Mail Stop 0408
November 9, 2006
David K. Johnson
President and Chief Executive Officer
WSB Financial Group, Inc.
607 Pacific Avenue
Bremerton, Washington 98337
Re: WSB Financial Group, Inc.
Amendment Number Two to Registration Statement on Form S-1
File No. 333-137038
Filed November 1, 2006
Dear Mr. Johnson:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your documents in
response to these comments. If you disagree, we will consider
your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
General
1. We note that the marked copy you provided us does not show all
changes to the document from the previous registration statement.
Please provide marked copies that show all additions and
deletions.
Cover Page
2. We note that you have added disclosure regarding the directed
share program. Please revise your statement in the first
paragraph
that that all shares will be purchased by underwriters to exclude
up
to 325,000 shares reserved for sale to your directors, officers
employees and others.
3. We note the addition of footnote 1 in which you assume that
none
of the 325, 000 shares offered for sale under the directed share
program will be sold to directors, officers, employees and others
though the directed share program. Please advise us as to your
basis for this assumption and explain why you have reserved the
shares if you believe none will be purchased. Otherwise, please
revise the disclosure, on the cover, in the summary and elsewhere,
to
assume that all of these shares will be purchased by management
and
others for whom you are reserving the shares.
WSB Financial Group, Inc., page 1
4. We note your response, on page 1, to comment 1 of our letter to
you dated October 27, 2006. Please revise this section as
follows:
* as we have requested, revise your claim, in the first paragraph
and
similar claims elsewhere, that you have "an array of commercial
bank
and real estate lending products" to state, as the FDIC states in
its
CRA Performance Evaluation, that your primary business is real
estate
lending;
* as we requested, revise the first paragraph to supplement your
disclosure of net loans to disclose that all, or virtually all,
of
the loans relate to real estate located in West Puget Sound area
of
Washington State and most is located in Kitsap County;
* disclose in the second paragraph the number of branches located
in
the west Puget Sound area and the number that are located outside
the
State of Washington;
* revise your claim in the third paragraph regarding your being
the
"fastest growing bank in the Pacific Northwest" to clarify that
it
is based on the percentage of growth not real dollar growth and
provide us with the basis for your claim;
* revise your claim, in the fifth paragraph, that you offer a full
range of other lending products and services to disclose the
percentage of your loans that are commercial and industrial and
the
percentage that are consumer; and
* disclose, in the sixth paragraph and in the related risk factor
on
page 16, the percentage of shares that will be beneficially owned
by
directors and executive officers assuming that they purchase all
of
the shares reserved in the directed offering and that they
exercise
all their options and disclose the number of shares reserved for
future issuance under your option plan;
Our Market Area, page 3
5. Please revise this section, and similar disclosure elsewhere,
as
follows:
* revise the first sentence to clarify that all of your operations
are located in the west Puget Sound area and most are located in
one
county;
* explain your statement, in the second sentence, that "we have
expanded our footprint" to the Oregon border;
* supplement your statement, in the second paragraph, that 69
percent
of your deposits are in Kitsap County to disclose the percentage
of
your loans originated in that county;
* balance your statement, in the second paragraph, regarding the
"national attention" that Kitsap County has received for its
"economic success" to disclose that, according to the CRA
Performance Evaluation, the median family income in the county is
$62,000; and
* revise your claim, in the second paragraph, that Bremerton is
"one
of the top 5 up and coming hot cities" to disclose that this
designation was made in an article in Money Magazine in June 2004
and
was limited to cities with a population under 250,000 persons.
The Offering, page 5
6. Please revise this section as follows:
* disclose the number of shares that you have reserved for sale to
directors officers employees and others; and
* disclose the aggregate number of shares that they presently
intend
to purchase.
Risks Relating to Our Business and Market, page 14
7. We note your response, in the second risk factor on page 11, to
comment 9 of our letter to you dated October 27, 2006. As we
requested, please revise both the caption and the text to clarify
that the FDIC required your Board enter into the MOU to correct
both
the violations of law and the deficiencies in internal controls.
Risks Relating to the Offering, page 14
8. We note the changes you have made to the risk factor, on the
bottom of page 15, relating to the lock up agreements. Please
revise
as follows:
* change the caption to reflect the fact that some of the lockups
are
only for 60 days not 180; and
* state that you have agreed to release Mr. Parr from the lock up
if
the market price exceeds the initial offering price by 20 percent
for
ten consecutive trading days.
Dilution, page 20
9. Please revise your discussion in the last paragraph and in the
related risk factor on page 16, of the dilution that would result
from stock issued pursuant to options as follows:
* disclose your intent, immediately after this offering is
completed,
to register over 1.3 million shares for issuance upon exercise of
stock options; and
* calculate the dilution if all outstanding options were
exercised.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 21
10. Please provide analysis, in the third paragraph on page 21,
regarding your various sources of revenue, and the percentage of
revenue from each source.
11. We note your response, in the third paragraph on page 21, to
comment 12 of our letter to you dated October 27, 2006 and comment
20
of our letter to you dated September 27, 2006. Please revise the
second sentence to disclose the percentage of your loans that are
consumer loans.
Key Factors in Evaluating Financial Condition and Results of
Operations, page 23
12. As we requested in comments regarding the summary in our
letters
to you dated September 27, 2006 and October 27, 2006, please
disclose, in this section, the business section and elsewhere in
the
document, the growth each year rather than the compound annual
growth rate ("CAGR").
Kitsap County, page 57
13. Please disclose percentage of loans and the percentage of your
deposits that are from Kitsap County. In addition, disclose that,
according to the CRA Performance Evaluation, the median family
income
in the county is $62,000.
Seattle Metropolitan Area, Page 59
14. Please disclose percentage of loans and the percentage of your
deposits that are from the Seattle metropolitan area.
Our Competition, page 59
15. Please delete your claims, in the second paragraph, that "no
reliable loan market data is available" and "we are one of the
leading real estate lenders in these counties." Please disclose
that, according to the Federal Deposit Insurance Corporation, you
rank number 20 of 330 mortgage lenders in Kitsap county with 1.2
percent market share in number and dollar volume of the county`s
mortgage lending activity.
Underwriting, page 94
16. Please provide more detail regarding your statement in the
fifth
paragraph on page 94 that "if all the shares are not sold at the
initial public offering price, D.A. Davidson may change the
offering
price and other selling terms."
Loans and Allowances for Loan Losses, page F-23
17. Please refer to prior comment 25. Given your assessment that
the
error of recording the liability for off-balance sheet commitments
in
the allowance was not material, but considering the impact on
trends,
on your allowance rollforward, and related notes, we believe that
the
immaterial errors noted in prior periods should be corrected in
order
to comply with GAAP and your presentation as of September 30,
2006.
Please revise accordingly for all periods affected throughout your
registration statement.
Exhibit 23.4
18. Please revise to include the referenced report dates in the
consent of your independent financial consultant.
* * * * * * * * * * * * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company and each filing person
acknowledging that:
* the company or filing person is responsible for the adequacy and
accuracy of the disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company or filing person may not assert staff comments as a
defense in any proceeding initiated by the Commission or any
person
under the federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Margaret Fitzgerald at (202) 551-3556 or
Kevin
L. Vaughn at 202-551-3494 if you have questions regarding comments
on
the financial statements and related matters. Please contact
either
Jonathan E. Gottlieb at (202) 551-3416 or me at (202) 551-3491
with
any other questions.
Sincerely,
Todd K. Schiffman
Assistant Director
cc. Thomas A. Sterken, Esquire
Keller Rohrback, L.L.P.
Suite 3200
1201 Third Avenue
Seattle, Washington 98101
David K. Johnson
WSB Financial Group, Inc.
November 9, 2006
Page 1