OAK HARBOR, Wash., Jan. 28, 2009 (GLOBE NEWSWIRE) -- Washington Banking Company (Nasdaq:WBCO), the holding company for Whidbey Island Bank, today reported that its well-diversified loan portfolio and strong capital ratios contributed to a profitable quarter. Washington Banking earned $1.7 million, or $0.18 per diluted share, in the quarter ended December 31, 2008, compared to $1.9 million, or $0.19 per diluted share, in the fourth quarter a year ago. In 2008, net income was $8.3 million, or $0.88 per diluted share, compared to $9.4 million, or $0.99 per diluted share in 2007.
"Our core strengths and consistent operating practices are reflected in our solid balance sheet, strong capital position and diversified loan portfolio," said Jack Wagner, President and CEO. "We achieved these respectable results in spite of the continued deterioration in the overall economy."
Conference Call Information
Management will host a conference call tomorrow, January 29, 2009, at 10:00 AM PST (1:00 noon EST) to discuss the quarterly results. The live call can be accessed by dialing (303) 262-2053 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 11124816#, or on the web at www.wibank.com.
Fourth Quarter 2008 Financial Highlights (December 31, 2008, compared to December 31, 2007)
* Capital ratios remained well above the regulatory requirements for well-capitalized institutions, with Tier 1 Capital to risk-adjusted assets of 11.98% compared to 11.14%. * Continued strong asset quality with nonperforming assets to total assets at 0.46% from 0.48%. * Total net loans increased 2% to $811 million from $795 million. * Book value per share increased 9% to $8.47 compared to $7.78. * Continued payment of quarterly cash dividends equivalent to an annual dividend of $0.26 per common share, with a yield of 3.2% at recent share prices. * Core deposits, consisting of transaction accounts and CDs under $100,000, totaled $561.1 million and accounted for 75% of total deposits.
Credit Quality
"Considering the difficult market conditions, our asset quality has remained above average," said Joe Niemer, Chief Credit Officer. "Like other banks in the area, we are seeing stress in our construction portfolio and higher credit costs in our indirect loan program, although at manageable levels." Nonperforming assets totaled $4.1 million, or 0.46% of total assets at December 31, 2008, compared to $4.6 million, or 0.50% of total assets at September 30, 2008, and $4.3 million, or 0.48% of total assets, a year ago. "Our NPAs continue to be limited to a handful of relationships and our loan portfolio remains well diversified by borrowers, loan type and geography within our operating area in Northwest Washington." 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 $12.3 million, or 1.49% of total loans at quarter end, compared to $11.1 million or 1.38% at December 31, 2007, in part, reflecting growth in the loan portfolio and deteriorating market conditions.
Net charge-offs in the fourth quarter were $1.1 million, or 55 basis points of average loans, compared to $429,000, or 21 basis points of average loans for the same period a year ago. In 2008, net charge-offs were $3.9 million, or 48 basis points, compared to $1.9 million, or 25 basis points for 2007. Net charge-offs in the indirect lending portfolio were $507,000 in the fourth quarter and $1.4 million for the year, reflecting the softening in the local economy. "Our indirect consumer loan program provides funding for new and used vehicles to creditworthy customers," Niemer noted. "In 2008, the average FICO credit score was 709 in this portfolio and we continue to maintain strong underwriting criteria." The indirect consumer portfolio was $108.3 million compared to $110.2 million at September 30, 2008, and $114.3 million a year ago, reflecting the reduced demand for auto loans."
Capital
Washington Banking's Tier 1 capital ratio was 11.98% at December 31, 2008, compared with 11.81% from the linked quarter and 11.14% at December 31, 2007. The total risk-based ratio was 13.23% at December 31, 2008, compared with 13.06% from the previous quarter and 12.45% at December 31, 2007. All regulatory ratios continue to exceed the "well-capitalized" requirements established by regulators. Washington Banking's tangible equity at year end was equal to 8.9% of total assets.
Last week, the company announced a quarterly cash dividend of $0.065 per common share payable on February 19 to shareholders of record on February 3, 2009. "As a result of the solid performance in 2008, which reflects our strong capital position, we are able to continue to reward our shareholders with quarterly cash dividends," Wagner noted. Washington Banking has paid a quarterly cash dividend since its 1998 initial public offering.
Balance Sheet
"We continue to maintain strong capital, adequate liquidity and a well-managed loan portfolio," stated Wagner. "Due to the strength of our organization and balance sheet, we were selected to participate in the Treasury's Capital Purchase Program, and received $26.38 million in funding this month. We plan to continue to lend to creditworthy customers in our markets for business and consumer needs."
At December 31, 2008, total assets increased 2% to $900 million compared to $882 million a year ago. Total net loans also grew 2% to $811 million from $795 million a year ago, and remained relatively flat from $812 million at the end of the third quarter 2008.
Total deposits were down 1% to $747 million at December 31, 2008 compared to $758 million a year ago and down 5% from $784 million at September 30, 2008. Money market accounts decreased 9% from the end of the linked quarter but grew 8% year-over-year. Time deposits were evenly balanced between certificates under $100,000 and certificates over $100,000 with a very small component of brokered deposits. "We initiated service to our customers last year through the Certificate of Deposit Account Registry Service (CDARS), which allows us to help customers maximize FDIC insurance coverage," stated Rick Shields, Chief Financial Officer.
Shareholder equity increased 10% to $80.6 million, or $8.47 per share, at December 31, 2008, compared to $73.6 million, or $7.78 per share, a year ago. Following the $26.38 million capital infusion from the preferred shares issued to the U.S. Treasury the pro forma total shareholders' equity was $106.9 million.
Operating Results
Revenue, consisting of net interest income and noninterest income, was $11.2 million in the fourth quarter of 2008, compared to $11.6 million for the third quarter and $11.4 million in the fourth quarter of 2007. For the 2008 full year, revenue was down slightly at $45.2 million compared to $45.7 million in 2007. Net interest income, before the provision for loan losses, decreased 1% to $9.5 million in the fourth quarter of 2008 from $9.6 million in the previous quarter and was flat compared to $9.5 million in the fourth quarter a year ago. For the year, net interest income, before provision for loan losses, increased modestly to $37.9 million in 2008 compared to $37.6 million for 2007.
Net interest margin was 4.50% in the fourth quarter of 2008, down 12 basis points from the linked quarter of 4.62%, and down 21 basis points from 4.71% in the same quarter a year ago. For the full year, Washington Banking's net interest margin stood at 4.60% compared to 4.89% in 2007.
Noninterest expense for the fourth quarter dropped 14% to $6.7 million compared with $7.9 million in the same quarter of 2007. Noninterest expense for the year fell 3% to $27.5 million compared to $28.5 million for 2007. Included in the 2008 operating expenses were $1.1 million in costs associated with the terminated merger agreement and employee separation expense, which included the retirement of the former CEO. In 2007, costs associated with the merger were $513,000.
The efficiency ratio during the fourth quarter of 2008 was 60.22%, compared to 65.26% reported in the linked quarter, and 68.61% at December 2007. For the year 2008, the efficiency ratio was 60.90% compared to 62.31% for 2007. Return on average assets and return on average equity were 0.74% and 8.37%, respectively, for the fourth quarter of 2008 and 0.94% and 10.82%, respectively, for the reporting year.
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.
This press release contains statements that the Company believes are "forward-looking statements." These statements relate to the Company's financial condition, results of operations, plans, objectives, future performance or business. The words "anticipate," "expect," "will," "believe," and words of similar meaning are intended, in part, to help identify forward-looking statements. You should not place undue reliance on these statements, as they are subject to risks and uncertainties. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. These statements speak only as of the date they are made and based only on information then actually known to the Company. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors which could cause actual results to differ materially include, but are not limited to: adverse developments in the capital markets; legislative or regulatory requirements affecting financial institutions; restructuring of the regulation of the financial services industry; changes in the interest rate environment; adverse changes in regional and national economic conditions and other risks detailed in the Company's reports filed with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2007 and Form 10-Q for quarters ended March 31, 2008 and September 30, 2008. Accordingly, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
-------------------------------------------------
($ in thousands, except per share data)
Quarter Quarter Quarter
Ended Ended Three Ended One
Dec. 31, Sept. 30, Month Dec. 31, Year
2008 2008 Change 2007 Change
---------------------------------------------------------------------
Interest Income
Loans $ 13,968 $ 14,432 -3% $ 15,813 -12%
Taxable
Investment
Securities 103 88 16% 135 -24%
Tax Exempt
Securities 52 51 1% 59 -13%
Other 22 6 287% 21 9%
---------------------------------------------------------------------
Total Interest
Income 14,145 14,577 -3% 16,028 -12%
Interest Expense
Deposits 4,195 4,411 -5% 6,017 -30%
Other Borrowings 199 276 -28% 62 222%
Junior
Subordinated
Debentures 279 286 -2% 471 -41%
---------------------------------------------------------------------
Total Interest
Expense 4,673 4,973 -6% 6,550 -29%
Net Interest
Income 9,472 9,604 -1% 9,478 0%
Provision for
Loan Losses 1,900 1,075 77% 800 138%
---------------------------------------------------------------------
Net Interest
Income after
Provision for
Loan Losses 7,572 8,529 -11% 8,678 -13%
Noninterest Income
Service Charges
and Fees 841 708 19% 772 9%
Electronic
Banking Income 316 356 -11% 329 -4%
Investment
Products 78 93 -16% 69 14%
Bank Owned Life
Insurance Income 73 11 561% 153 -53%
Income from the
Sale of Loans 46 36 27% 109 -58%
SBA Premium
Income 20 50 -59% 156 -87%
Other Income 205 621 -67% 221 -7%
---------------------------------------------------------------------
Total
Noninterest
Income 1,579 1,875 -16% 1,809 -13%
Noninterest
Expense
Compensation and
Employee
Benefits 3,644 3,940 -8% 4,373 -17%
Occupancy and
Equipment 966 944 2% 938 3%
Office Supplies
and Printing 170 162 5% 103 65%
Data Processing 156 155 0% 170 -8%
Consulting and
Professional
Fees 325 107 204% 294 11%
Employee
Separation
Expense 58 816 -93% -- 100%
Merger Related
Expenses 18 64 -72% 513 -97%
Other 1,398 1,390 1% 1,460 -4%
---------------------------------------------------------------------
Total
Noninterest
Expense 6,735 7,578 -11% 7,851 -14%
Income Before
Income Taxes 2,416 2,825 -14% 2,636 -8%
Provision for
Income Taxes 746 921 -19% 785 -5%
---------------------------------------------------------------------
Net Income $ 1,670 $ 1,904 -12% $ 1,851 -10%
=====================================================================
Earnings per
Common Share
---------------------------------------------------------------------
Net Income per
Share, Basic $ 0.18 $ 0.20 -10% $ 0.19 -5%
=====================================================================
---------------------------------------------------------------------
Net Income per
Share, Diluted $ 0.18 $ 0.20 -10% $ 0.19 -5%
=====================================================================
Average Number of
Common Shares
Outstanding 9,486,000 9,473,000 9,365,000
Fully Diluted
Average Common
and Equivalent
Shares
Outstanding 9,513,000 9,518,000 9,500,000
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
-------------------------------------------------
($ in thousands, except per share data)
Twelve Months Ended One
December 31, Year
2008 2007 Change
---------------------------------------------------------------------
Interest Income
Loans $ 58,144 $ 61,385 -5%
Taxable Investment Securities 397 547 -27%
Tax Exempt Securities 205 263 -22%
Other 36 173 -79%
---------------------------------------------------------------------
Total Interest Income 58,782 62,368 -6%
Interest Expense
Deposits 18,442 22,669 -19%
Other Borrowings 1,138 379 201%
Junior Subordinated Debentures 1,254 1,762 -29%
---------------------------------------------------------------------
Total Interest Expense 20,834 24,810 -16%
Net Interest Income 37,948 37,558 1%
Provision for Loan Losses 5,050 3,000 68%
---------------------------------------------------------------------
Net Interest Income after Provision for
Loan Losses 32,898 34,558 -5%
Noninterest Income
Service Charges and Fees 2,987 3,135 -5%
Electronic Banking Income 1,333 1,252 6%
Investment Products 338 364 -7%
Bank Owned Life Insurance Income 306 587 -48%
SBA Premium Income 259 490 -47%
Income from the Sale of Loans 223 667 -67%
Other Income 1,440 995 45%
---------------------------------------------------------------------
Total Noninterest Income 6,886 7,490 -8%
Noninterest Expense
Compensation and Employee Benefits 15,373 17,082 -10%
Occupancy and Equipment 3,762 3,805 -1%
Office Supplies and Printing 572 558 3%
Data Processing 625 663 -6%
Consulting and Professional Fees 794 735 8%
Employee Separation Expense 874 -- 100%
Merger Related Expenses 266 513 -48%
Other 5,257 5,115 3%
---------------------------------------------------------------------
Total Noninterest Expense 27,523 28,471 -3%
Income Before Income Taxes 12,261 13,577 -10%
Provision for Income Taxes 3,929 4,179 -6%
---------------------------------------------------------------------
Net Income $ 8,332 $ 9,398 -11%
=====================================================================
Earnings per Common Share
---------------------------------------------------------------------
Net Income per Share, Basic $ 0.88 $ 1.00 -12%
=====================================================================
---------------------------------------------------------------------
Net Income per Share, Diluted $ 0.88 $ 0.99 -11%
=====================================================================
Average Number of Common Shares
Outstanding 9,465,000 9,365,000
Fully Diluted Average Common and
Equivalent Shares Outstanding 9,513,000 9,493,000
CONSOLIDATED BALANCE SHEETS (unaudited)
---------------------------------------
($ in thousands except per share data)
Three One
Dec. 31, Sept. 30, Month Dec. 31, Year
2008 2008 Change 2007 Change
----------------------------------------------------------------------
Assets
Cash and Due from Banks $ 13,609 $ 19,202 -29% $ 18,795 -28%
Interest-Bearing Deposits
with Banks 381 451 -16% 257 48%
Fed Funds Sold -- 17,410 -100% -- 0%
------------------------------------- --------------------------------
Total Cash and Cash
Equivalents 13,990 37,063 -62% 19,052 -27%
Investment Securities
Available for Sale 17,798 10,781 65% 13,832 29%
FHLB Stock 2,430 2,880 -16% 1,984 22%
Loans Held for Sale 2,896 995 191% 2,347 23%
Loans Receivable 823,068 823,089 0% 805,862 2%
Less: Allowance for Loan
Losses (12,250) (11,488) 7% (11,126) 10%
----------------------------------------------------------------------
Loans, Net 810,818 811,601 0% 794,736 2%
Premises and Equipment, Net 24,971 24,476 2% 25,138 -1%
Bank Owned Life Insurance 16,822 16,750 0% 16,517 2%
Other Real Estate Owned 2,226 669 233% 1,440 55%
Other Assets 7,680 7,247 6% 7,243 6%
----------------------------------------------------------------------
Total Assets $899,631 $912,462 -1% $882,289 2%
======================================================================
Liabilities and
Shareholders' Equity
Deposits:
Noninterest-Bearing Demand $ 91,482 $ 90,183 1% $101,539 -10%
NOW Accounts 119,115 121,503 -2% 140,145 -15%
Money Market 143,855 157,614 -9% 133,265 8%
Savings 41,161 41,645 -1% 41,888 -2%
Time Deposits 351,546 372,796 -6% 341,517 3%
----------------------------------------------------------------------
Total Deposits 747,159 783,741 -5% 758,354 -1%
FHLB Overnight Borrowings 11,640 -- 100% 20,500 -43%
Other Borrowed Funds 30,000 20,000 50% -- 100%
Junior Subordinated
Debentures 25,774 25,774 0% 25,774 0%
Other Liabilities 4,498 3,964 13% 4,091 10%
----------------------------------------------------------------------
Total Liabilities 819,071 833,479 -2% 808,719 1%
Shareholders' Equity:
Common Stock (no par value)
Authorized 13,679,757
Shares: Issued
and Outstanding
9,510,007 at 12/31/08
9,488,101 at 9/30/08 and
9,453,767 at 12/31/07 33,701 33,384 1% 32,812 3%
Retained Earnings 46,567 45,513 2% 40,652 15%
Other Comprehensive Income 292 86 241% 106 174%
----------------------------------------------------------------------
Total Shareholders' Equity 80,560 78,983 2% 73,570 10%
----------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity $899,631 $912,462 -1% $882,289 2%
======================================================================
---------------------------------------------------------------------
ASSET QUALITY (unaudited)
-------------------------
($ in thousands, except per share data)
Quarter Quarter Quarter Twelve Months
Ended Ended Ended Ended
Dec. 31, Sept. 30, Dec. 31, December 31,
2008 2008 2007 2008 2007
---------------------------------------------------------------------
Allowance for Loan
Losses Activity:
Balance at Beginning
of Period $ 11,488 $ 11,585 $ 10,755 $ 11,126 $ 10,048
Indirect Loans:
Charge-offs (691) (638) (423) (2,023) (1,020)
Recoveries 184 111 144 583 343
---------------------------------------------------------------------
Indirect Net
Charge-offs (507) (527) (279) (1,440) (677)
Other Loans:
Charge-offs (1,151) (798) (288) (3,381) (1,762)
Recoveries 520 153 138 895 517
---------------------------------------------------------------------
Other Net
Charge-offs (631) (645) (150) (2,486) (1,245)
Total Net
Charge-offs (1,138) (1,172) (429) (3,926) (1,922)
Provision for Loan
Losses 1,900 1,075 800 5,050 3,000
---------------------------------------------------------------------
Balance at End of
Period $ 12,250 $ 11,488 $ 11,126 $ 12,250 $ 11,126
=====================================================================
Net Charge-offs to
Average Loans:
Indirect Loans Net
Charge-Offs, to Avg
Indirect Loans,
Annualized(1) 1.82% 1.89% 0.99% 1.30% 0.61%
Other Loans Net
Charge-Offs, to Avg
Other Loans,
Annualized(1) 0.35% 0.36% 0.09% 0.35% 0.19%
Net Charge-offs to
Average Total
Loans(1) 0.55% 0.57% 0.21% 0.48% 0.25%
Dec. 31, Sept. 30, Dec. 31,
2008 2008 2007
-------------------------------------------------
Nonperforming Assets
--------------------
Nonperforming
Loans(2) $ 1,918 $ 3,888 $ 2,839
Other Real Estate
Owned 2,226 669 1,440
-------------------------------------------------
Total Nonperforming
Assets $ 4,144 $ 4,557 $ 4,279
=================================================
Nonperforming Loans
to Loans(1) 0.23% 0.47% 0.35%
Nonperforming Assets
to Assets 0.46% 0.50% 0.48%
Allowance for Loan
Losses to
Nonperforming Loans 638.67% 295.46% 391.90%
Allowance for Loan
Losses to Loans 1.49% 1.40% 1.38%
Loan Composition
----------------
Commercial $ 94,522 $ 93,821 $102,284
Real Estate
Mortgages
One-to-Four Family
Residential 58,099 55,984 56,636
Commercial 327,704 325,314 296,902
Real Estate
Construction
One-to-Four Family
Residential 101,022 104,505 101,912
Commercial 44,401 45,147 44,735
Consumer
Indirect 108,266 110,239 114,271
Direct 86,364 85,321 86,716
Deferred Loan Costs,
net 2,690 2,758 2,406
-------------------------------------------------
Total Loans $823,068 $823,089 $805,862
=================================================
Time Deposit
Composition
------------
Time Deposits less
than or equal to
$100 $165,475 $168,833 $150,667
Time Deposits
greater than $100 163,344 192,083 180,850
Brokered Deposits
CDARS (Certificate
of Deposit Account
Registry Service) 12,727 1,880 --
Non-CDARS 10,000 10,000 10,000
-------------------------------------------------
Total Time Deposits $351,546 $372,796 $341,517
=================================================
(1) Excludes Loans Held for Sale.
(2) Nonperforming loans includes nonaccrual loans plus accruing loans
90 or more days past due.
FINANCIAL STATISTICS (unaudited)
--------------------------------
($ in thousands, except per share data)
Quarter Quarter Quarter Twelve Months
Ended Ended Ended Ended
Dec. 31, Sept. 30, Dec. 31, December 31,
2008 2008 2007 2008 2007
---------------------------------------------------------------------
Revenues(1)(2) $ 11,184 $ 11,613 $ 11,443 $ 45,194 $ 45,694
--------
Averages
--------
Total Assets $901,487 $889,483 $867,357 $890,589 $836,738
Loans and Loans Held
for Sale 823,217 820,425 791,546 819,468 759,242
Interest Earning
Assets 849,210 835,704 810,783 837,456 781,296
Deposits 766,362 748,375 759,676 748,649 732,107
Shareholders'
Equity $ 79,402 $ 78,084 $ 72,439 $ 76,998 $ 69,488
Financial Ratios
----------------
Return on Average
Assets, Annualized 0.74% 0.85% 0.85% 0.94% 1.12%
Return on Average
Equity, Annualized 8.37% 9.70% 10.14% 10.82% 13.53%
Average Equity to
Average Assets 8.81% 8.78% 8.35% 8.65% 8.30%
Efficiency Ratio(2) 60.22% 65.26% 68.61% 60.90% 62.31%
Yield on Earning
Assets(2) 6.67% 6.98% 7.92% 7.07% 8.07%
Cost of Interest
Bearing Liabilities 2.54% 2.76% 3.77% 2.89% 3.75%
Net Interest Spread 4.13% 4.22% 4.15% 4.18% 4.32%
Net Interest
Margin(2) 4.50% 4.62% 4.71% 4.60% 4.89%
Book Value Per
Share $ 8.47 $ 8.32 $ 7.78
Regulatory Requirements
------------------------
Dec. 31, Sept. 30, Dec. 31, Adequately- Well-
2008 2008 2007 capitalized capitalized
-------------------------------------------- ------------------------
Period End
Total Risk-Based
Capital Ratio -
Consolidated 13.23%(3) 13.06% 12.45% 8.00% N/A
Tier 1 Risk-Based
Capital Ratio -
Consolidated 11.98%(3) 11.81% 11.14% 4.00% N/A
Tier 1 Leverage
Ratio -
Consolidated 11.68%(3) 11.68% 11.29% 4.00% N/A
--------------------------------------------
Total Risk-Based
Capital Ratio -
Whidbey Island
Bank 13.10%(3) 12.97% 12.03% 8.00% 10.00%
Tier 1 Risk-Based
Capital Ratio -
Whidbey Island
Bank 11.85%(3) 11.72% 10.78% 4.00% 6.00%
Tier 1 Leverage
Ratio -
Whidbey Island
Bank 11.54%(3) 11.58% 10.92% 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) Capital ratios for the most recent period are an estimate pending
filing of the Company's regulatory reports.