SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 2001
-----------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission File No. 0-27606
WHG Bancshares Corporation
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Maryland 52-1953867
- --------------------------------------------------------------------------------
(State of incorporation (I.R.S. employer
or organization) identification no.)
1505 York Road, Lutherville, Maryland 21093
- --------------------------------------------------------------------------------
(Address of principal executive offices) (zip code)
(410) 583-8700
- --------------------------------------------------------------------------------
Issuer's telephone number, including area code
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
--- ---
Number of shares of Common Stock outstanding as of February 1, 2002: 1,285,050
Transitional Small Business Disclosure Format (check one)
YES NO X
--- ---
WHG BANCSHARES CORPORATION AND SUBSIDIARY
Contents
Pages
-----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements...........................................................................
Consolidated Statements of Financial Condition at December 31, 2001
(unaudited) and September 30, 2001.................................................................3
Consolidated Statements of Operations (unaudited) for the three months ended
December 31, 2001 and 2000 ........................................................................4
Consolidated Statements of Comprehensive Income (unaudited) for the three months ended
December 31, 2001 and 2000.........................................................................5
Consolidated Statements of Cash Flows (unaudited) for the three months ended
December 31, 2001 and 2000.......................................................................6-7
Notes to Consolidated Financial Statements (unaudited)...........................................8-9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..........................................................................10-12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.............................................................................13
Item 2. Changes in Securities.........................................................................13
Item 3. Defaults upon Senior Securities...............................................................13
Item 4. Submission of Matters to a Vote of Security-Holders...........................................13
Item 5. Other Information.............................................................................13
Item 6. Exhibits and Reports on Form 8-K..............................................................13
Signatures..................................................................................................14
2
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
-------------------------------------------
Lutherville, Maryland
---------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
December 31, September 30,
2001 2001
------------- -------------
(Unaudited)
Assets
------
Cash $ 1,883,668 $ 711,509
Interest bearing deposits in other banks 14,991,501 2,168,790
Federal funds sold 8,517,406 1,183,000
Investments available for sale 5,879,724 18,644,744
Other investments held to maturity 3,000,000 12,000,000
Mortgage backed securities 12,974,598 13,997,566
Loans receivable - net 112,531,696 110,275,237
Accrued interest receivable - loans 487,138 507,291
- investments 126,588 731,841
- mortgage backed securities 69,617 75,184
Premises and equipment - net 1,359,004 1,379,141
Federal Home Loan Bank of Atlanta stock, at cost 1,450,000 1,450,000
Deferred income taxes 336,281 329,818
Prepaid and refundable income taxes 48,109 36,899
Other assets 236,580 748,177
------------- -------------
Total assets $ 163,891,910 $ 164,239,197
============= =============
Liabilities and Stockholders' Equity
------------------------------------
Liabilities
Checks outstanding in excess of bank balances $ 483,910 $ 18,868
Deposits 124,053,199 124,938,953
Borrowings 22,000,000 22,000,000
Advance payments by borrowers for taxes and insurance 139,149 77,724
Income taxes payable 49,386 27,059
Other liabilities 231,062 277,765
------------- -------------
Total liabilities 146,956,706 147,340,369
Commitments and contingencies
Stockholders' Equity
- --------------------
Common stock .10 par value; authorized 1,620,062
shares; issued and outstanding 1,285,050 shares at
December 31, 2001 and 1,285,132 shares at
September 30, 2001 128,505 128,513
Additional paid-in capital 6,877,386 6,854,591
Retained earnings (substantially restricted) 10,259,055 10,267,594
Accumulated other comprehensive income 2,472 12,745
Employee Stock Ownership Plan (332,214) (364,615)
------------- -------------
Total stockholders' equity 16,935,204 16,898,828
------------- -------------
Total liabilities and stockholders' equity $ 163,891,910 $ 164,239,197
============= =============
The accompanying notes to consolidated financial statements
are an integral part of these statements.
3
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
-------------------------------------------
Lutherville, Maryland
---------------------
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
-------------------------------------------------
For Three Months Ended
------------------------
December 31, December 31,
---------- ----------
2001 2000
---------- ----------
Interest and fees on loans $2,129,529 $1,885,134
Interest and dividends on investment securities 268,099 645,397
Interest on mortgage backed securities 214,117 260,874
Other interest income 106,005 151,931
---------- ----------
Total interest income 2,717,750 2,943,336
Interest on deposits 1,518,039 1,637,831
Interest on short-term borrowings 26,779 -
Interest on long-term borrowings 283,320 359,359
---------- ----------
Total interest expense 1,828,138 1,997,190
---------- ----------
Net interest income 889,612 946,146
---------- ----------
Provision for loan losses - 30,000
---------- ----------
Net interest income after provision for loan losses 889,612 916,146
Non-Interest Income
- -------------------
Fees and charges on loans 6,637 5,162
Fees on transaction accounts 14,948 14,012
Other income 19,824 15,337
---------- ----------
Total non-interest income 41,409 34,511
Non-Interest Expenses
- ---------------------
Salaries and related expenses 481,163 474,284
Occupancy 46,144 49,068
SAIF deposit insurance premium 5,737 5,944
Depreciation of equipment 24,664 32,289
Advertising 12,892 21,727
Data processing costs 30,684 27,870
Professional services 54,071 44,510
Other expenses 105,826 118,912
---------- ----------
Total non-interest expenses 761,181 774,604
---------- ----------
Income before tax provision 169,840 176,053
Provision for income taxes 67,117 68,812
---------- ----------
Net income $ 102,723 $ 107,241
========== ==========
Basic earnings per share $ .08 $ .09
========== ==========
Diluted earnings per share $ .08 $ .09
========== ==========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
4
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
-------------------------------------------
Lutherville, Maryland
---------------------
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
-----------------------------------------------------------
For Three Months Ended
--------------------------
December 31, December 31,
------------ ------------
2001 2000
--------- ---------
Net income $ 102,723 $ 107,241
Unrealized holding (losses) gains net of tax of $6,463
and $369,051 for the three month periods ended December 31,
2001 and 2000, respectively (10,273) 586,547
--------- ---------
Comprehensive income $ 92,450 $ 693,788
========= =========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
5
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
-------------------------------------------
Lutherville, Maryland
---------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-------------------------------------------------
For Three Months Ended
-------------------------------
December 31, December 31,
------------ ------------
2001 2000
------------ ------------
Operating Activities
Net income $ 102,723 $ 107,241
Loss on disposal of equipment - 1,001
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities
-------------------------------------
Net accretion/amortization of premiums and
discounts on mortgage backed securities 1,246 395
Amortization of deferred loan fees (80,089) (613)
Loan fees deferred 79,029 (322)
Decrease in discount on loans purchased (65,571) (49,177)
Amortization of discounts on investments available for sale (1,716) (46)
Provision for loan losses - 30,000
Non-cash compensation under stock-based benefit plans 56,151 69,826
Decrease in accrued interest receivable 630,973 146,498
Provision for depreciation 32,591 42,888
(Increase) decrease in prepaid income taxes (11,210) 7,526
Decrease (increase) in other assets 511,597 (7,989)
(Decrease) increase in accrued interest payable (418) 51
Increase in income taxes payable 22,327 51,285
Decrease in other liabilities (46,703) (24,121)
------------ ------------
Net cash provided by operating activities 1,230,930 374,443
Cash Flows from Investment Activities
- -------------------------------------
Proceeds from sales and maturities of investments
available for sale 12,750,000 -
Proceeds from maturing investments held to maturity 9,000,000 -
Principal collected on mortgage backed securities - held
to maturity 1,021,722 402,251
Net decrease (increase) in shorter term loans 32,382 (13,423)
Longer term loans originated (8,085,273) (2,024,655)
Principal collected on longer term loans 5,863,063 1,583,699
Investment in premises and equipment (12,454) (91,818)
------------ ------------
Net cash provided (used) by investment activities 20,569,440 (143,946)
6
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
-------------------------------------------
Lutherville, Maryland
---------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-------------------------------------------------
For Three Months Ended
----------------------------
December 31, December 31,
------------ ------------
2001 2000
------------ ------------
Cash Flows from Financing Activities
- ------------------------------------
Net increase in demand deposits, money
market, passbook accounts and advances by
borrowers for taxes and insurance $ 457,216 $ 778,910
Net (decrease) increase in certificates of deposit (1,281,127) 5,340,355
Increase in checks outstanding in excess of bank balance 465,042 389,777
Dividends on stock (111,262) (109,398)
Stock repurchase (963) -
------------ ------------
Net cash (used) provided by financing activities (471,094) 6,399,644
------------ ------------
Increase in cash and cash equivalents 21,329,276 6,630,141
Cash and cash equivalents at beginning of period 4,063,299 5,994,277
------------ ------------
Cash and cash equivalents at end of period $ 25,392,575 $ 12,624,418
============ ============
The following is a Summary of Cash and Cash Equivalents:
- -------------------------------------------------------
Cash $ 1,883,668 $ 1,329,565
Interest bearing deposits in other banks 14,991,501 5,100,853
Federal funds sold 8,517,406 6,194,000
------------ ------------
Cash and Cash Equivalents $ 25,392,575 $ 12,624,418
============ ============
Supplemental Disclosure of Cash Flow Information:
- ------------------------------------------------
Cash paid during the year for:
Interest $ 1,825,185 $ 1,991,836
============ ============
Taxes $ 56,000 $ 10,000
============ ============
The accompanying notes to consolidated financial statements
are an integral part of these statements.
7
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
-------------------------------------------
Lutherville, Maryland
---------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
------------------------------------------------------
Note 1 - Basis of Presentation
---------------------
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and in accordance with the
instructions to Form 10-QSB of the United States of America.
Accordingly, they do not include all of the disclosures required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments necessary
for a fair presentation of the results of operations for the interim
periods presented have been made. Such adjustments were of a normal
recurring nature. The results of operations for the three months
ended December 31, 2001 are not necessarily indicative of the results
that may be expected for the fiscal year September 30, 2002 or any
other interim period. The consolidated financial statements should be
read in conjunction with the consolidated financial statements and
related notes which are incorporated by reference in the Company's
Annual Report on Form 10-KSB for the year ended September 30, 2001.
Note 2 - Cash Flow Presentation
----------------------
For purposes of the statements of cash flows, cash and cash
equivalents include cash and amounts due from depository
institutions, investments in federal funds, and certificates of
deposit with original maturities of 90 days or less.
Note 3 - Investment Available for Sale
-----------------------------
The amortized cost and fair values of investments available
for sale at are as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------- ----------- ------------ -------------
December 31, 2001
-----------------
Equity investments $ 356,198 $ 6,075 $ 43,815 $ 318,458
Federal Home Loan
Bank Bonds 5,519,501 42,538 770 5,561,269
Federal Home Loan
Mortgage Corporation
Bonds - - - -
------------- ----------- ------------ -------------
$ 5,875,699 $ 48,613 $ 44,585 $ 5,879,727
============= =========== ============ =============
8
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
- -------------------------------------------
Lutherville, Maryland
- ---------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- ------------------------------------------------------
Note 3 - Investment Available for Sale - Continued
-----------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------- ----------- ------------ -------------
September 30, 2001
------------------
Equity investments $ 356,198 $ - $ 47,498 $ 308,700
Federal Home Loan
Bank Bonds 15,018,601 67,443 - 15,086,044
Federal Home Loan
Mortgage Corporation
Bonds 3,249,181 819 - 3,250,000
------------ --------- ---------- ------------
$ 18,623,980 $ 68,262 $ 47,498 $ 18,644,744
============ ========= ========== ============
Note 4 - Earnings Per Share
------------------
Basic EPS is computed by dividing net income by the weighted
average number of common shares outstanding for the appropriate
period. Unearned ESOP shares are not included in outstanding shares.
Diluted EPS is computed by dividing net income by the weighted
average shares outstanding as adjusted for the dilutive effect of
stock options and unvested stock awards based on the "treasury stock"
method. Information relating to the calculations of net income per
share of common stock is summarized for the three month periods ended
December 31, as follows:
2001 2000
---------- ----------
Net income $ 102,723 $ 107,241
========== ==========
Weighted Average Shares
Outstanding basic EPS 1,228,789 1,195,160
Diluted Items:
Stock options 41,418 -
Unvested stock awards 269 48
---------- ----------
Adjusted weighted average shares
Used for dilutive EPS 1,270,476 1,195,208
========== ==========
9
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 contains safe
harbor provisions regarding forward-looking statements. When used in this
discussion, the words "believes", "anticipates", "contemplates", "expects", and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties which could cause
actual results to differ materially from those projected. Those risks and
uncertainties include changes in interest rates, the ability to control costs
and expenses and general economic conditions. WHG Bancshares Corporation
undertakes no obligation to publicly release the results of any revisions to
those forward-looking statements which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Since we conduct no significant business other than owning all of the
common stock of Heritage Savings Bank, F.S.B. ("Heritage Savings"), references
in this discussion to "we," "us," and "our," refer collectively to WHG
Bancshares Corporation and Heritage Savings.
Overview
For the three months ended December 31, 2001, net earnings decreased
$4,000 to $103,000, or $.08 diluted earnings per share, from $107,000, or $.09
diluted earnings per share, for the comparative 2000 period. Our earnings
decreased primarily due to a decrease in net interest income.
Results of Operations
Net Interest Income
Net interest income decreased $56,000 to $890,000 for the three months
ended December 31, 2001 from $946,000 for the comparable 2000 period. The
interest rate spread, which is the difference between the yield on average
interest earning assets and the percentage cost of average interest bearing
liabilities, decreased for the three months ended December 31, 2001 to 1.81%
from 1.97% for the comparable 2000 period. The decrease in interest rate spread
is primarily the result of a decrease in the average yield on other interest
earning assets, predominantly federal funds sold and interest bearing deposits
in other banks, partially offset by a decrease in rates paid on interest bearing
liabilities, principally demand deposits.
Interest Income
Total interest income decreased $225,000 to $2,718,000 for the three
months ended December 31, 2001 from $2,943,000 for the comparable 2000 period.
Total average interest rate yields for the three months ended December 31, 2001
was 6.77% compared to 7.34% for the same three month period in fiscal 2000. The
decrease in total interest income was primarily related to the decrease in the
total average balance of investments and mortgage backed securities and lower
average interest rate yields paid on other interest earning assets, offset by
increases in the total average balances of loans receivable and other interest
earning assets.
10
Interest and fees on loans increased $245,000 to $2,130,000 for the
three months ended December 31, 2001 from $1,885,000 for the comparable 2000
period. The increase was the result of an increase in the average dollar amount
of loans outstanding at December 31, 2001 of $13,219,000 as a result of new
loans originations. In addition, for the three months ended December 31, 2001,
the average yield on average loans decreased slightly to 7.72% compared to 7.76%
at the comparable 2000 period as the result of higher yielding 1 to 4 family
mortgage loans modifying to lower yielding interest rates, partially offset by
higher yielding commercial and real estate investment loans originated.
Interest and dividend income on investment securities decreased
$377,000 to $268,000 for the three months ended December 31, 2001 from $645,000
for the 2000 comparable period. Such decreases for the current period was due to
the decreases in average investment balances at amortized cost of $26,080,000
from investments called by issuers.
Interest income on mortgage backed securities decreased $47,000 to
$214,000 for the three months ended December 31, 2001 from $261,000 for the
comparable 2000 period. The decrease was the result of a decrease in the average
dollar amount of mortgage backed securities outstanding at December 31, 2001 of
$2,813,000.
Other interest income decreased $46,000 to $106,000 for the three
months ended December 31, 2000 from $152,000 for the comparable 2000 period. As
the result of short-term market rate decreases, the yield on our other interest
earning assets decreased 432 basis points to 1.72% for the three months ended
December 31, 2001 from 6.04%, for the same period in 2000. The average dollar
amount of other interest-earning assets, predominantly interest-bearing deposits
in other banks and federal funds sold, increased $14,569,000. Proceeds from the
investment calls were deposited in other banks and federal funds sold until such
time they can be reinvested in loans originations, other higher yielding
investments or reduce higher yielding borrowings.
Interest Expense
Total interest expense decreased $169,000, or 8.5%, to $1,828,000 for
the three months ended December 31, 2001 from $1,997,000 for the comparable 2000
period. Interest on deposits decreased by $120,000, or 7.3%, to $1,518,000 for
the three months ended December 31, 2001 from $1,638,000 for the comparable 2000
period. The decrease followed a 99 basis point decline in the average rate paid
on demand deposits coupled with a slight decline in certificate of deposits
rates from maturing higher yielding certificates. The average rate paid on
demand deposits was 1.93% and 2.92% at December 31, 2001 and 2000, respectively.
Interest on total borrowings decreased $49,000, or 13.6%, to $310,000
for the three months ended December 31, 2001 from $359,000 for the comparable
2000 period. The decrease resulted from a $2.0 million decrease in average
borrowings outstanding, coupled with 35 basis point decrease in rates paid on
total borrowings.
11
Provision for Loan Losses
For the three months ended December 31, 2001, we had no provision for
loan losses compared to a $30,000 provision for the same period in fiscal 2000.
We continually evaluate the adequacy of the allowance for loan losses, which
encompasses the overall risk characteristics of the various portfolio segments,
past experience with losses, the impact of economic conditions on borrowers and
other relevant conditions. Management continues to offer a wider variety of loan
products coupled with the continued success of changing the mix of the products
offered in the loan portfolio - from lower yielding loans (i.e., one-to four
family loans) to higher yielding loans (i.e., multi-family, non-residential
commercial, construction, and consumer loans). The allowance for loan loss is
maintained at a level that represents management's best estimate of losses in
the loan portfolio at the balance sheet date. However, there can be no assurance
that the allowance for losses will be adequate to cover losses which may be
realized in the future and that additional provision for losses will not be
required.
Non-Interest Expense
Total non-interest expenses decreased $14,000, or 1.8%, to $761,000 for
the three month ended December 31, 2001 from $775,000 for the comparable 2000
period. The rise in salaries and related expenses reflect annual performance
incentives and an $18,000 increase in Employee Stock Ownership Plan compensation
following the appreciation of our common stock. Increases in salaries and
related expenses were partially offset by a $34,000 decrease in Management Stock
Bonus Plan ("MSBP") expense. As of October 8, 2001 all granted shares of the
MSBP have been distributed and there will be no further stock-based expense
until such time the remaining 11,142 shares are granted. At September 30, 2001,
our computer system for our four branches and part of our main office was fully
depreciated. Accordingly, there was no depreciation expense for this equipment
during the current period. Advertising decreased primarily due to an advertising
campaign for 18 and 25 month certificates of deposit during the prior 2000
period. Professional fees increased due to an increase in legal fees and for
business development planning expenses incurred.
Provision for Income Taxes
The provision for income taxes decreased $2,000 for the quarter ended
December 31, 2001, as compared to the same quarter in 2000. The decrease was the
result of a decrease in net income. The effective tax rate for the period ended
December 31, 2001 remained relatively unchanged at 39.5% compared to 39.1%.
12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The registrant is not engaged in any legal proceedings at
the present time. From time to time, the Bank is a party to
legal proceedings within the normal course of business
wherein it enforces its security interest in loans made by
it, and other matters of a like kind.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
3(i) Articles of Incorporation of WHG Bancshares Corporation *
3(ii) Amended Bylaws of WHG Bancshares Corporation ******
10.1 Form of Amended and Restated Employment Agreement with
Peggy J. Stewart ***
10.2 Form of Amended and Restated Change in Control
Severance Agreements for three executive officers ***
10.3 Amendment to the 1996 Stock Option Plan ****
10.4 Amendment to Management Stock Bonus Plan and
Trust Agreement ****
10.5 Form of Directors Change In Control Severance Plan **
10.6 2001 Stock Option Plan *****
(b) None.
- ----------------------
* Incorporated by reference to the registration statement on Form S-1
(File No. 33-80487) declared effective by the SEC on
February 7, 1996.
** Incorporated by reference to the September 30, 1999 Form 10-KSB
filed with the SEC on December 21, 1999.
*** Incorporated by reference to the September 30, 2000 Form
10-KSB filed with the SEC on December 18, 2000.
**** Incorporated by reference to the proxy statement for the
annual meeting of stockholders filed with the SEC on or about
December 19, 1997.
***** Incorporated by reference to the proxy statement for the
annual meeting of stockholders filed with the SEC on or about
December 18, 2000.
****** Incorporated by reference to the March 31, 2001 Form 10QSB
filed with the SEC on February 13, 2001.
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WHG BANCSHARES CORPORATION
Date: February 13, 2002 By: /s/Peggy J. Stewart
-------------------------------------
Peggy J. Stewart
President and Chief Executive Officer
(duly authorized officer)
Date: February 13, 2002 By: /s/Robin L. Taylor
-------------------------------------
Robin L. Taylor
Controller (chief accounting officer)
14