED BALANCE SHEETS (unaudited)
---------------------------------------
($ in thousands Three One
except per share data) Dec. 31, Sept. 30, Month Dec. 31, Year
2007 2007 Change 2006 Change
---------------------------------------------------------------------
Assets
Cash and Due from Banks $ 18,795 $ 20,984 -10% $ 18,984 -1%
Interest-Bearing Deposits
with Banks 257 278 -7% 761 -66%
Fed Funds Sold -- 4,600 -100% -- 0%
---------------------------------------------------------------------
Total Cash and
Cash Equivalents 19,052 25,862 -26% 19,744 -4%
Investment Securities
Available for Sale 13,832 16,908 -18% 16,790 -18%
FHLB Stock 1,984 1,984 0% 1,984 0%
Loans Held for Sale 2,347 1,504 56% 2,458 -5%
Loans Receivable 805,862 782,095 3% 719,580 12%
Less: Allowance
for Loan Losses (11,126) (10,755) 3% (10,048) 11%
---------------------------------------------------------------------
Loans, Net 794,736 771,341 3% 709,532 12%
Premises and Equipment, Net 25,138 24,586 2% 23,372 8%
Bank Owned Life Insurance 16,517 16,363 1% 10,930 51%
Other Real Estate Owned 1,440 1,332 8% 363 296%
Other Assets 7,244 7,533 -4% 9,370 -23%
---------------------------------------------------------------------
Total Assets $882,289 $867,413 2% $794,545 11%
=====================================================================
Liabilities and
Shareholders' Equity
Deposits:
Noninterest-Bearing Demand $101,539 $107,648 -6% $ 96,858 5%
NOW Accounts 140,145 140,854 -1% 152,087 -8%
Money Market 133,265 147,195 -9% 101,856 31%
Savings 41,888 44,335 -6% 50,036 -16%
Time Deposits 341,517 326,276 5% 302,930 13%
---------------------------------------------------------------------
Total Deposits 758,354 766,308 -1% 703,766 8%
FHLB Overnight Borrowings 20,500 -- 100% 3,075 567%
Junior Subordinated
Debentures 25,774 25,774 0% 15,007 72%
Other Liabilities 4,091 3,608 13% 6,304 -35%
---------------------------------------------------------------------
Total Liabilities 808,719 795,691 2% 728,152 11%
Shareholders' Equity:
Common Stock (no par value)
Authorized 13,679,757 Shares:
Issued and Outstanding
9,453,767 at 12/31/07
9,396,875 at 9/30/07 and
9,388,600 at 12/31/06 32,812 32,335 1% 33,016 -1%
Retained Earnings 40,652 39,365 3% 33,422 22%
Other Comprehensive
Income (Loss) 106 22 381% (45) 336%
---------------------------------------------------------------------
Total Shareholders' Equity 73,570 71,722 3% 66,393 11%
---------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity $882,289 $867,413 2% $794,545 11%
=====================================================================
---------------------------------------------------------------------
ASSET QUALITY (unaudited)
-------------------------
($ in thousands, except per share data)
Quarter Quarter Quarter
Ended Ended Ended Twelve Months Ended
Dec. 31, Sept. 30, Dec. 31, Dec. 31,
2007 2007 2006 2007 2006
---------------------------------------------------------------------
Allowance for Loan
Losses Activity:
Balance at
Beginning
of Period $ 10,755 $ 10,526 $ 9,985 $ 10,048 $ 8,810
Indirect
Loans:
Charge-offs (423) (200) (185) (1,020) (747)
Recoveries 144 83 106 343 415
---------------------------------------------------------------------
Indirect Net
Charge-offs (279) (117) (79) (677) (332)
Other Loans:
Charge-offs (288) (573) (542) (1,762) (1,640)
Recoveries 138 119 59 517 535
---------------------------------------------------------------------
Other Net
charge-offs (150) (454) (483) (1,245) (1,105)
Total Net
Charge-offs (429) (571) (562) (1,922) (1,437)
Provision for
loan losses 800 800 625 3,000 2,675
---------------------------------------------------------------------
Balance at End
of Period $ 11,126 $ 10,755 $ 10,048 $ 11,126 $ 10,048
=====================================================================
Net Charge-
offs to
Average Loans:
Indirect Loans
Net Charge-
Offs, to Avg
Indirect
Loans,
Annualized (a) 0.99% 0.42% 0.31% 0.61% 0.34%
Other Loans Net
Charge-Offs,
to Avg Other
Loans,
Annualized (a) 0.09% 0.27% 0.31% 0.19% 0.19%
Net Charge-offs
to Average
Total
Loans (a) 0.21% 0.29% 0.31% 0.25% 0.21%
Dec. 31, Sept. 30, Dec. 31,
2007 2007 2006
-------------------------------------------------------------------
Nonperforming Assets
--------------------
Nonperforming Loans (b) $ 2,839 $ 1,324 $ 3,638
Other Real Estate Owned 1,440 1,332 363
-------------------------------------------------------------------
Total Nonperforming Assets $ 4,279 $ 2,656 $ 4,001
===================================================================
Nonperforming Loans to Loans (a) 0.35% 0.17% 0.51%
Nonperforming Assets to Assets 0.49% 0.31% 0.50%
Allowance for Loan Losses to
Nonperforming Loans 395.41% 812.27% 276.19%
Allowance for Loan Losses to
Nonperforming Assets 262.34% 404.91% 251.13%
Allowance for Loan Losses to
Loans 1.38% 1.38% 1.40%
Loan Composition
----------------
Commercial 102,284 $103,004 $ 82,990
Real Estate Mortgages
One-to-Four Family Residential 56,636 53,543 54,509
Commercial 296,901 276,244 249,109
Real Estate Construction
One-to-Four Family Residential 101,912 97,287 96,107
Commercial 44,735 44,464 46,329
Consumer
Indirect 114,271 117,384 104,794
Direct 86,716 87,439 83,741
Deferred Fees 2,405 2,730 2,001
-------------------------------------------------------------------
Total Loans $805,862 $782,095 $719,580
===================================================================
(a) Excludes Loans Held for Sale.
(b) Nonperforming loans includes nonaccrual loans plus accruing
loans 90 or more days past due.
FINANCIAL STATISTICS (unaudited)
--------------------------------
($ in thousands, Quarter Quarter Quarter Twelve Months
except per Ended Ended Ended Ended
share data) Dec. 31, Sept. 30, Dec. 31, Dec. 31,
2007 2007 2006 2007 2006
---------------------------------------------------------------------
Revenues (a) (b) $11,443 $ 11,840 $11,115 $ 45,694 $ 44,352
---------
Averages
--------
Total Assets $867,357 $853,908 $794,908 $836,738 $756,777
Loans and
Loans Held
for Sale 791,546 773,145 722,089 759,242 682,939
Interest
Earning Assets 810,783 796,246 742,345 781,296 706,393
Deposits 759,676 743,842 699,090 732,107 662,933
Shareholders'
Equity $ 72,439 $ 69,908 $ 65,133 $ 69,488 $ 61,800
Financial Ratios
----------------
Return on
Average Assets,
Annualized 0.85% 1.32% 0.90% 1.12% 1.25%
Return on
Average Equity,
Annualized 10.14% 16.18% 11.03% 13.53% 15.36%
Average Equity
to Average
Assets 8.35% 8.19% 8.19% 8.30% 8.17%
Efficiency
Ratio (b) 68.61% 57.65% 69.25% 62.31% 62.07%
Yield on
Earning
Assets (b) 7.92% 8.16% 8.02% 8.07% 7.86%
Cost of
Interest
Bearing
Liabilities 3.77% 3.80% 3.56% 3.75% 3.13%
Net Interest
Spread 4.15% 4.36% 4.42% 4.32% 4.73%
Net Interest
Margin (b) 4.71% 4.94% 4.99% 4.89% 5.25%
Dec. 31, Sept. 30, Dec. 31,
2007 2007 2006
-----------------------------------------------
Period End
Book Value
Per Share $ 7.78 $ 7.63 $ 7.07
-----------------------------------------------
(a) Revenues is the fully tax-equivalent net interest income before
provision for loan losses plus noninterest income.
(b) 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.