FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X]QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-18469
WORKINGMENS CAPITAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1791203
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
121 East Kirkwood Avenue, Bloomington, Indiana 47408
(Address of Principal Executive Offices)
(Zip Code)
(812) 332-9465
(Registrant's telephone number, including area code)
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. YES X NO _____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of July 19, 1996:
Common Stock, without par value -- 1,808,560 shares outstanding
WORKINGMENS CAPITAL HOLDINGS, INC.
FORM 10-Q
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Statements of Financial Condition
as of June 30, 1996 and December 31, 1995 .............. 1
Consolidated Statements of Earnings for the three months
and six months ended June 30, 1996 and 1995 ............ 2
Consolidated Statement of Shareholders' Equity
for the six months ended June 30, 1996 ................. 3
Consolidated Statements of Cash Flows for the six months
ended June 30, 1996 and 1995 ........................... 4
Notes to Consolidated Financial Statements ................ 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................. 6
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders ........ 9
Item 6. Exhibits and Reports on Form 8-K ........................... 9
Signatures .......................................................... 10
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WORKINGMENS CAPITAL HOLDINGS, INC.
AND SUBSIDIARY
Consolidated Statements of Financial Condition
(Unaudited and Dollars in Thousands)
June 30, December 31,
1996 1995
------------ -------------
Assets
Cash $1,002 $1,298
Interest-bearing deposits 2,021 3,231
Investment securities held to maturity 6,170 3,165
Investment in mutual fund available for sale 3,873 3,894
Mortgage-backed securities held to maturity 4,094 4,550
Mortgage-backed securities available for sale 1,137 1,256
Loans receivable 183,777 189,996
Less allowance for loan losses (376) (335)
-------- --------
Loans receivable, net 183,401 189,661
Accrued interest receivable:
Loans 1,109 1,052
Investment securities and interest-
bearing deposits 129 69
Mortgage-backed securities 36 39
Stock in FHLB of Indianapolis 1,838 1,758
Premises and equipment 1,362 1,371
Real estate owned - -
Prepaid expenses and other assets 2,031 1,910
-------- --------
Total Assets $208,203 $213,254
======== ========
Liabilities and Shareholders' Equity
Deposits $149,721 $152,141
FHLB advances 30,700 34,200
Advances by borrowers for taxes and insurance 311 422
Income taxes 183 89
Deferred income taxes 290 269
Accrued interest on deposits 53 61
Accrued expenses and other liabilities 486 387
Total Liabilities 181,744 187,569
-------- --------
Shareholders' Equity:
Preferred stock, no par value, 2,000,000
shares authorized, none issued - -
Common stock, no par value, shares authorized
of 5,000,000; shares issued and outstanding
of 1,808,560 and 1,777,920 8,341 8,066
Retained earnings - substantially restricted 18,262 17,722
Unrealized loss on securities available for sale (144) (103)
-------- --------
Total Shareholders' Equity 26,459 25,685
-------- --------
Total Liabilities and Shareholders' Equity $208,203 $213,254
======== ========
See Notes to Consolidated Financial Statements
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WORKINGMENS CAPITAL HOLDINGS, INC.
AND SUBSIDIARY
Consolidated Statements of Earnings
(Unaudited and Dollars in Thousands, Except Per Share Data)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ---------------------
1996 1995 1996 1995
Interest income:
Loans receivable $3,665 $3,663 $7,420 $7,245
Mortgage-backed securities 87 104 180 211
Investment securities 141 115 248 236
Interest-bearing deposits 82 61 167 108
Dividends from FHLB 34 34 69 65
----- ----- ----- -----
Total interest income 4,009 3,977 8,084 7,865
----- ----- ----- -----
Interest expense:
Deposits 2,031 2,008 4,105 3,912
FHLB advances 540 517 1,089 1,010
Other 3 2 7 4
Total interest expense 2,574 2,527 5,201 4,926
----- ----- ----- -----
Net interest income 1,435 1,450 2,883 2,939
Provision for loan losses 21 18 42 36
----- ----- ----- -----
Net interest income after
provision for loan losses 1,414 1,432 2,841 2,903
----- ----- ----- -----
Non-interest income:
Fees, service charges, and other 49 49 95 94
Commissions 4 4 20 22
Gain (loss) on sale of REO - 15 - 15
Gain (loss) on sale of loans 11 - 42 -
Gain (loss) on sale of investments - - - -
----- ----- ----- -----
Total non-interest income 64 68 157 131
----- ----- ----- -----
Non-interest expense:
Compensation and employee benefits 354 336 717 675
Occupancy and equipment 86 82 174 165
Federal deposit insurance premium 87 85 174 170
Merger related expenses 71 - 75 -
Other 167 173 385 375
----- ----- ----- -----
Total non-interest expense 765 676 1,525 1,385
----- ----- ----- -----
Earnings before income taxes 713 824 1,473 1,649
Income taxes 309 319 610 639
----- ----- ----- -----
Net earnings $404 $505 $863 $1,010
===== ===== ===== =====
Earnings per common share $0.22 $0.29 $0.48 $0.57
===== ===== ===== =====
Dividends per common share $0.09 $0.08 $0.18 $0.16
===== ===== ===== =====
Weighted average number of
common shares outstanding 1,807,219 1,767,420 1,793,215 1,767,420
See Notes to Consolidated Financial Statements
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WORKINGMENS CAPITAL HOLDINGS, INC.
AND SUBSIDIARY
Consolidated Statement of Shareholders' Equity
(Unaudited and Dollars in Thousands)
Six Months ended June 30, 1996
Net unrealized
depreciation
Number of on securities Total
Shares Common Retained available Shareholders'
Outstanding Stock Earnings for sale Equity
----------- ------ -------- -------------- -------------
Balance at beginning of period 1,777,920 $8,066 $17,722 $(103) $25,685
Net earnings for the period 863 863
Dividends ($0.18 per share) (323) (323)
Issuance of shares of common
stock at $5.00 per share 30,640 153 153
Tax benefit of stock
options exercised 122 122
Change in net unrealized
depreciation on securities (41) (41)
--------- ------ ------- ----- -------
Balance at end of period 1,808,560 $8,341 $18,262 $(144) $26,459
========= ====== ======= ===== =======
See Notes to Consolidated Financial Statements
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WORKINGMENS CAPITAL HOLDINGS, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited and Dollars in Thousands)
Six Months Ended
June 30
------------------
1996 1995
------ -------
Cash flows from operating activities:
Net earnings $863 $1,010
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Provision for loan losses 42 36
Depreciation 62 66
Deferred Federal income taxes 35 43
Amortization of premiums (discounts), net 19 30
Net (gain) loss on sale of investments - -
Net (gain) loss on sale of REO - (15)
(Increase) decrease in loans held for sale 360 -
(Increase) decrease in other assets (234) (201)
Increase (decrease) in other liabilities 306 52
------ ------
Net cash provided by operating activities 1,453 1,021
------ ------
Cash flows from investing activities:
Proceeds from maturity of investment securities - 3,000
Purchase of investment securities (3,095) (1,125)
Loans funded net of collections 5,859 (2,916)
Proceeds from sale of REO - 135
Mortgage insurance collected on REO - 12
Proceeds from sale of mortgage-backed securities - -
Principal collected on mortgage-backed securities 532 426
Purchase of mortgage-backed securities -
Purchases of premises and equipment (54) (71)
------ ------
Net cash provided (used) by investing activities 3,242 (539)
------ ------
Cash flows from financing activities:
Net increase in deposits (2,420) 5,284
Proceeds from issuance of common stock 153 -
Repurchase of common stock - -
Payments of dividends to common shareholders (323) (282)
Repayments of FHLB Advances (3,500) (10,500)
Borrowings of FHLB advances - 9,500
Increase in advances by borrowers
for taxes and insurance (111) 7
------ ------
Net cash provided (used) by financing activities (6,201) 4,009
------ ------
Net increase (decrease) in cash and cash equivalents (1,506) 4,491
Cash and cash equivalents at beginning of period 4,529 2,205
------ ------
Cash and cash equivalents at end of period $3,023 $6,696
====== ======
Supplemental disclosure of cash flow information:
Interest paid $5,214 $4,916
Income taxes paid $359 $562
See Notes to Consolidated Financial Statements
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WORKINGMENS CAPITAL HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1 - Basis of Presentation
The consolidated financial statements include the accounts of Workingmens
Capital Holdings, Inc. ("WCHI") and its subsidiary. The only direct subsidiary
of WCHI is Workingmens Federal Savings Bank ("WFSB"). A summary of WCHI's
significant accounting policies is set forth in Note 1 of Notes to Consolidated
Financial Statements of WCHI's 1995 Shareholder Annual Report.
The consolidated interim financial statements have been prepared in accordance
with instructions to Form 10-Q, and, therefore, do not include all information
and footnotes normally shown for full annual financial statements.
The consolidated interim financial statements at June 30, 1996 and for the three
months and six months ended June 30, 1996 and 1995 are unaudited, but reflect,
in the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows, and changes in shareholders' equity for
such periods.
Earnings per share is computed by dividing net earnings by the average number of
shares of common stock outstanding during the period. The effects of the
outstanding stock options (for 36,980 shares) are dilutive by less than three
percent.
-5-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(a) Results of Operations:
Three months ended June 30, 1996 compared to three months ended June 30, 1995:
The net earnings for the three months ended June 30, 1996, were $404,000
compared to $505,000 for the three months ended June 30, 1995, a decrease of
$101,000 or 20.0%.
Net interest income after provision for loan losses decreased $18,000, or
1.3%, from $1,432,000 for the three months ended June 30, 1995, to $1,414,000
for the same period in 1996. Total interest income for the three months ended
June 30, 1996 increased $32,000 compared to the three months ended June 30,
1995. The overall increase in total interest income is attributable to an
increase in volume in excess of a slight decline in interest rates. Total
interest expense for the three months ended June 30, 1996 increased $47,000
compared to the three months ended June 30, 1995. The increase in total interest
expense is attributable both to slight increases in volume and in interest
rates. The interest rate spread for the three months ended June 30, 1996, of
2.11% was down eleven basis points compared to 2.22% for the three months ended
June 30, 1995.
Total non-interest income for the three months ended June 30, 1996, was
$64,000, a decrease of $4,000, or 5.9%, from $68,000 for the three months ended
June 30, 1995. The decrease was due to a $15,000 decrease in gain on the sale of
REO, offset by an $11,000 increase in gain on the sale of loans.
Total non-interest expense for the three months ended June 30, 1996, was
$765,000, an increase of $89,000, or 13.2%, from $676,000 for the three months
ended June 30, 1995. The increase was due to increases in salaries and benefits
of $18,000 and merger related expenses of $71,000. The increase in salaries and
benefits was due to normal annual salary increases as well as the increase in
costs of employee benefits. The merger related expenses were due to cost
incurred in connection with the merger with Old National Bancorp which will be
accounted for under the pooling-of-interests method. The merger is expected to
be completed in the fourth quarter of 1996.
Income taxes decreased $10,000, or 3.1%, from $319,000 for the three months
ended June 30, 1995, to $309,000 for the same period in 1996 due to decreased
taxable income.
Six months ended June 30, 1996 compared to six months ended June 30, 1995:
The net earnings for the six months ended June 30, 1996, were $863,000
compared with $1,010,000 for the six months ended June 30, 1995, a decrease of
$147,000 or 14.6%.
Net interest income after provision for loan losses decreased $62,000, or
2.1%, from $2,903,000 for the six months ended June 30, 1995, to $2,841,000 for
the same period in 1996. Total interest income increased $219,000, or 2.8%, from
$7,865,000 for the six months ended June 30, 1995, to $8,084,000 for the same
period in 1996. The overall increase in total interest income is attributable to
increases in volume and in interest rates. Total interest expense increased
$275,000, or 5.6%, from $4,926,000 for the six months ended June 30, 1995, to
$5,201,000 for the same period in 1996. The increase in total interest expense
is attributable to increases in volume and in interest rates. The interest rate
spread for the six months ended June 30, 1996, of 2.12% was down sixteen basis
points compared to 2.28% for the six months ended June 30, 1995.
Total non-interest income for the six months ended June 30, 1996, was
$157,000, an increase of $26,000, or 19.8%, from $131,000 for the six months
ended June 30, 1995. The increase was due primarily to an increase of $42,000 in
gain on the sale of loans, offset by an decrease of $15,000 in gain on the sale
of REO.
-6-
Total non-interest expense for the six months ended June 30, 1996, was
$1,525,000, an increase of $140,000, or 10.1%, from $1,385,000 for the six
months ended June 30, 1995. The increase was primarily due to an increase in
compensation and employee benefits of $42,000 and an increase of $75,000 in
merger related expenses. The increase in compensation and employee benefits was
due to normal annual salary increases as well as the increase in costs of
employee benefits. The merger related expenses were due to cost incurred in
connection with the merger with Old National Bancorp which will be accounted for
under the pooling-of-interests method. The merger is expected to be completed in
the fourth quarter of 1996.
Income taxes decreased $29,000, or 4.5%, from $639,000 for the six months
ended June 30, 1995, to $610,000 for the same period in 1996 due to decreased
taxable income.
(b) Financial Condition:
WCHI's total assets decreased $5.1 million, or 2.4%, to $208.2 million at
June 30, 1996, from $213.3 million at December 31, 1995. Cash, interest bearing
deposits, investment securities, and investment in mutual fund increased $1.5
million, or 12.8%, to $13.1 million at June 30, 1996, from $11.6 million at
December 31, 1995. Loans receivable, net, decreased $6.3 million, or 3.3%, to
$183.4 million at June 30, 1996, from $189.7 million at December 31, 1995.
During the first six months a substantial number of loans originated were
fixed-rate loans which WFSB sold. The cash generated was invested in
interest-bearing deposits. Mortgage-backed securities decreased $575,000, or
9.9%, to $5.2 million at June 30, 1996, from $5.8 million at December 31, 1995.
Deposits decreased $2.4 million, or 1.6%, to $149.7 million at June 30,
1996. FHLB advances decreased $3.5 million, or 10.2%, to $30.7 million at June
30, 1996, from $34.2 million at December 31, 1995, due to repayments of maturing
advances.
WCHI's shareholders' equity increased $774,000, or 3.0%, to $26.5 million at
June 30, 1996, from $25.7 million at December 31, 1995. The increase was
attributable to current period earnings of $863,000 reduced by $323,000 of cash
dividends paid. Additionally, shareholders' equity increased $153,000 from
proceeds from the exercise of stock options and $122,000 from the income tax
benefit of stock options exercised, while the change in net unrealized
depreciation on securities available for sale was a reduction of $41,000.
(c) Liquidity and Capital Resources:
The standard measure of liquidity for savings associations is the ratio of
cash and eligible investments to a certain percentage of net withdrawable
savings and borrowings due within one year. The minimum required ratio is
currently set by the OTS regulation at 5%, of which 1% must be comprised of
short-term investments (i.e., generally with a term of less than one year). At
June 30, 1996, WCHI's liquidity ratio was 7.09%, of which 3.63% was comprised of
short-term investments, each of which is above the regulatory requirement.
Borrowings may be used to compensate for reductions in other sources of
funds such as deposits and to assist in asset liability management. As a member
of the FHLB system, WFSB may borrow from the FHLB of Indianapolis. At June 30,
1996, WFSB had $30.7 million in borrowings from the FHLB of Indianapolis, and
could have borrowed an additional $6.0 million from the FHLB of Indianapolis as
of that date. These borrowings were made to assist WFSB in its asset liability
management and to strengthen WFSB's liquidity position. As of that date, WFSB
had commitments to fund loan originations of approximately $4.8 million, of
which 43.4% were adjustable rate and 56.6% were fixed rate. In the opinion of
management, WFSB has sufficient cash flow and borrowing capacity to meet current
and anticipated funding commitments.
-7-
At June 30, 1996, based on the capital standards then in effect, WFSB was in
compliance with the capital requirements mandated by applicable law.
The following is a summary of WFSB's regulatory capital and capital
requirements at June 30, 1996:
Tangible Core Risk-based
capital capital capital
----------- ----------- -----------
Regulatory capital $25,180,000 $25,180,000 $25,556,000
Minimum capital requirement 3,122,000 6,245,000 9,486,000
----------- ----------- -----------
Excess capital $22,058,000 $18,935,000 $16,070,000
=========== =========== ===========
Regulatory capital ratio 12.1% 12.1% 21.6%
=========== =========== ===========
(d) Supplemental Data:
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -----------------
1996 1995 1996 1995
---- ---- ---- -----
Interest rate spread ..................... 2.11% 2.22% 2.12% 2.28%
Net yield on interest-earning assets ..... 2.78% 2.86% 2.79% 2.90%
Return on average assets ................. 0.77% 0.98% 0.82% 0.98%
Return on average equity ................. 6.12% 8.13% 6.60% 8.20%
At June 30,
----------------------
1996 1995
------- --------
Non-performing assets to total assets .... 0.32% 0.12%
Book value per share ..................... $14.63 $14.12
-8-
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On April 16, 1996, WCHI held its annual meeting of shareholders, the
results of which follow:
Report of proxies received and shares voted April 16, 1996.
Total Voted % of Total
--------- --------- ----------
Number of shares 1,778,480 1,588,886 89.34%
Election of Directors
Director Expiration of Against or Broker
Nominees Term as Director For Withheld Abstain Non-votes
- - ------------------ ---------------- --------- ---------- ------- ---------
Richard R. Haynes 1999 1,574,031 14,855 -0- -0-
J. H. McCutchen 1999 1,568,031 20,855 -0- -0-
David Rogers 1999 1,569,831 19,055 -0- -0-
Directors
Continuing in Office
Robert H. Shaffer 1997
Joseph A. Walker 1997
William E. Benckart 1998
Robert J. Wetnight 1998
Approval and ratification of the appointment of KPMG Peat Marwick as
auditors for the year ending December 31, 1996.
Against or Broker
For Withheld Abstain Non-votes
---------- -------- ------- ---------
1,564,487 7,012 17,387 -0-
Item 6. Exhibits and Reports on Form 8-K
a) Not applicable.
b) The Registrant filed a Form 8-K dated April 8, 1996 which disclosed
an Agreement of Affiliation and Merger among Old National Bancorp,
ONB Bank, Workingmens Capital Holdings, Inc., and Workingmens
Federal Savings Bank.
-9-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
DATE: July 19, 1996 /s/ Richard R. Haynes
---------------------------------
Richard R. Haynes, President
DATE: July 19, 1996 /s/ Joseph A. Walker
---------------------------------
Joseph A. Walker, Vice President/
Treasurer
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