Washington Banking Co., the Oak Harbor-based holding company for Whidbey Island Bank, reported strong fourth-quarter earnings Tuesday afternoon.
Its core banking business generated strong operating profits in 2010 augmented by FDIC-assisted acquisitions of CityBank of Lynnwood and North County Bank of Arlington, which contributed an $18.9 million one-time bargain purchase gain in pretax income for the year, bank officials reported. Before preferred dividends, net income grew to $25.3 million in 2010, compared to $6.2 million in 2009. Net income available to common shareholders was $23.6 million or $1.53 per diluted common share in 2010, compared to $4.6 million, or $0.46 per diluted common share, in 2009.
In the fourth quarter of 2010, Washington Banking earned $4.1 million, compared to $1.7 million for the same period last year, bank officials said. For the fourth quarter of 2010, net income available to common shareholders, after preferred dividend payments increased to $3.7 million, or $0.24 per diluted common share, compared to $1.3 million, or $0.11 per diluted common share, for the fourth quarter of 2009.
“It has been a pivotal year for our franchise,” said Jack Wagner, president and chief executive officer. “The two FDIC-assisted acquisitions have proven to be strategically and financially attractive, filling out our branch network in Snohomish County and north King County. We’ve added some very talented bankers to our ranks, not only from the institutions we acquired, but also from other banks, and they have been successful in bringing some terrific customer relationships to our franchise.
“In the short term, the acquisitions contributed a significant one-time pretax gain, added $4.9 million in goodwill to our balance sheet and greatly complicated the accounting and reporting process,” Wagner said. “In addition, the gain and goodwill recognized are subject to future adjustment up to one year from the date of each acquisition.
“Another item of significance is that we repaid $26.6 million to the U.S. Treasury to redeem the preferred shares issued under the TARP Capital Purchase Program, while maintaining well-capitalized status. Since the redemption took place in January 2011, it is not reflected in the 2010 year-end statements,” Wagner said.
The core operating earnings available to common shareholders, which exclude merger related costs and the bargain purchase gain on the FDIC-assisted transactions, totaled $12.4 million, or $0.80 per diluted common share, in 2010, compared to $5.5 million, or $0.55 per diluted share in 2009.
With a 63 percent increase in assets and expanding the branch network to 30 locations from 18 a year ago, the full-time equivalent employees count has increased to 448 from 281 FTEs at the end of 2009.
“Most of this growth was from the acquisitions, and we also hired a team of lenders who are working out of our new Everett Commercial Lending Center,” Wagner said. “We now have three lending teams in our new region covering north King County and Snohomish County. These lending teams are doing a great job of bringing new relationships to the bank and serving our existing customers.”
Meanwhile, the bank is keeping an eye on credit quality.
“With the continuing high unemployment in the region, our legacy loan portfolio has performed relatively well during the year, but has shown an incremental increase in nonperforming loans,” said Joe Niemer, Chief Credit Officer.
Nonperforming, noncovered loans (NPLs) increased by $4.3 million during the quarter and by $22.5 million in the year, primarily from land development projects, construction and commercial real estate.
“While some of the projects are still current on their payments, we have added them to nonaccrual status due to prospective evaluation of future values and the lengthening of the sales cycle,” Niemer said.
NPL/Loans grew to 3.10 percent at year end from 2.57 percent in the prior quarter and 0.42 percent a year ago. NPA/Assets was 1.73 percent compared to 1.40 percent in the third quarter and 0.76 percent a year ago. Other real estate owned (OREO) was $4.1 million, relatively unchanged from the prior quarter and down from $4.5 million a year ago. NPLs are concentrated primarily in the Skagit County market.
2010 financial highlights (Dec. 31, 2010, compared to Dec. 31, 2009:
• Capital ratios exceeded all regulatory requirements for well-capitalized institutions, with Total Risk Based Capital to risk-adjusted assets of 21.05 percent compared to 22.15 percent.
• Tangible book value per common share increased to $9.69 compared to $8.79.
• Deposits, including $633 million acquired through acquisitions, increased 76 percent year over year to $1.49 billion. Transaction account deposits in the acquired institutions increased $10.8 million since closing.
• Low cost demand, money market, savings and NOW accounts totaled $826 million and make up 55 percent of total deposits.
• Net noncovered loans increased $17.8 million from a year ago and totaled $815 million.
• The provision for noncovered loan losses was $12.2 million in 2010, a 19 percent increase from the $10.2 million a year ago.
• Loan loss reserves increased to 2.25 percent of noncovered loans, from 1.99 percent a year ago.
• A cash dividend of $0.05 per share will be paid March 1 to shareholders of record as of Feb. 11.
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
