WASHINGTON BUSINESS BANK
REPORT OF INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS
WASHINGTON BUSINESS BANK
December 31, 2018 and 2017
Table of Contents
Report of Independent Auditors
Financial Statements Statements of financial condition Statements of income Statements of comprehensive income Statements of changes in shareholders' equity Statements of cash flows Notes to financial statements
PAGE
1
2 3 4 5 6 7?30
Report of Independent Auditors
Board of Directors Washington Business Bank
Report on the Financial Statements
We have audited the accompanying financial statements of Washington Business Bank, which comprise the statements of financial condition as of December 31, 2018 and 2017, and the related statements of income, comprehensive income, changes in shareholders' equity, and cash flows for the years then ended, and the related notes to the financial statements.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Washington Business Bank as of December 31, 2018 and 2017, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Everett, Washington February 15, 2019
1
Washington Business Bank
Statements of Financial Condition (dollars in thousands)
ASSETS
December 31,
2018
2017
(Restated -
Note 13)
Cash and due from banks Federal funds sold
$
988
$
958
5,758
1,026
Total cash and cash equivalents
6,746
1,984
Interest-bearing deposits in banks Securities available-for-sale, at fair value Federal Home Loan Bank (FHLB) stock
2,265 87
294
5,650 149 282
Loans receivable Allowance for loan losses
76,053 (611)
68,300 (506)
Net loans
75,442
67,794
Accrued interest receivable Premises and equipment, net Other assets
Total assets
223 1,789
232
195 1,857
254
$
87,078
$
78,165
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES Customer deposits Accrued interest payable FHLB borrowings Other liabilities
$
72,359
$
64,213
75
29
5,000
5,000
232
207
Total liabilities
77,666
69,449
COMMITMENTS AND CONTINGENCIES (NOTE 8)
SHAREHOLDERS' EQUITY Preferred stock (no par value), 1,000,000 shares authorized, no shares issued or outstanding in 2018 and 2017 Common stock ($1 par value), 10,000,000 shares authorized, 668,157 and 676,459 shares issued and outstanding in 2018 and 2017, respectively Additional paid-in capital Retained earnings Accumulated other comprehensive income, net of tax
Total shareholders' equity
-
668 7,288 1,456
-
9,412
-
676 7,359
679 2
8,716
Total liabilities and shareholders' equity
$
87,078
$
78,165
See accompanying notes.
2
Washington Business Bank
Statements of Income (dollars in thousands)
INTEREST INCOME Loans and fees Federal funds sold and interest-bearing deposits in banks Dividends Securities available-for-sale
Total interest income
INTEREST EXPENSE Deposits FHLB borrowings
Total interest expense
Net interest income
PROVISION FOR LOAN LOSSES
Net interest income after provision for loan losses
NONINTEREST INCOME Service charges on deposit accounts Other fee income
Total noninterest income
NONINTEREST EXPENSE Salaries and employee benefits Occupancy Data processing Furniture and equipment Other
Total noninterest expense
Income before provision for income taxes
PROVISION FOR INCOME TAXES
NET INCOME
Years Ended December 31,
2018
2017
(Restated -
Note 13)
$
4,133 $
3,557
135
60
29
21
3
4
4,300
3,642
764 92
856 3,444
100 3,344
414 76
490 3,152
16 3,136
84
100
9
6
93
106
1,494 150 124 71 615
1,427 154 118 70 770
2,454
2,539
983
703
206
256
$
777 $
447
3
See accompanying notes.
Washington Business Bank
Statements of Comprehensive Income (dollars in thousands)
NET INCOME Other comprehensive income
Unrealized holding loss on securities available-for-sale (net of tax benefit of $1 and $0 for 2018 and 2017, respectively)
COMPREHENSIVE INCOME
Years Ended December 31,
2018
2017
(Restated -
Note 13)
$
777 $
447
(2)
(1)
$
775 $
446
See accompanying notes.
4
Washington Business Bank
Statements of Changes in Shareholders' Equity (dollars in thousands)
BALANCE, December 31, 2016 Net income Unrealized loss on securities, net of tax Vested restricted stock Repurchased shares Stock-based compensation
BALANCE, December 31, 2017 Net income Unrealized loss on securities, net of tax Vested restricted stock Repurchased shares Exercised stock options Stock-based compensation
BALANCE, December 31, 2018
Common Stock
Additional
Shares Amount Paid-In-Capital
Retained Earnings (Restated Note 13)
Accumulated Other
Comprehensive Income (Loss)
Total Shareholders'
Equity (Restated -
Note 13)
710,824 $ 711 $
-
-
7,623 $ -
232 $ 447
3$ -
8,569 447
-
-
-
-
6,000
6
(6)
-
(40,365)
(41)
(366)
-
-
-
108
-
(1)
(1)
-
-
-
(407)
-
108
676,459
676
7,359
679
-
-
-
777
2
8,716
-
777
-
-
-
-
6,670
7
(7)
-
(26,347)
(26)
(293)
-
11,375
11
121
-
-
-
108
-
(2)
(2)
-
-
-
(319)
-
132
-
108
668,157 $ 668 $
7,288 $
1,456
-
$
9,412
5
See accompanying notes.
Washington Business Bank
Statements of Cash Flows (dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES Net income Adjustments to reconcile net income to net cash from operating activities Provision for loan losses Deferred income (benefit) tax (Gain) loss on sale of other real estate owned Depreciation and amortization Stock-based compensation expense Changes in operating assets and liabilities Accrued interest payable Accrued interest receivable Other assets Other liabilities
Net cash from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES Activity in securities available-for-sale Maturities, prepayments, and calls Decrease (Increase) in interest-bearing deposits with banks Increase in loans made to customers, net of principal collections Proceeds from sale of other real estate owned (Purchase) Redemption of FHLB stock Purchases of premises and equipment
Net cash from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES Net increase in deposits Repayment of FHLB borrowings Advances of FHLB borrowings Repurchase of stock Proceeds from exercise of stock options
Net cash from financing activities
NET INCREASE (DECREASE) IN CASH
CASH AND CASH EQUIVALENTS, beginning of year
CASH AND CASH EQUIVALENTS, end of year
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for Taxes Interest
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Change in fair value of securities available-for-sale Net loans transferred to real estate owned
Years Ended December 31,
2018
2017
(Restated -
Note 13)
$
777
$
447
100
16
(25)
12
(144)
-
79
80
108
108
46
16
(28)
(20)
28
25
25
(12)
966
672
62 3,385 (8,178)
591 (12) (11)
(4,163)
46 (5,088) (8,274)
109 1
(58)
(13,264)
8,146 (3,000) 3,000
(319) 132
10,308 (2,000) 2,000
(407) -
7,959
9,901
4,762
(2,691)
1,984
4,675
$
6,746
$
1,984
$
215
$
260
$
810
$
474
$
(3)
$
1
$
430
$
-
See accompanying notes.
6
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