-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Olc5VdxoC86TA3KWdJvSdZSdzn9eFtGuW7X9PpVwRAucAxXOCKiOBxz8vnluNC/u M2/S44+wICfFBH09fvtWWA== 0000950135-98-004659.txt : 19980813 0000950135-98-004659.hdr.sgml : 19980813 ACCESSION NUMBER: 0000950135-98-004659 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980812 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WARREN BANCORP INC CENTRAL INDEX KEY: 0000830750 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTIONS, NOT FEDERALLY CHARTERED [6036] IRS NUMBER: 043024165 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-17222 FILM NUMBER: 98683791 BUSINESS ADDRESS: STREET 1: 10 MAIN ST CITY: PEABODY STATE: MA ZIP: 01960 BUSINESS PHONE: 5085317400 MAIL ADDRESS: STREET 1: 10 MAIN STREET STREET 2: PO BOX 6159 CITY: PEABODY STATE: MA ZIP: 01961-6159 FORMER COMPANY: FORMER CONFORMED NAME: NORTHBANC CORP DATE OF NAME CHANGE: 19880503 10-Q 1 WARREN BANCORP 1 16SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 or the quarterly period ended June 30, 1998 or ------------- [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from __________________ to ___________________ Commission File No. 0-17222 WARREN BANCORP, INC. (Exact Name of registrant as specified in the charter) MASSACHUSETTS 04-3024165 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 10 MAIN STREET, PEABODY, MASSACHUSETTS 01960 (Address of principal executive offices) (Zip Code) (978) 531-7400 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report(s), and (2) has been subject to such filing requirement for the past 90 days. Yes [x] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at August 4, 1998 - --------------------------------------- ----------------------------- Common Stock, par value $.10 per share 7,909,874 2
WARREN BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA) JUNE 30, DECEMBER 31, 1998 1997 ---- ---- ASSETS Cash and due from banks (non-interest bearing) $ 7,232 $ 7,191 Money market funds and overnight investments 11,495 6,288 Investment and mortgage-backed securities available for sale (amortized cost of of $95,696 at June 30, 1998 and $98,737 at December 31, 1997 ) 97,485 101,698 Other investments (fair value of $6,784 at June 30, 1998 and $6,534 at December 31, 1997) 6,544 6,294 Loans held for sale 1,699 1,031 Loans 245,910 240,763 Allowance for loan losses (4,023) (4,066) -------- -------- Net loans 241,887 236,697 Banking premises and equipment, net 4,950 4,785 Accrued interest receivable 2,721 2,790 Real estate acquired by foreclosure 1,735 2,010 Other assets 2,389 2,209 -------- -------- Total assets $378,137 $370,993 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits $330,294 $325,293 Borrowed funds 5,404 2,926 Escrow deposits of borrowers 928 1,005 Accrued interest payable 628 812 Accrued expenses and other liabilities 1,215 929 -------- -------- Total liabilities 338,469 330,965 -------- -------- Stockholders' equity: Preferred stock, $.10 par value; Authorized - 10,000,000 shares; Issued and outstanding - none -- -- Common stock, $.10 par value; Authorized - 20,000,000 shares; Issued - 8,094,414 shares at June 30, 1998 and 7,808,194 shares at December 31, 1997 Outstanding - 7,904,694 shares at June 30, 1998 and 7,612,194 shares at December 31, 1997 809 780 Additional paid-in capital 35,710 34,724 Retained earnings 3,132 4,282 Treasury stock, at cost, 189,720 shares at June 30, 1998 and 196,000 at December 31, 1997 (1,136) (1,174) -------- -------- 38,515 38,612 Net unrealized gain on securities available for sale, net of taxes 1,153 1,416 -------- -------- Total stockholders' equity 39,668 40,028 -------- -------- Total liabilities and stockholders' equity $378,137 $370,993 ======== ========
See accompanying notes to consolidated financial statements. 3
WARREN BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------- -------------------- 1998 1997 1998 1997 ---- ---- ---- ---- (Dollars in thousands, except per-share data) Interest and dividend income: Interest on loans $5,619 $5,331 $11,146 $10,398 Interest and dividends on investments 1,257 1,127 2,460 2,229 Interest on mortgage-backed securities 462 722 974 1,474 ------ ------ ------- ------- Total interest and dividend income 7,338 7,180 14,580 14,101 ------ ------ ------- ------- Interest expense: Interest on deposits 2,887 2,759 5,766 5,514 Interest on borrowed funds 54 30 84 82 ------ ------ ------- ------- Total interest expense 2,941 2,789 5,850 5,596 ------ ------ ------- ------- Net interest income 4,397 4,391 8,730 8,505 Provision for (recovery of) loan losses (50) (198) (68) (238) ------ ------ ------- ------- Net interest income after provision for (recovery of) loan losses 4,447 4,589 8,798 8,743 ------ ------ ------- ------- Non-interest income: Loan servicing fees 5 (4) 9 116 Customer service fees 229 260 417 476 Gains on sales of investment securities, net 179 -- 188 99 Gains on sales of mortgage loans 79 26 131 91 Gain on sale of mortgage-servicing rights -- (55) -- 1,407 Other 1 1 3 5 ------ ------ ------- ------- Total non-interest income 493 228 748 2,194 ------ ------ ------- ------- Income before non-interest expense and income taxes 4,940 4,817 9,546 10,937 ------ ------ ------- ------- Non-interest expense: Salaries and employee benefits 1,477 1,410 2,890 2,890 Office occupancy and equipment 296 284 601 572 Professional services 60 81 91 165 Marketing 87 50 127 88 Real estate operations 1 30 26 373 Outside data processing expense 125 121 250 233 Other 438 398 862 801 ------ ------ ------- ------- Total non-interest expenses 2,484 2,374 4,847 5,122 ------ ------ ------- ------- Income before income taxes 2,456 2,443 4,699 5,815 Income tax expense 837 819 1,602 1,727 ------ ------ ------- ------- Net income $1,619 $1,624 $ 3,097 $ 4,088 ====== ====== ======= ======= Basic earnings per share $ 0.21 $ 0.22 $ 0.40 $ 0.55 ====== ====== ======= ======= Diluted earnings per share $ 0.20 $ 0.21 $ 0.38 $ 0.52 ====== ====== ======= =======
See accompanying notes to consolidated financial statements. 4
WARREN BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY SIX MONTHS ENDED JUNE 30, 1997 AND 1998 ACCUMULATED ADDITIONAL OTHER COMPREHENSIVE COMMON PAID-IN RETAINED COMPREHENSIVE TREASURY INCOME STOCK CAPITAL EARNINGS INCOME STOCK TOTAL ------------- ------ ---------- -------- ------------- --------- ----- (Dollars in thousands) Balance at December 31, 1996 $752 $33,869 $ 260 $ 738 ($1,174) $34,445 Comprehensive income: Net income $4,088 - - 4,088 - - 4,088 Other comprehensive income (loss): Unrealized loss on securities available for sale, net of taxes 240 Less: Reclassification adjustment for securities gains, net tax expense of $34, included in net income 65 ------ ' Total other comprehensive (loss) 305 - - - 305 - 305 ------ Comprehensive income $4,393 ====== Dividends paid - - (2,277) - - (2,277) Issuance of 239,440 shares for exercise of options 24 533 - - - 557 ---- ------- ------ ------ ------- ------- Balance at June 30, 1997 776 34,402 2,071 1,043 (1,174) 37,118 Comprehensive income: Net income $3,197 - - 3,197 - - 3,197 Other comprehensive income (loss): Unrealized gain on securities available for sale, net of taxes 346 Less: Reclassification adjustment for securities gains, net tax expense of $14, included in net income 27 ------ Total other comprehensive income 373 - - - 373 - 373 ------ Comprehensive income $3,570 ====== Dividends paid - - (986) - - (986) Tax benefit of stock options exercised - 144 - - - 144 Issuance of 49,620 shares for exercise of options 4 178 - - - 182 ---- ------- ------ ------ ------- ------- Balance at December 31, 1997 780 34,724 4,282 1,416 (1,174) 40,028 Comprehensive income: Net income $3,097 - - 3,097 - - 3,097 Other comprehensive income (loss): Unrealized loss on securities available for sale, net of taxes (388) Less: Reclassification adjustment for securities gains, net tax expense of $63, included in net income 125 ------ Total other comprehensive (loss) (263) - - - (263) - (263) ------ Comprehensive income $2,834 ====== Dividends paid - - (4,247) - - (4,247) Tax benefit of stock options exercised - 61 - - - 61 Issuance of 260,405 common shares and 6,280 shares of treasury stock for exercise of options 29 925 - - 38 992 ---- ------- ------ ------ ------- ------- Balance at June 30, 1998 $809 $35,710 $3,132 $1,153 ($1,136) $39,668 ==== ======= ====== ====== ======= =======
See accompanying notes to consolidated financial statements. 5
WARREN BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, ------------------------- 1998 1997 ---- ---- (In thousands) Cash flows from operating activities: Net Income $ 3,097 $ 4,088 Adjustments to reconcile net income to net cash provided by operating activities: Provision for (recovery of) loan losses (68) (238) Depreciation and amortization 306 296 Deferred income tax expense (benefit) 135 (154) Amortization of premiums and discounts 136 70 (Gains) on sales of investment securities (188) (99) (Gains) on sales of mortgage loans (131) (91) Write-down of real estate acquired by foreclosure -- 208 (Gains) on sale of real estate acquired by foreclosure (17) (2) (Increase) decrease in loans held for sale (668) 2,352 Decrease in accrued interest receivable 69 22 (Increase) decrease in other assets (104) 717 (Decrease) in accrued interest payable (184) (34) Increase in other liabilities and escrow deposits 209 87 -------- -------- Net cash provided by operating activities 2,592 7,222 -------- -------- Cash flows from investing activities: Net (increase) in money market funds and overnight investments (5,207) (241) Purchase of investment securities (23,486) (20,972) Proceeds from sales of investment securities available for sale 2,525 1,100 Proceeds from maturities of investment securities 19,372 20,003 Proceeds from payments of mortgage-backed securities 5,191 3,585 Proceeds from sales of real estate acquired by foreclosure 450 549 Net (increase) in loans (5,149) (4,017) Purchases of premises and equipment (471) (196) -------- -------- Net cash (used in) investing activities ($6,775) ($189) -------- --------
6
WARREN BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS-CONTINUED SIX MONTHS ENDED JUNE 30, ------------------------- 1998 1997 ---- ---- (In thousands) Cash flows from financing activities: Net increase (decrease) in deposits $ 5,001 $(2,066) Proceeds from Federal Home Loan Bank advances 2,000 630 Principal payments on Federal Home Loan Bank advances -- (2,674) Net increase in other borrowed funds 478 451 Dividends paid (4,247) (2,277) Stock options exercised 992 557 ------- ------- Net cash provided by (used in) financing activities 4,224 (5,379) ------- ------- Net increase in cash and due from banks 41 1,654 Cash and due from banks at beginning of period 7,191 5,855 ------- ------- Cash and due from banks at end of period $ 7,232 $ 7,509 ------- ------- Cash paid during the period for: Interest $ 6,034 $ 5,630 Income taxes $ 1,725 $ 350 Supplemental noncash investing and financing activities: Foreclosures on real estate $ 158 $ 129
See accompanying notes to consolidated financial statements. 7 WARREN BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BASIS OF PRESENTATION The consolidated financial statements of Warren Bancorp, Inc. (the "Corporation") presented herein should be read in conjunction with the consolidated financial statements of the Corporation as of and for the year ended December 31, 1997. The accompanying consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to those rules and regulations, but the Corporation believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, the consolidated financial statements reflect all adjustments necessary for a fair presentation of the results for the interim periods presented. Certain amounts have been reclassified to conform with the 1998 presentation. All share data reflect the effect of a 2-for-1 stock split which occurred on May 12, 1998. EARNINGS PER SHARE In 1997, the Corporation adopted Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." Quarter and six months ended June 30, 1997 earnings per share has been restated to conform to SFAS No. 128. The components of basic and diluted EPS for the quarters and six months ended June 30, 1998 and 1997 are as follows:
QUARTER ENDED JUNE 30, ------------------------------------------------------------------------- NET INCOME WEIGHTED AVERAGE SHARES NET INCOME PER SHARE ------------------------------------------------------------------------- 1998 1997 1998 1997 1998 1997 ------------------------------------------------------------------------- (In thousands, except per-share data) Basic EPS $1,619 $1,624 7,856 7,488 $0.21 $0.22 Effect of dilutive stock options -- -- 322 434 0.01 0.01 ------ ------ ----- ----- ----- ----- Dilutive EPS $1,619 $1,624 8,178 7,922 $0.20 $0.21 ====== ====== ===== ===== ===== =====
SIX MONTHS ENDED JUNE 30, -------------------------------------------------------------------------- NET INCOME WEIGHTED AVERAGE SHARES NET INCOME PER SHARE -------------------------------------------------------------------------- 1998 1997 1998 1997 1998 1997 -------------------------------------------------------------------------- (In thousands, except per-share data) Basic EPS $3,097 $4,088 7,747 7,421 $0.40 $0.55 Effect of dilutive stock options -- -- 425 446 0.02 0.03 ------ ------ ----- ----- ----- ----- Dilutive EPS $3,097 $4,088 8,172 7,867 $0.38 $0.52 ====== ====== ===== ===== ===== =====
Basic EPS is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. The effect of this accounting change on previously reported EPS data is as follows:
QUARTER ENDED SIX MONTHS ENDED JUNE 30, 1997 JUNE 30, 1997 ------------- ---------------- Per Share Amounts: Primary EPS as previously reported $0.21 $0.52 Effect of SFAS No. 128 0.01 0.03 ----- ----- Basic EPS as restated $0.22 $0.55 ===== =====
8 COMPREHENSIVE INCOME SFAS No. 130, "Reporting Comprehensive Income," establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of a general-purpose financial statements. This statement requires that all items that are required to be recognized under accounting standards as components of comprehensive income to be reported in a financial statement that is displayed with the same prominence as other financial statements. This statement does not require a specific format for that financial statement but requires that an enterprise display an amount representing total comprehensive income for the period in that financial statement. This statement requires that an enterprise (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. The Corporation adopted SFAS No. 130 on January 1, 1998, and the components of and accumulated balance of other comprehensive income are displayed in the "Consolidated Statements of Changes in Stockholders' Equity for the Six Months Ended June 30, 1997 and 1998." Reclassification of financial statements for earlier periods provided for comparative purposes is required. 2 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements in this Form 10-Q constitute "forward-looking statements" as that term is defined under the Private Securities Litigation Reform Act of 1995. The words "believe," "expect," "anticipate," "intend," "estimate," "plan," "assume" and other similar expressions which are predictions of or indicate future events and trends and which do not relate to historical matters identify forward-looking statements. Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are in some cases beyond the control of the Corporation and may cause the actual results, performance or achievements of the Corporation to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. Certain factors that might cause such differences include, but are not limited to, the following: interest rates may increase, adversely affecting the ability of borrowers to repay adjustable-rate loans and the Corporation's earnings and income which derive in significant part from loans to borrowers; unemployment in the Corporation's market area may increase, adversely affecting the ability of individual borrowers to repay loans; property values may decline, adversely affecting the ability of borrowers to repay loans and the value of real estate securing repayment of loans; and general economic and market conditions in the Corporation's market area may decline, adversely affecting the ability of borrowers to repay loans, the value of real estate securing repayment of loans and the Corporation's ability to make profitable loans. Any of the above may also result in lower interest income, increased loan losses, additional charge-offs and writedowns and higher operating expenses. These and other factors that might cause differences between actual and anticipated results, performance and achievements are discussed in greater detail in this Form 10-Q. GENERAL Warren Bancorp, Inc.'s operating results for the three and six months ended June 30, 1998 (the "1998 quarter" and "1998 period", respectively) reflect the operations of its only subsidiary, Warren Five Cents Savings Bank (the "Bank"). The Bank, which is wholly owned by the Corporation, operates as a community bank and is in the business of making individual and commercial loans to customers in its market area. The Corporation recorded a decreased profit for the 1998 period as compared to the six months ended June 30, 1997 (the "1997 period") primarily due to a pre-tax gain of $1.4 million from the sale of rights to service residential mortgage loans occurring in the 1997 period. Real estate acquired by foreclosure decreased to $1.7 million at June 30, 1998 from $2.0 million at December 31, 1997. Nonperforming loans increased by $361,000 to $708,000 during the 1998 period. (One loan amounting to $475,000 was over 90 days past due but still accruing and is reflected in the total nonperforming loans. There were no 90-day past due loans at December 31, 1997 that were still accruing.) Management continues to monitor these nonperforming asset portfolios closely. If conditions in the Massachusetts' real estate market become unstable and values deteriorate, the amount of nonaccrual loans and real estate acquired through foreclosure would be expected to increase, resulting in lower interest income and increased loan losses, which could require additional loan loss provisions to be charged to operating income. Moreover, real estate acquired through foreclosure may give rise to additional charge-offs and writedowns and higher expenses for property taxes and other carrying costs. On April 16, 1998, the Corporation declared an increase in the quarterly dividend to 9 cents ($.09) per share from 7 cents ($0.7) per share and a special dividend of 39 cents ($.39) per share. Both were paid May 11, 1998 to stockholders of record on April 27, 1998. In addition, the Corporation announced a 2-for-1 stock split in the form of a stock dividend. Stockholders of records on April 27, 1998 received one additional share for each share they owned as of that date. The additional shares were issued on May 12, 1998. 3 10 ASSET/LIABILITY MANAGEMENT A primary objective of the Corporation's asset/liability management policy is to manage interest-rate risk over time to achieve a prudent level of net interest income in changing interest-rate environments. Management's strategies are intended to be responsive to changes in interest rates and to recognize market demands for particular types of deposit and loan products. These strategies are overseen by an internal Asset/Liability Management Committee and by the Bank's Board of Directors, and the risks are managed with techniques such as simulation analysis, which measures the effect on net interest income of possible changes in interest rates, and "gap" analysis, using models similar to the one shown on the following page. The Corporation uses simulation analysis to measure exposure of net interest income to changes in interest rates over a one-year period. This period is measured because the Corporation is most vulnerable to changes in short-term (one year and under) rates. Simulation analysis involves projecting future interest income and expense under various rate scenarios. The Corporation's policy on interest-rate risk specifies that if short-term interest rates were to shift immediately up or down 100 basis points, estimated net interest income for the next 12 months should decline by less than 13%. This policy remained in effect during the period, and in management's opinion there were no material changes in interest rate risk since December 31, 1997, the date as of which the simulation analysis was performed. Certain shortcomings are inherent in a simulation analysis. Estimates of customer behavior to changing interest rates may differ significantly from actual. Areas of these estimates include loan prepayment speeds, shifting between adjustable-rate and fixed-rate loans, and activity within different categories of deposit products. Also, the ability of some borrowers to repay their adjustable-rate loans may decrease in the event of interest-rate increases. The following table summarizes the Corporation's interest-rate sensitivity position as of June 30, 1998. Assets and liabilities are classified as interest-rate sensitive if they have a remaining term to maturity of 0-12 months, or are subject to interest-rate adjustments within those time periods. Adjustable-rate loans and mortgage-backed securities are shown as if the entire balance came due on the repricing date. Nonaccruing loans are not included in this analysis due to their status as non-earning assets. Estimates of fixed-rate loan and fixed-rate mortgage-backed security amortization and prepayments are included with rate sensitive assets. Because regular savings and N.O.W. accounts may be withdrawn at any time and are subject to interest-rate adjustments at any time, they are presented in the table below based on an assumed maturity of less than six months. None of these assets is considered a trading asset. 4 11 INTEREST-RATE SENSITIVITY POSITION
JUNE 30, 1998 ------------- 0-3 3-6 6-12 1-5 OVER 5 MONTHS MONTHS MONTHS YEARS YEARS ------ ------ ------ ----- ----- (Dollars in Thousands) INTEREST SENSITIVE ASSETS: Investment securities ....................... $ 31,662 $ 9,903 $ 18,606 $ 27,339 $ -- Loans held for sale ......................... 1,699 -- -- -- -- Adjustable-rate loans ....................... 86,647 19,400 35,996 65,052 2,493 Fixed-rate loans ............................ 5,184 2,922 4,775 15,851 7,339 Mortgage-backed securities .................. 1,680 8,804 6,401 5,887 1,766 -------- --------- -------- -------- ------- Total interest sensitive assets .......... 126,872 41,029 65,778 114,029 11,598 -------- --------- -------- -------- ------- INTEREST SENSITIVE LIABILITIES: Cash manager and passbook plus accounts ................................... 18,160 13,314 -- -- -- Time deposits ............................... 31,314 21,718 42,353 50,071 -- Other deposits (a) .......................... 69,046 69,045 323 -- -- Borrowings .................................. 2,733 -- -- 33 2,638 -------- --------- -------- -------- ------- Total interest sensitive liabilities ..... 121,253 104,077 42,676 50,104 2,638 -------- --------- -------- -------- ------- Excess (deficiency) of interest sensitive assets over interest sensitive liabilities ...................... $ 5,619 $ (63,048) $ 23,102 $ 64,025 $ 8,960 ======== ========= ======== ======== ======= Excess (deficiency) of cumulative interest sensitive assets over cumu- lative interest sensitive liabilities ...... $ 5,619 $ (57,429) $(34,327) $ 29,698 $38,698 ======== ========= ======== ======== ======= Cumulative interest sensitive assets as a percentage of cumulative interest sensitive liabilities.............. 104.6% 74.5% 87.2% 109.3% 112.1% ======== ========= ======== ======== ======= Cumulative excess (deficiency) as a percentage of total assets.................. 1.5% (15.2)% (9.1)% 7.9% 10.2% ======== ========= ======== ======== =======
- ---------------- (a) Other deposits consist of regular savings, club and N.O.W. accounts. Interest-rate sensitivity statistics are static measures that do not necessarily take into consideration external factors which might affect the sensitivity of assets and liabilities and consequently cannot be used alone to predict the operating results of a financial institution in a changing environment. However, these measurements do reflect major trends and thus the Corporation's sensitivity to interest rates changes over time. LIQUIDITY The Bank seeks to ensure sufficient liquidity is available to meet cash requirements while earning a return on liquid assets. The Bank uses its liquidity primarily to fund loan and investment commitments, to supplement deposit flows and to meet operating expenses. The primary sources of liquidity are interest and amortization from loans, mortgage-backed securities and investments, sales and maturities of investments, loan sales, deposits and Federal Home Loan Bank of Boston ("FHLBB") advances, which include a $15 million overnight line of credit. The Bank also has access to the Federal Reserve Bank's discount window and may borrow from the Depositors Insurance Fund Liquidity Fund. During the 1998 period, the Bank did not use the Federal Reserve Bank discount window and did not borrow from the Depositors Insurance Fund Liquidity Fund. The Bank also uses the longer-term borrowings facilities within its total available credit line with the FHLBB. Advances from the FHLBB, none of which were from the overnight facility, were $2,671,000 at June 30, 1998. 5 12 During 1998, the primary sources of liquidity were $17.2 million in loan sales, proceeds from maturities of investment securities of $19.4 million, proceeds from sales of investment securities of $2.5 million, $40.6 million in payoffs and paydowns of loans and proceeds from paydowns of mortgage-backed securities of $5.2 million. Primary uses of funds were $62.9 million in residential, commercial real estate and commercial loan originations and $23.5 million to purchase investment securities. At June 30, 1998, the Bank had $7.1 million in overnight investments. The primary source of liquidity for the Corporation is dividends from the Bank. Dividends paid by the Corporation are the primary use of this liquidity. From time to time, the Bank has obtained time deposits in denominations of $100,000 and over. The following table summarizes maturities of time deposits of $100,000 or more outstanding at June 30, 1998:
Within One Year (IN THOUSANDS) --------------- Less than 3 months.................................... $ 7,041 3 to 6 months......................................... 2,215 6 to 12 months........................................ 4,924 ------- 14,180 More than 12 months................................... 8,171 ------- $22,351 =======
CAPITAL ADEQUACY Total stockholders' equity at June 30, 1998 was $39.7 million, a decrease of $360,000 from $40.0 million at December 31, 1997. Included in stockholders' equity at June 30, 1998 is an unrealized gain on securities available for sale, which increased stockholders' equity, of $1,153,000 as compared to an unrealized gain at December 31, 1997 of $1,416,000. This change in unrealized gains on securities available for sale was mainly due to securities gains of $188,000 realized during the period. Future interest-rate increases could reduce the fair value of these securities and reduce stockholders' equity. As a percentage of total assets, stockholders' equity was 10.49% at June 30, 1998 compared to 10.79% at December 31, 1997. At June 30, 1998, neither the Federal Reserve Board ("FRB") nor the FDIC permitted the unrealized gain or loss to be used in their calculation of Tier I capital. In addition, they require the recognition of unrealized losses on equity securities as a reduction of Tier I capital. At June 30, 1998, net of applicable income taxes, the unrealized gain on securities available for sale was $1,153,000, of which the unrealized loss on marketable equity securities was zero. The FRB's leverage capital-to-assets guidelines require the strongest and most highly rated bank holding companies, such as the Corporation, to maintain at least a 3.00% ratio of Tier I capital to average consolidated assets. All other bank holding companies are required to maintain at least 4.00% to 5.00%, depending on how the FRB evaluates their condition. The FRB may require a higher capital ratio. At June 30, 1998, the FRB leverage capital ratio was 10.45% compared to 10.58% at December 31, 1997. The FDIC's leverage capital-to-assets ratio guidelines are substantially similar to those adopted by the FRB and described above. At June 30, 1998, the Bank's leverage capital ratio, under FDIC guidelines, was 9.63% compared to 9.22% at December 31, 1997. The FRB and the FDIC have also imposed risk-based capital requirements on the Corporation and the Bank, respectively, which give different risk weightings to assets and to off-balance sheet assets such as loan commitments and loans sold with recourse. Both the FRB and FDIC guidelines require the Corporation and the Bank to have an 8.00% risk-based capital ratio. The Corporation's and the Bank's risk-based capital ratios were 13.58% and 12.62%, respectively, at June 30, 1998 compared to 14.15% and 12.54% at December 31, 1997, thus exceeding their risk-based capital requirements. As of June 30, 1998, the Bank's total risk-based capital ratio, Tier I risk-based capital ratio and leverage capital ratio were 12.62%, 11.37%, and 9.63%, respectively. Based on these capital ratios, the Bank is designated as "well capitalized." 6 13 YEAR 2000 The Corporation has developed plans to address the possible exposures related to the impact on its computer systems and key service providers of the year 2000. In the third quarter of 1998, the Corporation will decide whether to renew the contract with its current outside data processing service provider or to convert to a new service provider. In either case, the data service provider will contractually ensure year-2000 compliance, and the costs related to that aspect of the year-2000 effort are the responsibility of the provider. In the fourth quarter of 1998 and first quarter of 1999 the data servicing providers' renovated system for year-2000 compliance will be tested. Test plans for systems not provided by the data servicing provider will be developed and tested by the Corporation during the third and fourth quarters of 1998. Management will ensure that the service provider has the financial resources to complete the effort. As part of its 1998 business plan, the Corporation is currently upgrading its personal computers and related software, all of which will be year-2000 certified upon purchase. Because the Corporation is updating systems as part of its ongoing operations and the hardware and software upgrades are a necessary result of that effort, management estimates that the incremental costs incurred by the Corporation for year-2000 compliance will not be material. The ability of third parties, including the Corporation's borrowers, with whom the Corporation transacts business to adequately address their year-2000 issues is outside of the Corporation's control. Failure of such third parties of the Corporation to adequately address their respective year-2000 issues could have a material adverse effect on the Corporation's financial condition and results of operation. FINANCIAL CONDITION The Corporation's total assets increased to $378.1 million at June 30, 1998 from $371.0 million at December 31, 1997. Increases occurred in commercial real estate and commercial loans and overnight investments and were partially offset by decreases in investments available for sale, residential mortgage, commercial construction and consumer loans. INVESTMENTS AND MORTGAGE-BACKED SECURITIES Investments, consisting of money market funds and overnight investments, investment securities and mortgage-backed securities available for sale, and other investments, increased to $115.5 million at June 30, 1998 from $114.3 million at December 31, 1997. This increase occurred in overnight investments and was partially offset by decreases in U.S. Treasury and U.S. Government Agency obligations and corporate notes. Mortgage-backed securities decreased to $27.9 million at June 30, 1998 from $30.6 million at December 31, 1997 due to principal paydowns. Future increases in interest rates could reduce the value of these investments. 7 14 INVESTMENTS AT JUNE 30, 1998 ARE AS FOLLOWS:
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ---- ----- ------ ----- (IN THOUSANDS) OVERNIGHT Money market funds and overnight investments .................. $ 11,495 $ -- $ -- $ 11,495 -------- ------ ---- -------- 11,495 $ -- $ -- 11,495 ======== ====== ==== ======== AVAILABLE-FOR-SALE Fixed income mutual funds ................ 20,787 486 -- 21,273 FNMA mortgage-backed securities .......... 18,129 644 -- 18,773 GNMA mortgage-backed securities .......... 6,411 -- (17) 6,394 U.S. Government and related obligations ............................. 3,521 1 -- 3,522 Corporate notes .......................... 39,541 9 (24) 39,526 Preferred stock .......................... 7,307 690 -- 7,997 -------- ------ ---- -------- 95,696 1,830 (41) 97,485 -------- ------ ---- -------- OTHER Foreign government bonds and notes .................................. 750 -- -- 750 Stock in Federal Home Loan Bank of Boston .............................. 4,110 -- -- 4,110 Stock in Depositors Insurance Fund Liquidity Fund ......................... 108 -- -- 108 Stock in Savings Bank Life Insurance Company of Massachusetts ............... 1,576 240 -- 1,816 -------- ------ ---- -------- 6,544 240 -- 6,784 -------- ------ ---- -------- $113,735 $2,070 $(41) $115,764 ======== ====== ==== ========
LOANS AND LOANS HELD FOR SALE Loans and loans held for sale increased by $5.8 million during the 1998 period to $247.6 million at June 30, 1998. This increase is the result of increases in commercial real estate and commercial loans partially offset by paydowns and payoffs of residential mortgage and commercial construction loans. Commercial real estate, commercial construction and commercial loans typically earn higher yields than residential mortgage loans, but usually carry higher risk due to loan size. The following table sets forth the classification of the Corporation's loans as of June 30, 1998 and December 31, 1997 (in thousands):
JUNE 30, 1998 DECEMBER 31, 1997 ------------- ----------------- Residential mortgages................................ $ 47,507 $ 52,707 Commercial real estate............................... 137,267 125,832 Commercial construction ............................. 17,236 19,739 Commercial loans..................................... 23,964 22,259 Consumer loans....................................... 19,936 20,226 -------- -------- $245,910 $240,763 ======== ========
8 15 Residential mortgage loan originations during the 1998 period were $21.4 million compared to $14.6 million in the 1997 period. The Corporation originated $19.7 million in fixed-rate loans during the 1998 period compared to $7.3 million during the 1997 period. Adjustable-rate loans totaling $1.7 million were originated during the 1998 period compared to $7.3 million during the 1997 period. The Corporation sold loans totaling $17.2 million during the 1998 period compared to $12.1 million sold in the 1997 period. At June 30, 1998, the Corporation held $1.7 million of fixed-rate residential mortgage loans for sale compared to $1.0 million at December 31, 1997. CREDIT QUALITY IMPAIRED AND NONPERFORMING LOANS Loans are deemed by the Corporation to be impaired when, based on current information and events, it is probable that the Corporation will be unable to collect all amounts due according to the contractual terms of the original loan agreement. Generally, nonaccruing loans are deemed impaired. Large groups of homogeneous loans, such as smaller balance residential mortgage and consumer installment loans are collectively evaluated for impairment. Typically, the minimum delay in receiving payments according to the contractual terms of the loan that can occur before a loan is considered impaired is ninety days. Impaired loans are analyzed and categorized by level of credit risk and collectibility in order to determine their related allowance for loan losses. At June 30, 1998 there were five loans considered impaired and accruing totaling $867,000 compared to four loans considered impaired and accruing totaling $720,000 at December 31, 1997. Loans past due 90 days or more, or past due less than 90 days but in nonaccrual status were $708,000 at June 30, 1998 compared to $347,000 at December 31, 1997. Included in nonperforming loans is one loan considered impaired and nonaccruing in the amount of $148,000 at June 30, 1998 as compared to two loans considered impaired and nonaccruing totaling $201,000 at December 31, 1997. Accrual of interest on loans is discontinued either when a reasonable doubt exists as to that the full, timely collection of principal or interest or when the loans become contractually past due by ninety days or more, unless they are adequately secured and are in the process of collection. When a loan is placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income. Income on such loans is recognized to the extent that cash is received and where the ultimate collection of principal and interest is probable. Following collection procedures, the Corporation generally institutes appropriate action to foreclose the property or acquire it by deed in lieu of foreclosure. The table below details nonperforming loans at:
JUNE 30, 1998 DECEMBER 31, 1997 ------------- ----------------- (DOLLARS IN THOUSANDS) Accruing loans 90 days or more in arrears........... $457 $ 0 Nonaccrual loans.................................... 251 347 ---- ---- Total nonperforming loans........................... $708 $347 ==== ==== Percentage of nonperforming loans to: Total loans......................................... 0.29% 0.14% ==== ==== Total assets........................................ 0.19% 0.09% ==== ====
REAL ESTATE ACQUIRED BY FORECLOSURE Real estate acquired by foreclosure totaled $1.7 million at June 30, 1998 and $2.0 million at December 31, 1997. Real estate acquired by foreclosure is reflected at the lower of the carrying value of the loans or the net carrying value of the property less estimated cost of disposition. These properties consist mainly of land and single-family dwellings. Unstable conditions in the Massachusetts real estate market could result in losses and writedowns as the Corporation reduces the book value of real estate to reflect likely realizable values. 9 16 In summary, nonperforming assets are as follows (dollars in thousands):
JUNE 30, 1998 DECEMBER 31, 1997 ------------- ----------------- Nonperforming loans ........................... $ 708 $ 347 Real estate acquired by foreclosure ........... 1,735 2,010 ------ ------ Total nonperforming assets .................... $2,443 $2,357 ====== ====== Total nonperforming assets as a percentage of total assets ................. 0.6% 0.6%
ALLOWANCE FOR LOAN LOSSES The following table presents the activity in the allowance for loan losses for the six months ended June 30, 1998 and June 30, 1997 (dollars in thousands):
1998 1997 ---- ---- Balance at beginning of period $4,066 $4,533 ------ ------ Losses charged to the allowance: Residential mortgage -- 184 Commercial mortgage and construction -- 309 Commercial loans -- -- Consumer loans 57 -- 3 ------ ------ 57 496 ------ ------ Loan recoveries: Residential mortgage 8 39 Commercial mortgage and construction 40 217 Commercial loans 20 4 Consumer loans 14 7 82 267 ------ ------ Net (charge-offs) recoveries 25 (229) ------ ------ Provision for (recovery of) loan losses charged (credited) to income (68) (238) ------ ------ Balance at end of period $4,023 $4,066 ====== ====== Allowance to total loans at end of period 1.64% 1.79% ====== ====== Allowance to nonperforming loans at end of period 568.2% 361.4% ====== ====== Allocation of ending balance: Residential mortgage $ 695 $ 806 Commercial mortgage and construction 2,786 2,698 Commercial loans 311 248 Consumer loans 231 314 ------ ------ $4,023 $4,066 ====== ======
Notwithstanding the foregoing allocations, the entire allowance for loan losses is available to absorb charge-offs in any category of loans. Loan losses are charged against the allowance when management believes that the collectibility of the loan principal is doubtful. Balances in the allowance for loan losses are determined on a periodic basis by management and the Loan Committee of the Board of Directors with assistance from an independent credit review consulting firm. Loan loss allocations are based on the conditions of each loan, whether performing or non-performing, including collectibility, collateral adequacy and the general condition of the borrowers, economic conditions, delinquency statistics, market area activity, the risk factors associated with each of the various loan categories and the borrower's adherence to the original terms of the loan. Individual loans, including loans 10 17 considered impaired, are analyzed and categorized by level of credit risk and collectibility. The associated provision for loan losses is the amount required to bring the allowance for loan losses to the balance considered necessary by management at the end of the period after accounting for the effect of loan charge-offs (which decrease the allowance) and loan-loss recoveries (which increase the allowance). The allowance for loan losses included above attributable to $1,015,000 of impaired loans, of which $457,000 is measured using the present value method and $558,000 using the fair value method, is $224,000. The required allowance for loan losses could increase in future periods if the condition of the loan portfolio deteriorates or if the balance of the portfolio increases. Such an increase in the allowance could require additional provisions for loan losses to be charged to income. LEGAL AND OFF-BALANCE SHEET RISKS Various legal claims arise from time to time in the course of business of the Corporation and its subsidiaries. At June 30, 1998, there were no legal claims against the Corporation or its subsidiaries. The Corporation is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of its customers and to reduce its own exposure to fluctuations of interest rates. These financial instruments include commitments to originate loans, unused lines of credit, standby letters of credit, recourse arrangements on sold assets and forward commitments to sell loans. The financial instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. OTHER ASSETS Included in other assets at June 30, 1998 and December 31, 1997 are $1,429,000 and $742,000, respectively, of deferred income taxes receivable. Also included in other assets at December 31, 1997 was a current income tax receivable of $547,000. LIABILITIES Deposits increased to $330.3 million at June 30, 1998 from $325.3 million at December 31, 1997. This increase took place primarily in NOW and demand deposit accounts, and was partially offset by decreases in money market deposit accounts. Federal Home Loan Bank of Boston advances were $2,671,000 at June 30, 1998 and $671,000 at December 31, 1997. Securities sold under agreement to repurchase were $2.7 million at June 30, 1998 and $2.2 million at December 31, 1997. RESULTS OF OPERATIONS - FOR THE THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 1997 GENERAL The Corporation's profit for the 1998 and 1997 quarters, respectively remained unchanged at $1.6 million. Income before taxes was $2.5 million in the 1998 quarter compared to $2.4 million in the 1997 quarter. Net interest income for the 1998 and 1997 quarters was $4.4 million, respectively. The weighted average interest rate spread for the 1998 quarter was 4.70% compared to 4.93% for the 1997 quarter. The net yield on average earning assets was 4.99% for the 1998 quarter and 5.21% for the 1997 quarter. The decrease in the weighted average interest rate spread and the net yield on average earnings assets is mainly due to lower interest rates in a highly competitive lending market. The return on average assets and the return on average stockholders' equity were 1.75% and 16.33%, respectively, for the 1998 quarter compared to 1.83% and 17.88%, respectively, for the 1997 quarter. 11 18 INTEREST AND DIVIDEND INCOME Total interest and dividend income increased to $7.3 million for the 1998 quarter from $7.2 million for the 1997 quarter. Interest on loans increased to $5.6 million for the 1998 quarter from $5.3 million for the 1997 quarter due to an increase in the average loans outstanding in the 1998 quarter despite a decrease in the average loan yield to 9.17% for the 1998 quarter compared to 9.42% for the 1997 quarter. Interest and dividends on investments was $1.2 and $1.1 million for the 1998 and 1997 quarters, respectively. This increase is attributed to an increase in the average investments held despite a decrease in the average yield to 6.00% for the 1998 quarter from 6.07% for the 1997 quarter. Mortgage-backed securities income decreased to $462,000 in the 1998 quarter from $722,000 in the 1997 quarter primarily due to a decrease in the average amount of mortgage-backed securities held due to paydowns and a decrease in the average yield to 7.16% for the 1998 quarter compared to 7.25% in the 1997 quarter. INTEREST EXPENSE Interest on deposits increased to $2.9 million for the 1998 quarter from $2.8 million for the 1997 quarter. This increase was primarily related to an increase in the average cost of deposits to 3.58% for the 1998 quarter from 3.50% for the 1997 quarter and by an increase in average total deposits outstanding. Interest on borrowed funds and escrow deposits of borrowers increased to $54,000 in the 1998 quarter from $30,000 for the 1997 quarter. This increase is related to an increase in borrowed funds and an increase in the average cost of borrowings to 3.71% for the 1998 quarter from 2.95% for the 1997 quarter. NON-INTEREST INCOME Total non-interest income for the 1998 quarter was $493,000 compared to $228,000 for the 1997 quarter. The gain from the sale of mortgage loans was $79,000 in the 1998 quarter compared to $65,000 in the 1997 quarter. The gain from the sale of investment securities was $179,000 for the 1998 quarter compared to zero in the 1997 quarter. NON-INTEREST EXPENSE Total non-interest expense was $2.5 million in the 1998 quarter and $2.4 million in the 1997 quarter. Salary and employee benefits increased to $1.5 million in the 1998 quarter from $1.4 million in the 1997 quarter. Real estate operations expense decreased to $1,000 in the 1998 quarter compared to $30,000 in the 1997 quarter mainly due to a writedown in the value of real estate owned through foreclosure occurring in the 1997 quarter. INCOME TAX EXPENSE Income tax expense for the 1998 quarter was $837,000 compared to $819,000 for the 1997 quarter. RESULTS OF OPERATIONS - FOR THE SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1997 GENERAL The Corporation recorded a profit for the 1998 period of $3.1 million compared to a profit for the 1997 quarter of $4.1 million. The decrease in the 1998 period profit is primarily due to a $1.4 million pre-tax gain from the sale of rights to service residential mortgage loans in the 1997 period. Income before taxes was $4.7 million in the 1998 period compared to $5.8 million in the 1997 period. Net interest income for the 1998 and 1997 period were $8.7 million and $8.5 million, respectively. The weighted average interest rate spread for the 1998 period was 4.72% compared to 4.77% for the 1997 period. The net yield on average earning assets was 4.97% for the 1998 period and 5.03% for the 1997 period. The return on average assets and the return on average stockholders' equity were 1.67% and 15.53%, respectively, for the 1998 period compared to 2.29% and 22.71%, respectively, for the 1997 period. 12 19 INTEREST AND DIVIDEND INCOME Total interest and dividend income increased to $14.6 million for the 1998 period from $14.1 million for the 1997 period. Interest on loans increased to $11.1 million for the 1998 period from $10.4 million for the 1997 period due to average loans outstanding increasing in the 1998 period despite a decrease in the average loan yield to 9.17% for the 1998 period compared to 9.24% for the 1997 period. Interest and dividends on investments was $2.5 and $2.2 million for the 1998 and 1997 periods, respectively. This increase is attributed to an increase in the average yield on investments to 6.10% for the 1998 period from 6.01% for the 1997 period partially offset by a decrease in the average amount of investments held. Mortgage-backed securities income decreased to $974,000 in the 1998 period from $1.5 million in the 1997 period primarily due to a decrease in the average amount of mortgage-backed securities held due to paydowns and a decrease in the average yield to 7.16% for the 1998 period compared to 7.25% in the 1997 period. INTEREST EXPENSE Interest on deposits increased to $5.8 million for the 1998 period from $5.5 million for the 1997 period. This increase was related to an increase in the average cost of deposits to 3.58% for the 1998 period from 3.51% for the 1997 period and to an increase in average total deposits outstanding. Interest on borrowed funds and escrow deposits of borrowers increased to $84,000 in the 1998 period from $82,000 for the 1997 period. This increase is primarily related to an increase in borrowed funds despite the average cost of borrowings decreasing to 3.32% for the 1998 period from 3.54% for the 1997 period. NON-INTEREST INCOME Total non-interest income for the 1998 period was $748,000 compared to $2.2 million for the 1997 period. The 1997 quarter included a pre-tax gain from the sale of $209 million of mortgage servicing rights of $1.4 million. The gain from the sale of mortgage loans was $131,000 in the 1998 period compared to $91,000 in the 1997 period. Loan servicing fees were $9,000 for the 1998 period compared to $116,000 in the 1997 period. This decrease is mainly due to a reduction in the amount of loans serviced for others as the result of the sale of the above-mentioned mortgage servicing rights. The gain from the sale of investment securities was $188,000 for the 1998 period compared to $99,000 in the 1997 period. NON-INTEREST EXPENSE Total non-interest expense was $4.8 million in the 1998 period and $5.1 million in the 1997 period. Salary and employee benefits remained at $2.9 million in the 1998 and 1997 periods, respectively. Real estate operations expense decreased to $26,000 in the 1998 period compared to $373,000 in the 1997 period mainly due to a writedown in the value of real estate owned through foreclosure occurring in the 1997 period. INCOME TAX EXPENSE Income tax expense for the 1998 period was $1.6 million compared to $1.7 million for the 1997 period. As a result of the capital gain generated from the sale of mortgage-servicing rights in the 1997 period, the Corporation was able to recognize a tax benefit in the amount of $279,000 from capital losses of prior periods during that period which substantially lowered the effective tax rate of the 1997 period. 13 20 WARREN BANCORP, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ANNUAL MEETING - MAY 6, 1998 A. ELECTION OF DIRECTORS* TERM TO EXPIRE IN 2001 Total Vote for Total Vote Withheld Each Director From Each Director ------------- ------------------ Francis L. Conway 3,121,394 7,193 Arthur E. Holden 3,123,569 5,018 Stephen G. Kasnet 3,124,194 4,393 Linda Lerner 3,110,394 18,193 Arthur J. Pappathanasi 3,110,694 17,893 George W. Phillips 3,124,694 3,893 John H. Womack 3,123,544 5,043 OTHER DIRECTORS TERM TO EXPIRE IN 1999 TERM TO EXPIRE IN 2000 ---------------------- ---------------------- Peter V. Bent Stephen J. Connolly, IV Paul J. Curtin Robert R. Fanning, Jr. Stephen R. Howe John C. Jeffers Arthur E. McCarthy Paul M. Peduto John D. Smidt John R. Putney * Number of shares prior to May 12, 1998 stock split. B. Approval of the Warren Bancorp, Inc. Incentive and Nonqualified Stock Option Plan. FOR-1,986,772 AGAINST-223,945 ABSTAIN-129,908 NON-VOTE-787,962 ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS 27.1 Financial Data Schedule - 1998 27.2 Financial Data Schedule - 1997 Restated REPORTS ON FORM 8-K - On June 9, 1998 the Corporation filed a current report on Form 8-K regarding a 2-for-1 stock split which occurred on May 12, 1998 and the effect of the split on prior periods' selected financial data. 14 21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WARREN BANCORP, INC. DATE: August 13, 1998 By: /s/ John R. Putney ------------------------------- John R. Putney President and Chief Executive Officer DATE: August 13, 1998 By: /s/ Paul M. Peduto ------------------------------- Paul M. Peduto Treasurer (Principal Financial Officer and Principal Accounting Officer) 15 EX-27.1 2 FINANCIAL DATA SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JUNE 30, 1998 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 3-MOS DEC-31-1998 APR-01-1998 JUN-30-1998 1 7,232 11,495 0 0 97,485 6,544 6,784 247,609 4,023 378,137 330,294 2,733 2,771 2,671 0 0 809 38,859 378,137 5,619 1,719 0 7,338 2,887 2,941 4,397 (50) 179 2,484 2,456 2,456 0 0 1,619 0.21 0.20 4.99 233 475 1,918 0 4,066 57 82 4,023 4,023 0 0
EX-27.2 3 FINANCIAL DATA SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JUNE 30, 1997 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 3-MOS DEC-31-1997 APR-01-1997 JUN-30-1997 1 7,509 6,974 0 0 101,919 6,475 6,715 227,247 4,066 358,021 314,300 2,663 3,269 671 0 0 388 36,730 358,021 5,331 1,849 0 7,180 2,759 2,789 4,391 (198) 0 2,374 2,443 2,443 0 0 1,624 0.22 0.21 5.16 871 254 1,401 0 4,533 496 267 4,066 4,066 0 0
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