-----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, Ag2z4a6Yx0C2XQySEFApONHmF2Y00OYTsGzpN5m9osvv8G/z0V6zCyuIH6X9uPpp KNkw+w3Gia6N8tvLJ9EBPg== 0000939057-97-000167.txt : 19971114 0000939057-97-000167.hdr.sgml : 19971114 ACCESSION NUMBER: 0000939057-97-000167 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST SAVINGS BANK OF WASHINGTON BANCORP INC CENTRAL INDEX KEY: 0000946673 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTIONS, NOT FEDERALLY CHARTERED [6036] IRS NUMBER: 911632900 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26584 FILM NUMBER: 97713291 BUSINESS ADDRESS: STREET 1: 10 S FIRST AVE CITY: WALLA WALLA STATE: WA ZIP: 99362 BUSINESS PHONE: 5095273636 MAIL ADDRESS: STREET 1: PO BOX 907 CITY: WALLA WALLA STATE: WA ZIP: 99362 10-Q 1 FIRST SAVINGS BANK OF WASHINGTON BANCORP FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended.................... SEPTEMBER 30, 1997 -------------------- [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission File Number 0-26584 FIRST SAVINGS BANK OF WASHINGTON BANCORP, INC. (Exact name of registrant as specified in its charter) DELAWARE 91-1691604 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 10 S. FIRST AVENUE WALLA WALLA, WASHINGTON 99362 (Address of principal executive offices and zip code) (509) 527-3636 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report.) 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 reports), and (2) has been subject to such filing requirements for the past 90 days. (1) 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. Title of class: As of OCTOBER 31, 1997 --------------- ---------------------- COMMON STOCK, $.01 PAR VALUE 10,246,513 SHARES * * Includes 752,573 shares held by employee stock ownership plan (ESOP) that have not been released, committed to be released, or allocated to participant accounts; and 321,568 unvested shares held in trust for management recognition and development plan (MRP). FIRST SAVINGS BANK OF WASHINGTON BANCORP, INC. AND SUBSIDIARIES Table of Contents PART I - FINANCIAL INFORMATION ITEM 1 - Financial Statements. The Consolidated Financial Statements of First Savings Bank of Washington Bancorp, Inc. and Subsidiaries filed as a part of the report are as follows: Consolidated Statements of Financial Condition as of September 30, 1997 and March 31, 1997............................... 2 Consolidated Statements of Income for the Quarters and Six Months ended September 30, 1997 and 1996......... 3 Consolidated Statements of Changes in Stockholders' Equity for the Six Months ended September 30, 1997 and 1996.......................4 Consolidated Statements of Cash Flows for the Six Months ended September 30, 1997 and 1996..................... 5 Selected Notes to Consolidated Financial Statements....................... 6 ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results of Operation General................................................................... 9 Recent Developments and Significant Events................................ 9 Comparison of Financial Condition at September 30, 1997 and March 31, 1997..................................................................... 9 Comparison of Results of Operations for the Quarters and Six Months ended September 30, 1997 and 1996............................................. 10 Asset Quality.............................................................14 Liquidity and Capital Resources.......................................... 15 Capital Requirements......................................................15 PART II - OTHER INFORMATION Item 1. Legal Proceedings................................................ 16 Item 2. Changes in Securities............................................ 16 Item 3. Defaults upon Senior Securities.................................. 16 Item 4. Submission of Matters to a Vote of Stockholders.................. 16 Item 5. Other Information................................................ 16 Item 6. Exhibits and Reports on Form 8-K................................. 16 SIGNATURES.................................................................. 17 EXHIBIT 27- FINANCIAL DATA SCHEDULE..........................................18 1 FIRST SAVINGS BANK OF WASHINGTON BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (DOLLARS IN THOUSANDS) SEPTEMBER 30, 1997 AND MARCH 31, 1997 (UNAUDITED) ASSETS SEPTEMBER 30 March 31 1997 1997 ------- ------- CASH AND DUE FROM BANKS $ 25,896 $ 24,488 SECURITIES AVAILABLE FOR SALE, cost $284,978 and $288,142 287,822 287,516 SECURITIES HELD TO MATURITY, fair value $788 and $987 788 987 LOANS RECEIVABLE HELD FOR SALE, fair value $6,457 and $2,940 6,457 2,940 LOANS RECEIVABLE, net of the allowance for losses of $7,187 and $6,748 726,022 642,941 ACCRUED INTEREST RECEIVABLE 7,740 6,950 REAL ESTATE HELD FOR SALE, net 1,613 1,057 FEDERAL HOME LOAN BANK STOCK 15,067 12,807 PROPERTY AND EQUIPMENT, net 11,084 10,534 COSTS IN EXCESS OF NET ASSETS ACQUIRED 11,457 11,906 DEFERRED INCOME TAX ASSET 254 1,220 OTHER ASSETS 4,415 4,287 --------- --------- $ 1,098,615 $ 1,007,633 LIABILITIES AND STOCKHOLDERS' EQUITY DEPOSITS: Interest bearing $ 523,820 $ 508,258 Non-interest bearing 44,663 36,709 ---------- ---------- 568,483 544,967 ADVANCES FROM FEDERAL HOME LOAN BANK 277,207 231,515 OTHER BORROWINGS 83,652 62,185 ADVANCES BY BORROWERS FOR TAXES AND INSURANCE 3,661 4,112 ACCRUED EXPENSES AND OTHER LIABILITIES 10,457 11,086 DEFERRED COMPENSATION 3,475 2,814 INCOME TAXES PAYABLE 1,385 2,318 ---------- ---------- 948,320 858,997 STOCKHOLDERS' EQUITY: Preferred stock - $0.01 par value, 500,000 shares authorized, no shares issued -- -- Common stock - $0.01 par value, 25,000,000 shares authorized, 10,910,625 shares issued: 10,246,513 shares and 10,518,982 shares outstanding at September 30, 1997 and March 31, 1997, respectively 109 109 Additional paid - in capital 108,445 107,844 Retained earnings 67,710 62,572 Valuation reserve for securities available for sale 1,872 (401) Treasury stock, at cost: 664,112 shares at September 30, 1997 and 391,643 at March 31, 1997 (13,585) (6,954) Unearned shares of common stock issued to employee stock ownership plan trust 752,573 and 775,105 shares outstanding but restricted at September 30, 1997 and March 31,1997, respectively (7,526) (7,751) Shares held in trust for stock-related compensation plans (6,730) (6,783) ---------- ---------- 150,295 148,636 ---------- ---------- $ 1,098,615 $ 1,007,633 ========== ========== 2 FIRST SAVINGS BANK OF WASHINGTON BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS) Quarters Six Months Ended September 30 Ended September 30 1997 1996 1997 1996 INTEREST INCOME: ------ ------ ------ ------ Loans receivable $ 16,178 $ 11,316 $ 31,100 $ 20,248 Mortgage-backed securities 3,173 3,219 6,315 6,331 Securities and deposits 1,960 2,113 3,958 3,854 ------ ------ ------ ------ 21,311 16,648 41,373 30,433 INTEREST EXPENSE: Deposits 6,373 5,434 12,432 10,061 Federal Home Loan Bank advances 4,310 3,164 8,001 5,807 Other borrowings 1,071 409 2,042 705 ------ ------ ------ ------ 11,754 9,007 22,475 16,573 Net interest income before provision for loan losses 9,557 7,641 18,898 13,860 PROVISION FOR LOAN LOSSES 400 407 755 920 ------ ------ ------ ------ Net interest income 9,157 7,234 18,143 12,940 OTHER OPERATING INCOME: Loan servicing fees 189 206 387 384 Other fees and service charges 640 381 1,204 545 Gain on sale of loans 301 187 503 274 Gain (loss) on sale of securities 1 (212) 2 (208) Miscellaneous 14 32 32 54 ------ ------ ------ ------ Total other operating income 1,145 594 2,128 1,049 OTHER OPERATING EXPENSES: Salary and employee benefits 3,466 2,913 6,780 4,689 Less capitalized loan origination costs(491) (401) (997) (792) Occupancy 383 324 769 601 Outside computer services 256 208 504 406 Real estate operations 1 2 -- 19 Advertising 111 144 233 194 Deposit insurance 69 2,605 139 2,819 Amortization of costs in excess of net assets acquired 225 -- 449 -- Miscellaneous 1,148 1,066 2,230 1,089 ------- ------ ------- ------ Total other operating expenses 5,168 6,861 10,107 9,745 ------- ------ ------- ------ Income before provision for income taxes 5,134 967 10,164 4,244 PROVISION FOR INCOME TAXES 1,837 164 3,622 1,048 ------- ------ ------- ------ NET INCOME $ 3,297 $ 803 $ 6,542 $ 3,196 ======= ======= ======= ======= Net income per common shares: Primary $ .34 $ .08 $ .68 $ .33 Fully diluted $ .34 $ .08 $ .67 $ .33 Cumulative dividends declared per common share: $ .07 $ .05 $ .14 $ .10 3 PAGE FIRST SAVINGS BANK OF WASHINGTON BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) (IN THOUSANDS) FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 Valuation reserve for Shares Total Common Stock Additional securities Unearned ESOP shares Treasury stock held in trust Stock- Number of At par paid-in Retained available Number of Carrying Number of Carrying for deferred holders shares value capital earnings for sale shares value shares value compensation equity ------ ----- ------- -------- -------- ------ -------- ------ -------- ------------ -------- BALANCE, April 1, 1996 10,911 $ 109 $107,370 $ 55,343 $ 774 (833) $ (8,331) -- $ -- $ (1,123) $154,142 Net income 3,196 3,196 Change in valuation reserve for securities available for sale, net of income taxes (544) (544) Cash dividends on common stock (.10/share cumulative) (963) (963) Purchase of treasury stock (436) (6,430) (6,430) Reissuance of treasury stock for deferred compensation plan 58 404 5,956 (6,014) -- Release of earned ESOP shares 94 18 178 272 Amortization of compensation related to MRP 301 301 Forfeiture or net change in the number and/or carrying amount of shares held in trust for compensation plans (325) (325) ------ ----- ------- -------- -------- ------ -------- ------ -------- ------------ -------- BALANCE, September 30, 1996 10,911 $ 109 $107,522 $ 57,576 $ 230 (815) $ (8,153) (32) $ (474) $ (7,161) $149,649 ====== ===== ======= ======== ======== ====== ======== ====== ======== ========== ======== BALANCE, April 1, 1997 10,911 $ 109 $107,844 $ 62,572 $ (401) (775) $ (7,751) (392) $(6,954) $ (6,783) $148,636 Net income 6,542 6,542 Change in valuation reserve for securities available for sale, net of income taxes 2,273 2,273 Cash dividends on stock ($.14/share cumulative) (1,404) (1,404) Purchase of treasury stock (272) (6,619) (6,619) Purchase and sale of stock (2) (49) (49) for incentive stock options exercised (19) 2 49 30 Release of earned ESOP shares 389 22 225 614 Recognition of tax benefit due to vesting of MRP shares 231 231 Amortization of compensation related to MRP 611 611 Forfeiture or net change in number and/or carrying amount of shares held in trust for compensation plans (12) (558) ------ ----- ------- -------- -------- ------ -------- ------ -------- ------------ -------- BALANCE, SEPTEMBER 30, 1997 10,911 $ 109 $108,445 $ 67,710 $ 1,872 (753) $ (7,526) (664) $(13,585) $(6,730) $150,295 ====== ===== ======= ======== ======== ====== ======== ====== ======== ============ ======== 4
FIRST SAVINGS BANK OF WASHINGTON BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS) FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 1997 1996 ------ ------ OPERATING ACTIVITIES Net income $ 6,542 $ 3,196 Adjustments to reconcile net income to net cash provided by operating activities: Deferred taxes -- (950) Depreciation 536 322 Loss (gain) on sale of securities (2) 208 Net amortization of (premiums) discounts on investments (3) (474) Amortization of costs in excess of net assets acquired 449 140 Amortization of MRP liability 611 301 Loss (gain) on sale of loans (503) (274) Loss (gain) on disposal of real estate held for sale 20 -- Net changes in deferred loan fees, premiums and discounts 453 480 Loss (gain) on disposal of equipment (5) -- Capitalization of mortgage servicing rights from sale of mortgages with servicing retained (73) -- Amortization of mortgage servicing rights 35 38 Provision for losses on loans and real estate held for sale 745 981 FHLB stock dividend (541) (411) Cash provided (used) in operating assets and liabilities: Loans held for sale (3,517) (828) Accrued interest receivable (790) (108) Other assets (90) 173 Deferred compensation 130 98 Accrued expenses and other liabilities (611) 966 Income taxes payable (933) (1,628) ------- ------- Net cash provided by operating activities 2,453 2,230 ------- ------- INVESTING ACTIVITIES: Purchase of securities available for sale (80,735) (374,604) Principal payments and maturities of securities available for sale 82,904 413,173 Sales of securities available for sale 1,000 -- Principal payments and maturities of securities held to maturity 199 198 Loans originated and closed - net (244,846) (135,304) Purchase of loans and participating interest in loans (28,673) (37,937) Sales of loans and participating interest in loans 27,324 17,410 Principal repayments on loans 160,597 88,929 Purchase of FHLB stock (1,719) (2,061) Purchase of property and equipment (1,090) (200) Proceeds from sale of property and equipment 9 -- Insurance proceeds on real estate held for sale-net of capitalized costs 119 -- Basis of real estate held for sale acquired in settlement of loans and disposed of during the period 1,127 365 Funds transferred to deferred compensation plan trusts (39) (37) Acquisition of IEB, net of cash acquired -- (17,289) ------- ------- Net cash used by investing activities (83,823) (47,357) ------- ------- (CONTINUED ON NEXT PAGE) 5 FIRST SAVINGS BANK OF WASHINGTON BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS) FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (CONTINUED FROM PRIOR PAGE) 1997 1996 ------ ------ FINANCING ACTIVITIES Increase (decrease) in deposits $ 23,516 $ 16,926 Proceeds from FHLB advances 424,345 293,362 Repayment of FHLB advances (378,653) (253,656) Proceeds from reverse repurchase borrowings 24,877 16,111 Repayments of reverse repurchase borrowings (301) -- Decrease-net in other borrowings (3,109) (1,436) Decrease in borrowers'advances for taxes and insurance (451) (377) Compensation expense recognized for shares released for allocation to participants of the ESOP: Original basis of shares 225 178 Excess of fair value of released shares over basis 389 94 Cash dividends paid (1,422) (963) Net cost to exercise stock options (19) -- Purchase of treasury stock (6,619) (6,430) ------- ------- Net cash provided by financing activities 82,778 63,809 ------- ------- NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS 1,408 18,682 CASH AND DUE FROM BANKS, BEGINNING OF PERIOD 24,488 9,026 ------- ------- CASH AND DUE FROM BANKS, END OF PERIOD $ 25,896 $ 27,708 ======= ======= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest paid $ 21,346 $ 16,107 Taxes paid $ 4,555 $ 3,626 Non-cash transactions: Loans, net of discounts, specific loss allowances and unearned income transferred to real estate owned $ 1,812 $ 444 Net change in accrued dividends payable $ (18) $ -- Net change in unrealized gain (loss) in deferred compensation trust and related liability $ (538) $ 296 Treasury stock forfeited by MRP $ 12 $ -- Treasury stock reissued to MRP $ -- $ 6,014 Recognize tax benefit of vested MRP shares $ 231 $ -- 6 FIRST SAVINGS BANK OF WASHINGTON BANCORP, INC. AND SUBSIDIARIES SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1997 AND MARCH 31, 1997 NOTE 1: BASIS OF PRESENTATION The unaudited consolidated financial statements of First Savings Bank of Washington Bancorp, Inc. (the Company) included herein reflect all adjustments which are, in the opinion of management, necessary to present fairly the statement of financial position and the results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. The consolidated financial statements include the Company's wholly owned subsidiaries, First Savings Bank of Washington (FSBW) and Inland Empire Bank (IEB) (together, the Banks). The balance sheet data at March 31, 1997, is derived from the Company's audited financial statements. Certain information andnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended March 31, 1997 (File No. 0-26584), of the Company. Certain amounts in the prior period's financial statements and/or schedules have been reclassified to conform to the current period's presentation. NOTE 2: ADDITIONAL INFORMATION REGARDING INTEREST-BEARING DEPOSITS AND SECURITIES The following table sets forth additional detail on the Company's interest-bearing deposits and securities at the dates indicated (at carrying value) (in thousands): SEPTEMBER 30 March 31 1997 1997 Interest-bearing deposits included --------- --------- in cash and due from banks $ 7,501 $ 8,849 --------- --------- Mortgage-backed securities 186,650 174,375 Other securities-taxable 65,233 76,401 Other securities-tax exempt 34,096 33,969 Other stocks with dividends 2,631 3,758 --------- --------- Total securities $ 288,610 $ 288,503 --------- --------- Federal Home Loan Bank Stock 15,067 12,807 --------- --------- $ 311,178 $ 310,159 ========= ========= The following table provides additional detail on income from deposits and securities for the periods indicated (in thousands): Quarters ended Six Months ended September 30 September 30 1997 1996 1997 1996 ------ ------ ------ ------ Mortgage-backed securities $ 3,173 $ 3,219 $ 6,315 $ 6,331 ------ ------ ------ ------ Taxable interest and dividends $ 1,149 $ 1,372 2,382 2,461 Tax-exempt interest 516 517 1,035 982 Federal Home Loan Bank stock-dividends 295 224 541 411 ------ ------ ------ ------ $ 1,960 $ 2,113 3,958 3,854 ------ ------ ------ ------ $ 5,133 $ 5,332 $10,273 $10,185 ====== ====== ====== ====== 7 NOTE 3: CALCULATION OF WEIGHTED AVERAGE SHARES OUTSTANDING FOR EARNINGS PER SHARE (EPS) AND CALCULATION OF OUTSTANDING SHARES. Calculation of Weighted Average Shares Outstanding for Earnings Per Share (in thousands) Quarters ended Six Months ended September 30 September 30 ------------ ------------ 1997 1996 1997 1996 ------ ------ ------ ------ Total shares originally issued 10,911 10,911 10,911 10,911 Less treasury stock including shares allocated to MRP (854) (436) (825) (342) Less unallocated shares held by the ESOP (758) (821) (764) (825) Plus MRP and stock option incremental shares considered outstanding for primary EPS calculations 346 153 332 76 ------ ------ ------ ------ Primary weighted average shares outstanding 9,645 9,807 9,654 9,820 Plus MRP and stock option incremental shares considered outstanding for fully diluted EPS calculations 32 -- 44 -- ------ ------ ------ ------ Fully diluted weighted average shares outstanding 9,677 9,807 9,698 9,820 ====== ====== ====== ====== Calculation of Outstanding Shares at (in thousands) SEPTEMBER 30 March 31 1997 1997 -------- -------- Total shares issued 10,911 10,911 Less treasury stock (664) (392) -------- -------- Outstanding shares 10,247 10,519 ======== ======== In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share. SFAS No. 128 specifies the computation, presentation and disclosure requirements for earnings per share (EPS) for entities with publicly held common stock or potential common stock such as options, warrants, convertible securities or contingent stock agreements if those securities trade in a public market. This standard specifies computation and presentation requirements for both basic EPS and, for entities with complex capital structures, diluted EPS. SFAS No. 128 is effective for reporting periods ending after December 15, 1997 and early adoption of the standard is not permitted. The following table shows the Company's pro forma basic and diluted earnings per share if calculated under SFAS No. 128. Quarters ended Six Months ended September 30 September 30 ------------ ------------ 1997 1996 1997 1996 ------ ------ ------ ------ Basic earnings per share $ .35 $ .08 $ .70 $ .33 Diluted earnings per share $ .34 $ .08 $ .68 $ .32 8 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL First Savings Bank of Washington Bancorp, Inc. (the Company), a Delaware corporation, is primarily engaged in the business of planning, directing and coordinating the business activities of its wholly owned subsidiaries, First Savings Bank of Washington (FSBW) and Inland Empire Bank (IEB) (together, the Banks). FSBW is a Washington-chartered savings bank the deposits of which are insured by the Federal Deposit Insurance Corporation (FDIC) under the Savings Association Insurance Fund (SAIF). FSBW conducts business from its main office in Walla Walla, Washington and its 15 branch offices and three loan production offices located in southeast, central, north central and western Washington. IEB is an Oregon-chartered commercial bank whose deposits are insured by the FDIC under the Bank Insurance Fund (BIF). IEB conducts business from its main office in Hermiston, Oregon and its five branch offices and two loan production offices located in northeast Oregon. The operating results of the Company depend primarily on its net interest income, which is the difference between interest income on interest-earning assets, consisting of loans and investment securities, and interest expense on interest-bearing liabilities, composed primarily of savings deposits and Federal Home Loan Bank (FHLB) advances. Net interest income is primarily a function of the Company's interest rate spread, which is the difference between the yield earned on interest-earning assets and the rate paid on interest-bearing liabilities, as well as a function of the average balance of interest-earning assets as compared to the average balance of interest-bearing liabilities. As more fully explained below, the Company's net interest income significantly increased for both the most recent quarter and six months ended September 30, 1997, when compared to the same periods for the prior year. This increase in net interest income was largely due to the substantial growth in average asset and liability balances and the acquisition of IEB on August 1, 1996. The Company's net income also is affected by provisions for loan losses and the level of its other income, including deposit service charges, loan origination and servicing fees, and gains and losses on the sale of loans and securities, as well as its non-interest operating expenses and income tax provisions. As further explained below, net income for both the most recent quarter and six months increased $2.5 million and $3.4 million respectively, from the comparable periods ended September 30, 1996. After adjusting for the special SAIF assessment of $2.4 million ($1.6 million after tax) that occurred in the second quarter of fiscal year 1997 (quarter ended September 30, 1996), the increases were $808,000 and $1.7 million for the most recent quarter and six months when compared to the same periods in fiscal 1997. These increases reflected the rise in net interest income and an increase in other operating income which were partially offset by increases in operating expenses and the provision for income taxes. Operating results for both the quarter and six months ended September 30, 1997, were significantly affected by the acquisition of IEB. Because the acquisition of IEB occurred on August 1, 1996, part way through the quarter and six months ended September 30, 1996, the consolidated results for those periods, reflecting only two months of IEB operating results, were less significantly affected by that acquisition. Management's discussion and analysis of results of operations is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the Consolidated Financial Statements and accompanying Selected Notes to Consolidated Financial Statements. RECENT DEVELOPMENTS AND SIGNIFICANT EVENTS In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income and SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. SFAS No. 131 establishes standards of reporting by publicly-held business enterprises and disclosure of information about operating segments in annual financial statements and, to a lesser extent, in interim financial reports issued to shareholders. SFAS Nos. 130 and 131 are effective for fiscal years beginning after December 15, 1997. As both SFAS Nos. 130 and 131 deal with financial statement disclosure matters, the Company does not anticipate the adoption of these new standards will have a material impact on its financial position or results of operations. In October 1997, the Company adopted a dividend reinvestment and stock purchase plan. Under the terms of the plan all registered stockholders with 100 or more shares of stock may automatically reinvest all or a portion of their cash dividends in additional shares of the Company's common stock. In addition qualifying participants may also make optional monthly cash payments of $50 to $1,500 to purchase additional shares of Company stock. 9 COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30 AND MARCH 31, 1997 Total assets increased $91.0 million, or 9.0%, from $1.008 billion at March 31, 1997, to $1.099 billion at September 30, 1997. The increase generally reflected growth in net loans receivable and was funded primarily with deposit growth, advances from the FHLB and other borrowings. This growth represented a continuation of management's plans to further leverage the Company's capital. Loans receivable (gross loans less loans in process, deferred fees and discounts, and allowance for loan losses) grew $86.6 million, or 13.4%, from $645.9 million at March 31,1997, to $732.5 million at September 30, 1997. The increase in gross loans of $89.3 million from $707.8 million at March 31, 1997, to $797.1 million at September 30, 1997, consists of $25.1 million of mortgages secured by commercial and multi-family real estate, $33.9 million of residential mortgages, $13.2 million of construction and land loans and $17.1 million of non-mortgage loans such as commercial, agricultural and consumer loans. A little more than half of the increase in assets was funded by a net increase of $45.7 million, or 19.7%, in FHLB advances from $231.5 million at March 31, 1997, to $277.2 million on September 30, 1997. Asset growth was also funded by increased deposits, other borrowings and net income from operations. Deposits grew $23.5 million, or 4.3%, from $545.0 million at March 31, 1997, to $568.5 million at September 30, 1997. Other borrowings, primarily reverse repurchase agreements with securities dealers, grew $21.5 million, or 34.5%, from $62.2 million at March 31, 1997, to $83.7 million at September 30, 1997. Funds also were used to purchase $6.6 million of treasury stock during this six month period. Securities available for sale and held to maturity did not significantly change from balances at March 31, 1997. Federal Home Loan Bank Stock increased $2.3 million as the Company was required to purchase more stock as a result of its increased use of FHLB advances. Real estate held for sale increased $556,000, primarily as a result of foreclosure actions completed on certain non-performing loans. COMPARISON OF OPERATING RESULTS FOR THE QUARTERS AND SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 GENERAL. Net income for the second quarter of fiscal 1998 was $3.3 million, an increase of $2.5 million from the comparable quarter in fiscal 1997. Net income for the first six months of fiscal 1998 was $6.5 million, or $.68 per share, compared to net income of $3.2 million, or $.33 per share, recorded in the comparable period of fiscal 1997. Net income for the second quarter and six months ended September 30, 1996 was significantly affected by the $2.4 million ($1.6 million after tax) SAIF assessment. In addition, the first six months of fiscal 1998 included $1.5 million of net income from a full six months of operations at IEB, which the Company acquired on August 1, 1996, compared to $400,000 for two months in the comparable fiscal 1997 period. The Company's improved operating results reflect the significant growth of assets and liabilities. Compared to year ago levels, total assets increased 16% to $1.10 billion at September 30, 1997, total loans rose 28% to $732.5 million, deposits grew 8.2% to $568.5 million and borrowings increased 42% to $360.9 million. The substantial increase in these balances during the year since September 30, 1996, resulted from the continued deployment and leveraging of the $98.6 million in net proceeds raised in the Company's conversion from mutual to stock ownership on October 31, 1995. This growth helped to increase the Company's return on average equity from 6.43% (excluding the SAIF assessment of $1.6 million after tax) for the six months ended September 30, 1996, to 8.63% for the six months ended September 30, 1997. INTEREST INCOME. Interest income for the quarter ended September 30, 1997, was $21.3 million compared to $16.6 million for the quarter ended September 30, 1996, an increase of $4.7 million, or 28.0%. The increase in interest income was a result of a $190.0 million or 22.3% growth in average balances of interest-earning assets combined with a 36 basis point increase in the average yield on those assets, which rose from 7.75% in the quarter ended September 1996, to 8.11% in September 1997. Average loans receivable for the second quarter of fiscal 1998 increased by $201.4 million, or 38.0%, when compared to the same quarter in fiscal 1997. Interest income on loans increased by $4.9 million, or 43.0%, compared to the same quarter a year earlier, reflecting the impact of the increase in average loan balances and a 31 basis point increase in the yield on those balances primarily resulting from the inclusion of higher yielding loans held by IEB. The average balance of mortgage-backed and investment securities and FHLB stock for the second quarter of fiscal 1998 decreased by $11.4 million compared to the second quarter of fiscal 1997, and the yield on those balances decreased 2 basis points. Interest and dividend income from those investments decreased by $199,000 for the September 1997 quarter compared to September 1996. Interest income for the six months ended September 30, 1997 increased $10.94 million, or 35.9%, from the comparable period in fiscal 1997. Interest income from loans increased $10.85 million, or 53.6%, from the comparable period in fiscal 1997. The majority of the increase from loan interest income reflected the impact of a $223.1 million growth in average loans receivable balances combined with a 41 basis point increase in the yield on the loan balances. Interest income from mortgage-backed and investment securities and FHLB stock for the six months ended September 30, 1997, increased a modest $88,000 from $10.2 million in fiscal 1996, to $10.3 million in fiscal 1997, reflecting a $433,000 increase in average balances combined with a 5 basis point increase in yield. The yield on average earning assets increased from 7.67% for the six months ended September 30, 1996, to 8.13% for the six months ended September 30, 1997. 10 INTEREST EXPENSE. Interest expense for the quarter ended September 30, 1997, was $11.8 million compared to $9.0 million for the comparable period in 1996, an increase of $2.8 million, or 30.5%. The increase in interest expense was due to the $198.3 million growth in average interest-bearing liabilities. The increase in average interest-bearing liabilities in the quarter ended September 1997 was largely due to a $107.2 million increase in the average balance of FHLB advances and other borrowings combined with a $91.1 million growth in average deposits. Average FHLB advances totaled $280.0 million during the quarter ended September 30, 1997, as compared to $215.8 million during the quarter ended September 30,1996, resulting in a $1.1 million increase in related interest expense. The average rate paid on those advances increased from 5.82% for the quarter ended September 1996, to 6.11% for the comparable period in 1997, adding to the increase in interest expense. Other borrowings consist of retail repurchase agreements with customers and repurchase agreements with investment banking firms secured by certain investment securities. The average balance for other borrowings increased $43.0 million from $30.8 million for the quarter ended September 30, 1996, to $73.8 million for the same period in 1997, and the related interest expense increased $662,000, from $409,000 to $1.1 million for the respective periods. The majority of this growth in other borrowings reflects an increase in repurchase agreements with investment banking firms which totaled $67.7 million at September 30, 1997. Deposit interest expense increased $939,000 for the quarter ended September 30, 1997. Average deposit balances increased from $473.3 million for the quarter ended September 1996, to $564.4 million for the comparable period in 1997 while, at the same time, the average rate paid on deposit balances decreased 7 basis points. The decline in the rate paid on deposits primarily reflects the acquisition of IEB's $32.1 million of non-interest-bearing deposits as well as generally lower rates paid on interest-bearing accounts of IEB. In addition the average balances of non-interest and low-interest (savings and NOW) deposits have grown at both Banks. The percentage of these non or low-interest deposits to total average deposits increased for the most recent quarter and six month period when compared to the same period a year earlier. A comparison of total interest expense for the six months ended September 30, 1997, shows an increase of $5.9 million, or 35.6%, from the comparable period in September 1996. The increased interest expense reflects the increase in average deposits of $131.9 million combined with a $106.4 million increase in FHLB advances and other borrowings. The effect on interest expense of the increase in average interest-bearing liabilities was slightly reduced by a 4 basis point decrease in the interest rate paid on those liabilities. 11 The following tables provide additional comparative data on the Company's operating performance (in thousands): Quarters ended Six Months ended September 30 September 30 AVERAGE BALANCES 1997 1996 1997 1996 - ---------------- ------ ------ ------ ------ Investment securities and deposits $107,753 $124,551 $110,905 $115,538 Mortgage-backed obligations 187,862 186,011 185,157 183,590 Loans 732,216 530,785 704,555 481,411 FHLB stock 14,640 11,135 13,891 10,392 ------ ------ ------ ------ Total average interest-earning asset 1,042,471 852,482 1,014,508 790,931 Non-interest-earning assets 44,073 25,840 41,830 21,231 ------ ------ ------ ------ Total average assets $1,086,544 $878,322 $1,056,338 $812,162 ========= ======= ========= ======= Deposits $564,406 $473,317 $554,691 $422,777 Advances from FHLB 280,034 215,772 263,992 203,281 Other borrowings 73,758 30,817 70,711 25,045 ------ ------ ------ ------ Total average interest-bearing liabilities 918,198 719,906 889,394 651,103 Non-interest-bearing liabilities 16,213 13,687 15,719 12,951 ------ ------ ------ ------ Total average liabilities 934,411 733,593 905,113 664,054 Equity 152,133 144,729 151,225 148,108 ------ ------ ------ ------ Total average liabilities and equity $1,086,544 $878,322 $1,056,338 $812,162 ======= ======= ======= ======= INTEREST RATE YIELD/EXPENSE (RATES ARE ANNUALIZED) - -------------------------------------------------- Interest Rate Yield: Investment securities and deposits 6.13% 6.02% 6.15% 5.94% Mortgage-backed obligations 6.70% 6.87% 6.80% 6.88% Loans 8.77% 8.46% 8.80% 8.39% FHLB stock 7.99% 7.98% 7.77% 7.89% Total interest rate yield on ------ ------ ------ ------ interest-earning assets 8.11% 7.75% 8.13% 7.67% ------ ------ ------ ------ Interest Rate Expense: Deposits 4.48% 4.55% 4.47% 4.75% Advances from FHLB 6.11% 5.82% 6.04% 5.70% Other borrowings 5.76% 5.27% 5.76% 5.61% Total interest rate expense on ------ ------ ------ ------ interest-bearing liabilities 5.08% 4.96% 5.04% 5.08% ------ ------ ------ ------ Interest spread 3.03% 2.79% 3.09% 2.59% Net interest margin on interest ------ ------ ------ ------ earning assets 3.64% 3.56% 3.72% 3.50% ADDITIONAL KEY FINANCIAL RATIOS (RATIOS ARE ANNUALIZED) - ------------------------------------------------------- Return on average assets 1.20% 0.36% 1.24% 0.78% Return on average equity 8.60% 2.20% 8.63% 4.30% Average equity / average assets 14.00% 16.48% 14.32% 18.24% Average interest-earning assets/interest- bearing liabilities 113.53% 118.42% 114.07% 121.48% Non-interest [other operating] expenses/ average assets 1.89% 3.10% 1.91% 2.39% Efficiency ratio [non-interest (other operating) expenses/revenues] 48.29% 83.32% 48.07% 65.36% 12 PROVISION FOR LOAN LOSSES. During the quarter ended September 30, 1997, the provision for loan losses was $400,000, compared to $407,000 for the quarter ended September 30, 1996, a decrease of $7,000. A comparison of the provision for loan losses for the six month period shows a decrease of $165,000 to $755,000 for the six months ended September 30, 1997, from $920,000 for the comparable period in fiscal 1996. The decrease in the provision for loan losses reflects management's current estimate of a reduction of the inherent risk in the Company's loan portfolio due to continuing favorable actual loss experience and the strength and anticipated growth in the Northwest economy. The allowance for loan losses net of charge-offs (recoveries) increased by $439,000, to $7.2 million at September 30, 1997, compared to $6.8 million at March 31, 1997. The allowance for losses on loans is maintained at a level sufficient to provide for estimated losses based on evaluating known and inherent risks in the loan portfolio and upon management's continuing analysis of the factors underlying the quality of the loan portfolio. These factors include changes in the size and composition of the loan portfolio, actual loan loss experience, current and anticipated economic conditions, detailed analysis of individual loans for which full collectibility may not be assured, and determination of the existence and realizable value of the collateral and guarantees securing the loans. Additions to these allowances are charged to earnings. Provisions for losses that are related to specific assets are usually applied as a reduction of the carrying value of the assets and charged immediately against the income of the period. The reserve is based upon factors and trends identified by management at the time financial statements are prepared. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Banks' allowance for loan losses. Such agencies may require the Banks to provide additions to the allowance based upon judgments different from management. Although management uses the best information available, future adjustments to the allowance may be necessary due to economic, operating, regulatory and other conditions beyond the Banks' control. The following tables are provided to disclose additional detail on the Company's loans and allowance for loan losses (in thousands): SEPTEMBER 30 March 31 1997 1997 Loans (including loans held for sale): -------- -------- Gross principal $ 797,108 $ 707,816 Less loans in process 54,214 52,412 Less deferred fees and discounts 3,228 2,775 Less allowance for loan losses 7,187 6,748 -------- -------- Total net loans at end of period $ 723,479 $ 645,881 ======== ======== Allowance for loan losses as a percentage of gross principal of loans outstanding 0.90% 0.95% Quarters ended Six Months ended September 30 September 30 1997 1996 1997 1996 Change in allowance for loan losses: ------ ------ ------ ------ Balance at beginning of the period $6,955 $4,434 $6,748 $4,051 Acquisition of IEB -- 1,416 -- 1,416 Provision for loan losses 400 407 755 920 Recoveries 3 32 10 32 Charge-offs (171) (19) (326) (149) ------ ------ ------ ------ Balance at end of the period $7,187 $6,270 $7,187 $6,270 ====== ====== ====== ====== Charge-offs as a percentage of average net book value of loans outstanding for the period. 0.02% 0.00% 0.05% 0.03% OTHER OPERATING INCOME. Other operating income increased $551,000 from $594,000 for the quarter ended September 30, 1996, to $1.1 million for the quarter ended September 30, 1997. The increase resulted primarily from a $259,000 increase in other fees and service charges due largely to IEB operations earning higher fees as a commercial bank, combined with an increase in fee income at FSBW reflecting deposit growth and pricing adjustments. There also was a $114,000 increase in net gains on loans sold in the quarter ended September 30, 1997, as compared to the same period in 1996. This increase primarily reflects the inclusion of, and increases in, IEB's residential mortgage banking operations, which increased the volume of loans sold in the secondary market over the comparable period in the prior year, and slightly increased sales of loans by First Savings Bank. In addition other operating income was reduced in the 1996 quarter by $212,000 in net losses on the sale of securities as compared to a $1,000 net gain recorded in the quarter ended September 30, 1997. 14 Other operating income for the six months ended September 30, 1997, increased $1.1 million from the comparable period in 1996. The $659,000 increase in fee income was due largely to the addition of six months of IEB's operations in the current fiscal 1997 period compared to only two months in 1996. The $439,000 increase in gains from the sale of loans and securities for the six months ended September 30, 1997 also reflects the inclusion of IEB's operations as well as the previously noted net loss on securities sales reported in the comparable period in 1996. OTHER OPERATING EXPENSES. Other operating expenses decreased $1.7 million from $6.9 million for the quarter ended September 30, 1996, to $5.2 million for the quarter ended September 30, 1997. The decrease in other expenses was due to a $2.5 million reduction in deposit insurance in the September 1997 quarter from $2.6 million for the quarter ended September 30, 1996, to $69,000 for the quarter ended September 30, 1997. The majority of the decrease from the September 1996 quarter was due to the $2.4 million special SAIF assessment in 1996. The decrease in deposit insurance was somewhat offset by a $549,000 increase in salary and employee benefits from the inclusion of a full quarter of IEB's operations versus two months in 1996, combined with Company growth. Included in the Company's operating expenses for the quarter ended September 30, 1997, was $225,000 for amortization of costs in excess of net assets acquired resulting from the purchase of IEB. Other increases also reflect growth of the Company including increased personnel costs and increases in legal, accounting and insurance costs relating to operating as a public company. The cost of deposit insurance declined despite a significant increase in deposits as a result of reduced premium levels subsequent to the special SAIF assessment incurred in September 1996. Other operating expenses for the six months ended September 30, 1997 increased $362,000 from the comparable period in 1996. The $2.7 million decrease in deposit insurance was more than offset by a $3.0 million increase in other operating expenses of which $2.0 million of the increase was due to the acquisition of IEB and the balance of the increase was related to the growth in FSBW's operations. INCOME TAXES. Income tax expense was $1.8 million for the quarter ended September 30, 1997, compared to $164,000 for the comparable quarter in 1996. The $1.6 million increase in the provision for income taxes reflects the higher level of income being taxed at higher effective rates due to the phase out of the 34% surtax exemption; the net effect of IEB paying Oregon state income taxes; and the fact that the expenses from the amortization of costs in excess of net assets acquired in purchasing IEB and part of the expense recorded in the release of employee stock ownership plan (ESOP) shares are not deductible for tax purposes. The Company's effective tax rates for the quarters ended September 30, 1997 and 1996, were 36% and 16%, respectively. Income tax expense for the six months ended September 30, 1997 increased $2.6 million from $1.0 million for the six months ended September 30, 1996, to $3.6 million for the comparable period in 1997. The Company's effective tax rate increased to 36% for the six months ended September 30, 1997 from 25% for the comparable period in 1996. This increase was due to the same reasons the income tax provision for the quarter increased. ASSET QUALITY The following tables are provided to disclose additional details on asset quality (in thousands): SEPTEMBER 30 March 31 1997 1997 -------- -------- Non-performing assets at end of the period: Non-performing loans: Delinquent loans on non-accrual status $ 800 $ 2,082 Delinquent loans on accrual status 189 30 -------- -------- Total non-performing loans 989 2,112 REO 1,613 1,057 -------- -------- Total non-performing assets at end of the period $2,602 $3,169 Non-performing loans as a percentage of total net loans at end of the period 0.14% 0.33% Ratio of allowance for loan losses to non-performing loans at end of the period 727% 320% Non-performing assets as a percentage of total assets at end of the period. 0.24% 0.31% Troubled debt restructuring [TDR's] at end of the period $ 372 $ 238 Troubled debt restructuring as a percentage of: Total gross principal of loans outstanding at end of the period 0.05% 0.03% Total assets at end of the period 0.03% 0.02% 14 LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of funds are deposits, FHLB advances, proceeds from loan principal and interest payments and sales of loans, and the maturity of, and interest income on mortgage-backed and investment securities. While maturities and scheduled amortization of loans and mortgage-backed and investment securities are a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by market interest rates, general economic conditions and competition. The primary investing activity of the Company is the origination and purchase of mortgage, consumer, and commercial loans through its subsidiary Banks, IEB and FSBW. During the six months ended September 30, 1997, the Banks closed or purchased loans in the amount of $273.5 million. In addition, during this six month period, funds were used to purchase $6.6 million of treasury stock. These activities were funded primarily by principal repayments on loans and securities, sales of loans, increases in FHLB advances, and deposit growth. For the six months ended September 30, 1997, principal repayments on loans totaled $160.6 million and the Banks' proceeds from the sale of mortgage loans totaled $27.3 million. FHLB advances and other borrowings increased $67.2 million and $12.1 million, respectively, for the same period, and net deposit growth was $23.5 million. The Banks must maintain an adequate level of liquidity to ensure the availability of sufficient funds to support loan growth and deposit withdrawals, to satisfy financial commitments and to take advantage of investment opportunities. At September 30, 1997, the Banks had undisbursed loans in process totaling $54.2 million. The Banks generally maintain sufficient cash and readily marketable securities to meet short term liquidity needs. FSBW also maintains a credit facility with the FHLB of Seattle, which provides for advances which in aggregate may equal up to 40% of FSBW's total assets, which as of September 30, 1997, would give FSBW a total credit line of $360.6 million. Advances under this credit facility totaled $277.2 million, or 30.8% of FSBW's assets at September 30, 1997. IEB also maintains credit facilities with various financial institutions, including the FHLB of Seattle, that would allow it to borrow up to $6.9 million. At September 30, 1997, savings certificates amounted to $350.4 million, or 62%, of the Banks' total deposits, including $198.0 million which were scheduled to mature within one year. Historically, the Banks have been able to retain a significant amount of their deposits as they mature. Management believes it has adequate ability to fund all loan commitments by using deposits, FHLB of Seattle advances, other borrowings and the sale of mortgage loans or securities, and that it can adjust the offering rates of savings certificates to retain deposits in changing interest rate environments. CAPITAL REQUIREMENTS Federally-insured state-chartered banks are required to maintain minimum levels of regulatory capital. Under current FDIC regulations, insured state-chartered banks generally must maintain (i) a ratio of Tier 1 leverage capital to total assets of at least 3.0% (4.0% to 5.0% for all but the most highly rated banks), (ii) a ratio of Tier 1 capital to risk weighted assets of at least 4.0% and (iii) a ratio of total capital to risk weighted assets of at least 8.0%. At September 30, 1997, the Company's banking subsidiaries exceeded all current regulatory capital requirements to be classified as well capitalized institutions, the highest regulatory standard. In order to be categorized as a well capitalized institution, the FDIC requires banks it regulates to maintain a leverage ratio, defined as Tier 1 capital divided by total regulatory assets, of at least 5.00%; Tier 1 (or core) capital of at least 6.00% of risk-weighted assets; and total capital of at least 10.00% of risk-weighted assets. The Company, as a bank holding company, is regulated by the Federal Reserve Board (FRB). The FRB has established capital requirements for bank holding companies that generally parallel the capital requirements of the FDIC for banks with $150 million or more in total consolidated assets. The Company's total regulatory capital must equal 8% of risk-weighted assets and one half of the 8% (4%) must consist of Tier 1 (core) capital. The actual regulatory capital ratios calculated for the Company along with the minimum capital amounts and ratios for capital adequacy purposes were as follows (dollars in thousands): Minimum for capital Actual adequacy purposes Amount Ratio Amount Ratio SEPTEMBER 30, 1997: ------ ----- ------ ----- The Company-consolidated Total capital to risk-weighted assets $144,112 23.31% $49,460 8.00% Tier 1 capital to risk-weighted assets 136,926 22.15 24,730 4.00 Tier 1 leverage capital to average assets 136,926 12.61 42,941 4.00 15 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS From time to time the Company or its subsidiaries are engaged in legal proceedings in the ordinary course of business, none of which is considered to have a material impact on the Company's financial position or results of operations. ITEM 2. CHANGES IN SECURITIES Not Applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS The Annual meeting of stockholders of the Company (Meeting) was held on July 18, 1997. The results of the votes on the matters presented at the Meeting are as follows: 1. The following individuals were elected as directors, each for a three-year term: Votes for Votes withheld --------- ---------- David Casper 9,694,337 39,005 Morris Ganguet 9,695,302 38,040 Marvin Sundquist 9,688,393 44,949 The terms of Directors Dean Mitchell, R.R. "Pete" Reid, Gary Sirmon, Wilber Pribilsky, Jess Foster and Robert D. Adams continued. ITEM 5. OTHER INFORMATION Not Applicable ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K Exhibit 27 - Financial data schedule - see page 18 Report (s) on Form 8-K filed during the six months ended September 30, 1997, are as follows: Date Filed Purpose ---------- ------- Not Applicable 16 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. First Savings Bank of Washington Bancorp, Inc. November 12, 1997 /s/ Gary Sirmon --------------- Gary Sirmon President and Chief Executive Officer November 12, 1997 /s/ D. Allan Roth ------------------ D. Allan Roth Secretary and Treasurer 17 EX-27 2
9 1000 6-MOS MAR-31-1998 SEP-30-1997 25896 1501 6000 0 287822 788 788 732479 7187 1098615 568483 83652 18978 277207 0 0 109 150186 1098615 31100 10147 126 41373 12432 22475 18898 755 2 10107 10164 6542 0 0 6542 0.68 0.67 3.72 800 189 372 0 6748 326 10 7187 3439 0 3748
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