OAK HARBOR, Wash., April 24, 2014 (GLOBE NEWSWIRE) -- Washington Banking Company (Nasdaq:WBCO), the holding company for Whidbey Island Bank, today reported it earned $4.4 million, or $0.28 per diluted share, in the first quarter of 2014, fueled by robust loan growth, strong growth in core deposits and continuing improvement in asset quality. In the fourth quarter of 2013, Washington Banking earned $2.5 million, or $0.16 per diluted share, and in the first quarter a year ago, earnings were $4.6 million, or $0.30 per diluted share.
"Our shareholders voted overwhelmingly to approve the merger with Heritage Financial Corporation (Nasdaq:HFWA) last week and all of the pieces are in place for us to complete the business combination very soon," said Jack Wagner, President and Chief Executive Officer. "We are confident the transition will be seamless and that the combined organization will be a great place for our customers to do business and for our employees to work."
"Our lending teams continue to build a solid book of business, generating 8% year-over year growth in our loan portfolio," said Bryan McDonald, Whidbey Island Bank's President and CEO. "Loan demand remains strong and our pipeline of activity continues to grow. During the first quarter, we closed $47.8 million in new commercial loans, renewed or extended $37.0 million in existing commercial loans and funded $16.9 million in residential mortgages, for both refinance and purchase transactions."
First Quarter 2014 Financial Highlights (as of, or for the period ended March 31, 2014)
- On a consolidated basis, Total Risk-Based Capital to risk-adjusted assets was 19.60% compared to 19.78% a year ago. The minimum ratio to be considered well-capitalized under FDIC rules is 10%.
- With the exception of planned runoff in construction loans, all loan categories increased for the quarter.
- Asset quality continues to improve with the ratio of nonperforming non-covered assets (NPAs) to total assets dropping to 0.59% from 0.68% at December 31, 2013, and 1.03% a year ago. Classified loans declined to $60.3 million at March 31, 2014, from $66.1 million at December 31, 2013.
- Low-cost demand, money market, savings and NOW accounts were $1.12 billion, or 76% of total deposits.
- Loan loss reserves were 1.84% of non-covered loans, compared to 2.01% a year ago.
- The interest income generated from the loan portfolios in the FDIC-assisted acquisitions contributed $4.5 million to first quarter revenues in 2014.
- In the first quarter, the net interest margin fell 18 basis points to 4.32% compared to 4.50% in the preceding quarter, and fell 52 basis points from 4.84% in the year ago quarter, reflecting declines in both the yields and balances of covered loans.
- In the first quarter, Washington Banking sold its operations center in Oak Harbor, generating a pre-tax gain of $1.5 million, which contributed to other non-interest income.
Credit Quality
"With the strong performance of the loan portfolio, both covered and non-covered, we released reserves during the first quarter," said Dan Kuenzi, Chief Credit Officer. "Overall credit quality is improving on every metric, and we continue to be optimistic about the progress we are making in reducing the problem assets in the portfolio."
Total nonperforming assets fell 41.9% from a year ago. Nonperforming, non-covered loans (NPLs) decreased at quarter end to $7.5 million from $8.4 million in the preceding quarter and from $11.8 million a year ago, with residential construction loans accounting for 35.8% of nonperforming assets. The ratio of NPLs/total non-covered loans improved to 0.82% at March 31, 2014, from 0.95% at the end of the fourth quarter and 1.40% a year ago. Nonperforming, non-covered assets (NPA)/total assets improved to 0.59% compared to 0.68% in the preceding quarter and 1.03% a year ago. Non-covered other real estate owned (OREO) was $2.5 million, down from $3.1 million in the preceding quarter and $5.3 million a year ago. Distribution of nonperforming, non-covered assets is shown in the following table:
| Non-Covered NPA by Location |
Island County |
San Juan County |
Skagit County |
Snohomish County |
Whatcom County |
Total |
Percent of Total Non-Covered NPA by Loan Type |
| (dollars in 000s) | |||||||
| 3/31/2014 | |||||||
| Commercial | $ 2 | $ 42 | $ 331 | $ 1,253 | $ 444 | $ 2,072 | 20.80% |
| Real Estate Mortgages | |||||||
| One-to-Four Family Residential | 44 | -- | -- | -- | 314 | 358 | 3.59% |
| Commercial | -- | -- | 545 | -- | 873 | 1,418 | 14.24% |
| Real Estate Construction | |||||||
| One-to-Four Family Residential | 780 | -- | 356 | -- | 2,432 | 3,568 | 35.82% |
| Commercial | -- | -- | -- | -- | -- | -- | 0.00% |
| Consumer | |||||||
| Direct | 30 | -- | -- | 55 | -- | 85 | 0.85% |
| Other Real Estate Owned | -- | -- | 1,883 | -- | 576 | 2,459 | 24.69% |
| Total | $ 856 | $ 42 | $ 3,115 | $ 1,308 | $ 4,639 | $ 9,960 | 100.00% |
| Percent of Total Non-Covered NPA by Location | 8.59% | 0.42% | 31.28% | 13.14% | 46.58% | 100.00% |
With the improvement in asset quality, the company recognized a negative provision for non-covered loan losses of $300,000 in the first quarter of 2014, compared to a provision of $50,000 in the fourth quarter of 2013 and a provision of $450,000 in the first quarter a year ago. At March 31, 2014 the allowance for non-covered loan losses totaled $16.8 million, or 1.84% of non-covered loans.
Balance Sheet
Total assets were $1.69 billion at March 31, 2014, compared to $1.68 billion three months earlier and $1.67 billion a year ago. Total net non-covered loans increased 3% to $895.7 million compared to $871.6 million at December 31, 2013, and were up 8% from $826.9 million at March 31, 2013.
The non-covered loan portfolio is well diversified with commercial and industrial loans making up 20.4% and residential mortgages accounting for 4.6% of the portfolio. Owner-occupied commercial real estate loans represent 26.5% of the portfolio and non-owner occupied commercial real estate loans account for 23.5% of loans. Indirect consumer loans account for 9.8% of the portfolio and other consumer loans account for 9.1%. Construction and land development loans for residential properties were 3.7% and commercial construction and land development loans represent 2.2% of the portfolio.
As resolution of the covered portfolio progresses, net covered loans totaled $116.1 million and covered OREO totaled $4.7 million at March 31, 2014, compared to $137.3 million and $6.0 million, respectively, three months earlier.
The mix of total deposits continued to improve with non-CD deposits increasing to 76.3% of total deposits from 70.4% a year ago. Total deposits were up 1.5% to $1.46 billion at March 31, 2014, compared to $1.44 billion a year ago. Noninterest-bearing demand deposits increased 5.8% in the quarter and 10.6% year-over-year, representing 19.2% of total deposits. Year-over-year, NOW accounts increased 7.7% to $373.1 million, comprising 25.5% of deposits and time deposits declined 18.7% to $346.3 million and accounted for 23.7% of total deposits. Core deposits, excluding time deposits over $100,000, represented 89.6% of all deposits.
Tangible shareholder equity totaled $179.9 million, or $11.54 per share, at March 31, 2014, compared to $178.4 million, or $11.50 per share, a year ago.
Operating Results
In the first quarter of 2014, net interest income totaled $16.4 million compared to $17.3 million in the preceding quarter, and $18.2 million in the first quarter a year ago. The majority of the decline came from the resolution of the covered loan portfolio and a change in the yield on covered loans to 14.20% in the first quarter of 2014 from 14.92% in the fourth quarter and 13.16% in the first quarter a year ago.
"The costs associated with the due diligence for our merger with Heritage Financial added $200,000 to first quarter operating expense," said Rick Shields, Chief Financial Officer. "With the on-going successful resolution of our FDIC indemnified assets, we were able to release reserves from our impairment allowance for this portfolio in the first quarter this year. These reserves are based on our forecast of expected cash flows for covered loans. The progress we have made during the quarter, particularly in the hospitality sector, allowed us to release $2.0 million in reserves." Washington Banking's net interest margin decreased 18 basis points from the preceding quarter to 4.32% from 4.50% and fell 52 basis points from 4.84% in the year ago quarter. "As anticipated, as we reduce the size of the covered loan portfolio, its contribution to margin is diminishing," Shields noted.
Earlier this month, Washington Banking announced it will pay a cash dividend of $0.14 per common share.
About Washington Banking Company
Washington Banking Company is a bank holding company based in Oak Harbor, Washington, that operates Whidbey Island Bank, a state-chartered full-service commercial bank. Founded in 1961, Whidbey Island Bank provides various deposit, loan and investment services to meet customers' financial needs. With its two FDIC-assisted acquisitions in 2010, Whidbey Island Bank currently operates 32 full-service branches located in six counties in Northwestern Washington.
Forward Looking Statements
This news release contains forward-looking statements that are subject to risks and uncertainties. These forward-looking statements describe management's expectations regarding future events and developments such as the proposed merger with Heritage Financial Corporation, future operating results, regional economic trends, dividends and dividend payout ratios, covered loan trends, branch openings, growth in loans and deposits, credit quality and loan losses, net interest margin, benefits from prior FDIC-assisted acquisitions and continued success of the Company's business plan. Readers should not place undue reliance on forward-looking statements, which reflect management's views only as of the date hereof. The words "anticipate," "expect," "will," "believe," and words of similar meaning are intended, in part, to help identify forward-looking statements. Future events are difficult to predict, and the expectations described above are subject to risk and uncertainty that may cause actual results to differ materially. In addition to discussions about risks and uncertainties set forth from time to time in the Company's filings with the Securities and Exchange Commission, factors that may cause actual results to differ materially from those contemplated in these forward-looking statements include, among others: (1) local and national general and economic condition; (2) changes in interest rates and their impact on net interest margin and customer behavior; (3) competition among financial institutions, including without limitation the impact of competitors' pricing initiatives on loan and deposit products; (4) legislation or regulatory requirements, including but not limited to the Dodd-Frank Act and regulations adopted thereunder, changes in capital requirements pursuant to the Dodd-Frank Act and the implementation of the Basel III capital standards, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (5) the ability to realize the efficiencies expected from investment in personnel and infrastructure; (6) the requisite shareholder and regulatory approvals for the Heritage-Washington Banking merger might not be obtained and other closing conditions may not be satisfied; (7) the costs, effects and outcomes of litigation; (8) changes in financial markets; (9) results of examinations by regulatory authorities, including the possibility that any such regulatory authority may, among other things, require increases in the allowance for loan losses or writing down of assets; (10) expected revenues, cost savings, synergies and other benefits from the Heritage-Washington Banking merger might not be realized within the expected time frames or at all and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, might be greater than expected; (11) fluctuations in real estate values; (12) the ability to access cost-effective funding; (13) the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses, which could necessitate additional provisions for loan losses, resulting both from loans originated and loans acquired from other financial institutions; (14) the ability to adapt successfully to technological changes to meet customers' needs and developments in the market place; (15) changes in accounting principles, policies or guidelines; (16) future acquisitions of other depository institutions or lines of business; and (17) future goodwill impairment due to changes in business, changes in market conditions, or other factors. Washington Banking Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made. Any such statements are made in reliance on the safe harbor protections provided under the Securities Exchange Act of 1934, as amended.
| CONSOLIDATED STATEMENTS OF INCOME (unaudited) | Quarter Ended | Quarter Ended | Three | Quarter Ended | One |
| ($ in thousands, except per share data) | March 31, | December 31, | Month | March 31, | Year |
| 2014 | 2013 | Change | 2013 | Change | |
| Interest Income | |||||
| Non-Covered Loans | $ 10,976 | $ 10,994 | 0% | $ 11,153 | -2% |
| Covered Loans | 4,468 | 5,466 | -18% | 6,713 | -33% |
| Taxable Investment Securities | 1,734 | 1,630 | 6% | 1,313 | 32% |
| Tax Exempt Securities | 411 | 400 | 3% | 372 | 10% |
| Other | 62 | 64 | -3% | 59 | 5% |
| Total Interest Income | 17,651 | 18,554 | -5% | 19,610 | -10% |
| Interest Expense | |||||
| Deposits | 1,120 | 1,182 | -5% | 1,310 | -15% |
| Junior Subordinated Debentures | 116 | 119 | -3% | 118 | -2% |
| Total Interest Expense | 1,236 | 1,301 | -5% | 1,428 | -13% |
| Net Interest Income | 16,415 | 17,253 | -5% | 18,182 | -10% |
| (Recovery) Provision for Loan Losses, Non-Covered Loans | (300) | 50 | -700% | 450 | -167% |
| (Recovery) Provision for Loan Losses, Covered Loans | (2,000) | 326 | -713% | 1,500 | -233% |
| Net Interest Income after (Recovery) Provision for Loan Losses | 18,715 | 16,877 | 11% | 16,232 | 15% |
| Noninterest Income | |||||
| Service Charges and Fees | 803 | 870 | -8% | 816 | -2% |
| Electronic Banking Income | 983 | 985 | 0% | 1,143 | -14% |
| Investment Products | 103 | 171 | -40% | 224 | -54% |
| Gain on Sale of Investment Securities, Net | -- | -- | 100% | 265 | -100% |
| Bank Owned Life Insurance Income | 14 | 19 | -26% | 38 | -63% |
| Income from the Sale of Loans | 240 | 469 | -49% | 1,011 | -76% |
| SBA Premium Income | 146 | 132 | 11% | 278 | -47% |
| Change in FDIC Indemnification Asset | (2,124) | (563) | 277% | (174) | 1121% |
| Gain on Disposition of Covered Assets | 506 | 851 | -41% | 380 | 33% |
| Other Income | 1,849 | 231 | 700% | 365 | 407% |
| Total Noninterest Income | 2,520 | 3,165 | -20% | 4,346 | -42% |
| Noninterest Expense | |||||
| Compensation and Employee Benefits | 7,949 | 8,656 | -8% | 7,676 | 4% |
| Occupancy and Equipment | 1,884 | 1,883 | 0% | 1,801 | 5% |
| Office Supplies and Printing | 385 | 362 | 6% | 400 | -4% |
| Data Processing | 549 | 547 | 0% | 535 | 3% |
| Consulting and Professional Fees | 365 | 212 | 72% | 333 | 10% |
| Intangible Amortization | 90 | 110 | -18% | 108 | -17% |
| Merger Related Expenses | 200 | 652 | -69% | -- | 100% |
| FDIC Premiums | 260 | 256 | 2% | 289 | -10% |
| FDIC Clawback Liability | 87 | 88 | -1% | 200 | -57% |
| Non-Covered OREO & Repossession Expenses, Net | 481 | 924 | -48% | 525 | -8% |
| Covered OREO & Repossession Expenses, Net | 430 | 945 | -54% | 136 | 216% |
| Other | 1,960 | 1,801 | 9% | 1,864 | 5% |
| Total Noninterest Expense | 14,640 | 16,436 | -11% | 13,867 | 6% |
| Income Before Provision for Income Tax | 6,595 | 3,606 | 83% | 6,711 | -2% |
| Provision for Income Tax | 2,150 | 1,104 | 95% | 2,127 | 1% |
| Net Income Available to Common Shareholders | $ 4,445 | $ 2,502 | 78% | $ 4,584 | -3% |
| Earnings per Common Share | |||||
| Net Income per Share, Basic | $ 0.29 | $ 0.16 | 81% | $ 0.30 | -3% |
| Net Income per Share, Diluted | $ 0.28 | $ 0.16 | 75% | $ 0.30 | -7% |
| Average Number of Common Shares Outstanding | 15,569,000 | 15,536,000 | 15,485,000 | ||
| Fully Diluted Average Common and Equivalent Shares Outstanding | 15,651,000 | 15,616,000 | 15,519,000 |
| CONSOLIDATED BALANCE SHEETS (unaudited) | Three | One | |||
| ($ in thousands except per share data) | March 31, | December 31, | Month | March 31, | Year |
| 2014 | 2013 | Change | 2013 | Change | |
| Assets | |||||
| Cash and Due from Banks | $ 35,073 | 27,489 | 28% | $ 23,047 | 52% |
| Interest-Bearing Deposits with Banks | 76,440 | 103,869 | -26% | 77,516 | -1% |
| Federal Funds Sold | -- | -- | 100% | -- | 100% |
| Total Cash and Cash Equivalents | 111,513 | 131,358 | -15% | 100,563 | 11% |
| Investment Securities Available for Sale | 449,462 | 432,542 | 4% | 394,328 | 14% |
| FHLB Stock | 7,064 | 7,172 | -2% | 7,374 | -4% |
| Loans Held for Sale | 2,809 | 3,389 | -17% | 11,106 | -75% |
| Loans Receivable | 912,451 | 888,686 | 3% | 843,812 | 8% |
| Less: Allowance for Loan Losses | (16,789) | (17,093) | -2% | (16,926) | -1% |
| Non-Covered Loans, Net | 895,662 | 871,593 | 3% | 826,886 | 8% |
| Covered Loans, Net Allowance for Loan Losses | 116,053 | 137,333 | -15% | 195,589 | -41% |
| Premises and Equipment, Net | 33,551 | 35,038 | -4% | 36,431 | -8% |
| Bank Owned Life Insurance | 32,075 | 17,836 | 80% | 17,742 | 81% |
| Goodwill and Other Intangible Assets, Net | 5,498 | 5,588 | -2% | 5,919 | -7% |
| Other Real Estate Owned | 2,459 | 3,067 | -20% | 5,297 | -54% |
| Covered Other Real Estate Owned | 4,710 | 5,980 | -21% | 15,453 | -70% |
| FDIC Indemnification Asset | 10,367 | 14,536 | -29% | 28,140 | -63% |
| Other Assets | 15,639 | 18,556 | -16% | 23,526 | -34% |
| Total Assets | $ 1,686,862 | $ 1,683,988 | 0% | $ 1,668,354 | 1% |
| Liabilities and Shareholders' Equity | |||||
| Deposits: | |||||
| Noninterest-Bearing Demand | $ 280,781 | $ 265,412 | 6% | $ 253,947 | 11% |
| NOW Accounts | 373,120 | 370,244 | 1% | 346,450 | 8% |
| Money Market | 333,723 | 347,670 | -4% | 296,565 | 13% |
| Savings | 129,057 | 124,516 | 4% | 118,602 | 9% |
| Time Deposits | 346,343 | 359,650 | -4% | 426,111 | -19% |
| Total Deposits | 1,463,024 | 1,467,492 | 0% | 1,441,675 | 1% |
| Junior Subordinated Debentures | 25,774 | 25,774 | 0% | 25,774 | 0% |
| Other Liabilities | 12,715 | 10,792 | 18% | 16,619 | -23% |
| Total Liabilities | 1,501,513 | 1,504,058 | 0% | 1,484,068 | 1% |
| Shareholders' Equity | |||||
| Common Stock (no par value) | |||||
| Authorized 35,000,000 Shares: | |||||
| Issued and Outstanding 15,587,154 at 3/31/14, 15,538,969 at 12/31/13 and 15,503,861 at 3/31/13 | 87,177 | 86,714 | 1% | 85,912 | 1% |
| Retained Earnings | 101,631 | 98,431 | 3% | 94,496 | 8% |
| Accumulated Other Comprehensive (Loss) Income | (3,459) | (5,215) | -34% | 3,878 | -189% |
| Total Shareholders' Equity | 185,349 | 179,930 | 3% | 184,286 | 1% |
| Total Liabilities and Shareholders' Equity | $ 1,686,862 | $ 1,683,988 | 0% | $ 1,668,354 | 1% |
| NON-COVERED ASSET QUALITY (unaudited) | Quarter Ended | Quarter Ended | Quarter Ended | |||
| ($ in thousands, except per share data) | March 31, | December 31, | March 31, | |||
| 2014 | 2013 | 2013 | ||||
| Allowance for Non-Covered Loan Losses Activity: | ||||||
| Balance at Beginning of Period | $ 17,093 | $ 16,942 | $ 17,147 | |||
| Indirect Loans: | ||||||
| Charge-offs | (160) | (261) | (173) | |||
| Recoveries | 97 | 71 | 115 | |||
| Indirect Net Charge-offs | (63) | (190) | (58) | |||
| Other Loans: | ||||||
| Charge-offs | (319) | (305) | (741) | |||
| Recoveries | 379 | 596 | 128 | |||
| Other Net Recoveries (Charge-offs) | 60 | 291 | (613) | |||
| Total Net (Charge-offs) Recoveries | (4) | 101 | (671) | |||
| (Recovery) Provision for Loan Losses, Non-Covered Loans | (300) | 50 | 450 | |||
| Balance at End of Period | $ 16,789 | $ 17,093 | $ 16,926 | |||
| Net Charge-offs to Average Loans: | ||||||
| Indirect Loans Net Charge-Offs, to Avg Indirect Loans, Annualized (1) | 0.30% | 0.93% | 0.29% | |||
| Other Loans Net (Recoveries) Charge-Offs, to Avg Other Loans, Annualized (1) | -0.03% | -0.15% | 0.32% | |||
| Net Charge-offs (Recoveries) to Average Total Loans (1) | 0.00% | -0.05% | 0.32% | |||
| March 31, | December 31, | March 31, | ||||
| 2014 | 2013 | 2013 | ||||
| Nonperforming Non-Covered Assets | ||||||
| Nonperforming Non-Covered Loans (2) | $ 7,501 | $ 8,409 | $ 11,832 | |||
| Non-Covered Other Real Estate Owned | 2,459 | 3,067 | 5,297 | |||
| Total Nonperforming Non-Covered Assets | $ 9,960 | $ 11,476 | $ 17,129 | |||
| Nonperforming Non-Covered Loans to Total Non-Covered Loans (1) | 0.82% | 0.95% | 1.40% | |||
| Nonperforming Non-Covered Assets to Total Assets | 0.59% | 0.68% | 1.03% | |||
| Allowance for Loan Losses to Nonperforming Non-Covered Loans | 223.82% | 203.27% | 143.05% | |||
| Allowance for Loan Losses to Non-Covered Loans | 1.84% | 1.92% | 2.01% | |||
| Non-Covered Loan Composition | ||||||
| Commercial | $ 186,043 | $ 179,914 | $ 160,053 | |||
| Real Estate Mortgages | ||||||
| One-to-Four Family Residential | 41,588 | 41,811 | 35,174 | |||
| Commercial | 456,360 | 447,337 | 425,069 | |||
| Real Estate Construction | ||||||
| One-to-Four Family Residential | 33,501 | 33,928 | 40,099 | |||
| Commercial | 20,170 | 22,320 | 25,773 | |||
| Consumer | ||||||
| Indirect | 89,324 | 79,900 | 77,654 | |||
| Direct | 83,357 | 81,773 | 78,209 | |||
| Deferred Costs | 2,108 | 1,703 | 1,781 | |||
| Total Non-Covered Loans | $ 912,451 | $ 888,686 | $ 843,812 | |||
| Time Deposit Composition | ||||||
| Time Deposits $100,000 and more | $ 151,627 | $ 156,297 | $ 189,684 | |||
| All Other Time Deposits | 194,716 | 203,026 | 234,672 | |||
| Brokered Deposits | ||||||
| CDARS (Certificate of Deposit Account Registry Service) | -- | 327 | 1,755 | |||
| Total Time Deposits | $ 346,343 | $ 359,650 | $ 426,111 | |||
| (1) Excludes Loans Held for Sale. | ||||||
| (2) Nonperforming loans includes nonaccrual loans plus accruing loans 90 or more days past due. | ||||||
| FINANCIAL STATISTICS (unaudited) | Quarter Ended | Quarter Ended | Quarter Ended | Quarter Ended | ||
| ($ in thousands, except per share data) | March 31, | December 31, | September 30, | March 31, | ||
| 2014 | 2013 | 2013 | 2013 | |||
| Averages | ||||||
| Total Assets | $ 1,664,230 | $ 1,652,752 | $ 1,628,236 | $ 1,672,807 | ||
| Non-Covered Loans and Loans Held for Sale | 894,063 | 874,899 | 868,745 | 856,249 | ||
| Covered Loans | 127,576 | 145,301 | 165,964 | 206,873 | ||
| Interest Earning Assets | 1,561,988 | 1,541,783 | 1,500,065 | 1,539,196 | ||
| Deposits | 1,445,653 | 1,434,083 | 1,414,504 | 1,447,939 | ||
| Common Shareholders' Equity | 181,948 | 181,739 | 177,448 | 182,667 | ||
| Financial Ratios | ||||||
| Return on Average Assets, Annualized | 1.08% | 0.60% | 1.10% | 1.11% | ||
| Return on Average Common Equity, Annualized | 9.91% | 5.46% | 10.07% | 10.18% | ||
| Efficiency Ratio (1) | 76.35% | 79.57% | 63.75% | 61.00% | ||
| Yield on Earning Assets (1) | 4.65% | 4.84% | 4.94% | 5.22% | ||
| Cost of Interest Bearing Liabilities | 0.42% | 0.43% | 0.44% | 0.48% | ||
| Net Interest Spread | 4.23% | 4.41% | 4.50% | 4.74% | ||
| Net Interest Margin (1) | 4.32% | 4.50% | 4.59% | 4.84% | ||
| Tangible Book Value Per Share (2) | $ 11.54 | $ 11.22 | $ 11.34 | $ 11.50 | ||
| Tangible Common Equity to Total Tangible Assets (2) | 10.70% | 10.39% | 10.72% | 10.73% | ||
| March 31, | December 31, | September 30, | March 31, | Regulatory Requirements | ||
|
2014 |
2013 |
2013 |
2013 |
Adequately- capitalized |
Well- capitalized |
|
| Period End | ||||||
| Total Risk-Based Capital Ratio - Consolidated (3) | 19.60% | 19.76% | 19.82% | 19.78% | 8.00% | NA |
| Tier 1 Risk-Based Capital Ratio - Consolidated (3) | 18.33% | 18.49% | 18.55% | 18.52% | 4.00% | NA |
| Tier 1 Leverage Ratio - Consolidated (3) | 12.55% | 12.41% | 12.56% | 11.96% | 4.00% | NA |
| Total Risk-Based Capital Ratio - Whidbey Island Bank (3) | 19.17% | 19.20% | 19.26% | 19.16% | 8.00% | 10.00% |
| Tier 1 Risk-Based Capital Ratio - Whidbey Island Bank (3) | 17.90% | 17.93% | 17.99% | 17.90% | 4.00% | 6.00% |
| Tier 1 Leverage Ratio - Whidbey Island Bank (3) | 12.25% | 12.02% | 12.17% | 11.55% | 4.00% | 5.00% |
| (1) Fully tax-equivalent is a non-GAAP performance measurement that management believes provides investors with a more accurate picture of the net interest margin, revenue and efficiency ratio for comparative purposes. The calculation involves grossing up interest income on tax-exempt loans and investments by an amount that makes it comparable to taxable income. Please see reconciliation to GAAP measure that appears elsewhere in this release. | ||||||
| (2) Please see the reconciliations to GAAP measures that appear elsewhere in this release. Tangible book value per share and tangible common equity to total tangible assets are non-GAAP performance measurements that management believes provide a more accurate picture of equity. | ||||||
| (3) Capital ratios for the most recent period are an estimate pending filing of the Company's regulatory reports. | ||||||
| Non-GAAP Financial Measures | |||
| In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP) this press release presents certain non-GAAP financial measures. Management believes that certain non-GAAP financial measures provide investors with information useful in understanding the Company's financial performance; however, readers of this report are urged to review these non-GAAP measures in conjunction with the GAAP results as reported. | |||
| Operating earnings are not a measure of performance calculated in accordance with GAAP. However, management believes that operating earnings are an important indication of our ability to generate earnings through the Company's fundamental banking business. Since operating earnings exclude the effects of certain items that are unusual and/or difficult to predict, management believes that operating earnings provide useful supplemental information to both management and investors in evaluating the Company's financial results. | |||
| Operating earnings should not be considered in isolation or as a substitute for net income, cash flows from operating activities, or other income or cash flow statement data calculated in accordance with GAAP. Moreover, the manner in which the Company calculates operating earnings may differ from that of other companies reporting measures with similar names. | |||
| The following table provides the reconciliation of the Company's GAAP earnings to operating earnings (non-GAAP) for the periods presented: | |||
| Quarter Ended | |||
| March 31, | December 31, | March 31, | |
| 2014 | 2013 | 2013 | |
| GAAP Earnings Available to Common Shareholders | $ 4,445 | $ 2,502 | $ 4,584 |
| Provision for Income Tax | 2,150 | 1,104 | 2,127 |
| GAAP Earnings Available to Common Shareholders before Provision for Income Tax | 6,595 | 3,606 | 6,711 |
| Adjustments to GAAP Earnings Available to Common Shareholders | |||
| Acquisition-Related Costs | 200 | 652 | -- |
| Operating Earnings Before Income Tax | 6,795 | 4,258 | 6,711 |
| Provision for Income Tax | 2,220 | 1,332 | 2,127 |
| Net Operating Earnings | $ 4,575 | $ 2,926 | $ 4,584 |
| Diluted GAAP Earnings per Common Share | $ 0.28 | $ 0.16 | $ 0.30 |
| Diluted Operating Earnings per Common Share | $ 0.29 | $ 0.19 | $ 0.30 |
| Non-GAAP Financial Measures | |||
| Fully tax-equivalent net interest income and fully tax-equivalent net interest margin are non-GAAP performance measurements that management believes provides investors with a more accurate picture of the Company's operational performance and is consistent with industry practice. The calculation involves grossing up interest income on tax-exempt loans and investments by an amount that makes it comparable to taxable income. | |||
| The following table provides the reconciliation of the Company's net interest income and net interest margin (GAAP) to a fully tax-equivalent net interest income and fully tax-equivalent net interest margin (non-GAAP) for the periods presented: | |||
| Quarter Ended | |||
| March 31, | December 31, | March 31, | |
| 2014 | 2013 | 2013 | |
| Net Interest Income | $ 16,415 | $ 17,253 | $ 18,182 |
| Tax-Equivalent Adjustment (1) | 240 | 237 | 206 |
| Tax-Equivalent Net Interest Income | 16,655 | 17,490 | 18,388 |
| Average Interest Earning Assets | 1,561,988 | 1,541,783 | 1,539,196 |
| Net Interest Margin | 4.26% | 4.44% | 4.79% |
| Tax-Equivalent Net Interest Margin (1) | 4.32% | 4.50% | 4.84% |
| Non-GAAP Financial Measures | |||
| Tangible common equity, tangible assets and tangible book value per common share are not measures that are calculated in accordance with GAAP. However, management uses these non-GAAP measures in its analysis of the Company's performance. Management believes that these non-GAAP measures are an important indication of the Company's ability to grow both organically and through business combinations, and, with respect to tangible common equity, the Company's ability to pay dividends and to engage in various capital management strategies. | |||
| Neither tangible common equity, tangible assets or tangible book value per common share should be considered in isolation or as a substitute for common shareholders' equity or book value per common share or any other measure calculated in accordance with GAAP. Moreover, the manner in which the Company calculates tangible common equity, tangible assets and tangible book value per share may differ from that of other companies reporting measures with similar names. | |||
| The following table provides the reconciliation of the Company's shareholders' equity (GAAP) to tangible common equity (non-GAAP) and total assets (GAAP) to tangible assets (non-GAAP) for the periods presented: | |||
| March 31, | December 31, | March 31, | |
| ($ in thousands, except per share data) | 2014 | 2013 | 2013 |
| Total Shareholders' Equity | $ 185,349 | $ 179,930 | $ 184,286 |
| Adjustments to Shareholders' Equity | |||
| Goodwill and Other Intangible Assets, Net (2) | (5,498) | (5,588) | (5,919) |
| Tangible Common Equity | 179,851 | 174,342 | 178,367 |
| Total Assets | $ 1,686,862 | $ 1,683,988 | $ 1,668,354 |
| Adjustments to Total Assets | |||
| Goodwill and Other Intangible Assets, Net (2) | (5,498) | (5,588) | (5,919) |
| Total Tangible Assets | 1,681,364 | 1,678,400 | 1,662,435 |
| Common Shares Outstanding at Period End | 15,587,154 | 15,538,969 | 15,503,861 |
| Tangible Common Equity to Total Tangible Assets | 10.70% | 10.39% | 10.73% |
| Tangible Book Value per Common Share | $ 11.54 | $ 11.22 | $ 11.50 |
| (1) Tax exempt interest has been adjusted to a taxable equivalent basis using a 35% tax rate | |||
| (2) Goodwill and Other Intangible Assets, Net excludes mortgage servicing rights | |||