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 March 31, 2002
--------------
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
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(Exact name of small business issuer as specified in its charter)
Maryland 52-1953867
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(State of incorporation (I.R.S. employer
or organization) identification no.)
1505 York Road, Lutherville, Maryland 21093
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(Address of principal executive offices) (zip code)
(410) 583-8700
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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 May 1, 2002: 1,285,050
Transitional Small Business Disclosure Format (check one)
YES NO X
--- ---
WHG BANCSHARES CORPORATION AND SUBSIDIARY
Contents
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Pages
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements...........................................................................3
Consolidated Statements of Financial Condition at March 31, 2002
(unaudited) and September 30, 2001.................................................................3
Consolidated Statements of Operations (unaudited) for the six and three months ended
March 31, 2002 and 2001 ...........................................................................4
Consolidated Statements of Comprehensive Income (unaudited) for the six and three months
ended March 31, 2002 and 2001......................................................................5
Consolidated Statements of Cash Flows (unaudited) for the six months ended
March 31, 2002 and 2001..........................................................................6-7
Notes to Consolidated Financial Statements (unaudited)..........................................8-10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..........................................................................11-15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.............................................................................16
Item 2. Changes in Securities.........................................................................16
Item 3. Defaults upon Senior Securities...............................................................16
Item 4. Submission of Matters to a Vote of Security-Holders...........................................16
Item 5. Other Information.............................................................................16
Item 6. Exhibits and Reports on Form 8-K..............................................................16
Signatures..................................................................................................17
-2-
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
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Lutherville, Maryland
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CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
March 31, September 30,
------------- -------------
2002 2001
------------- -------------
(Unaudited)
Assets
------
Cash $ 1,167,550 $ 711,509
Interest bearing deposits in other banks 1,297,103 2,168,790
Federal funds sold 3,731,850 1,183,000
Investments available for sale 5,596,844 18,644,744
Other investments held to maturity 2,500,000 12,000,000
Mortgage backed securities - available for sale 3,984,284 -
Mortgage backed securities - held to maturity 14,880,691 13,997,566
Loans receivable - net 119,916,589 110,275,237
Accrued interest receivable - loans 533,750 507,291
- investments 113,624 731,841
- mortgage backed securities 92,413 75,184
Premises and equipment - net 1,334,263 1,379,141
Federal Home Loan Bank of Atlanta stock, at cost 1,450,000 1,450,000
Deferred income taxes 393,903 329,818
Prepaid and refundable income taxes 133,855 36,899
Other assets 411,334 748,177
------------- -------------
Total assets $ 157,538,053 $ 164,239,197
============= =============
Liabilities and Stockholders' Equity
------------------------------------
Liabilities
Deposits $ 119,739,036 $ 124,938,953
Borrowings 19,250,000 22,000,000
Advance payments by borrowers for taxes and insurance 337,215 77,724
Checks outstanding in excess of bank balances 999,739 18,868
Income taxes payable 11,045 27,059
Other liabilities 229,837 277,765
------------- -------------
Total liabilities 140,566,872 147,340,369
Commitments and contingencies
Stockholders' Equity
- --------------------
Common stock .10 par value; authorized 1,620,062
shares; issued and outstanding 1,285,050 shares at
March 31, 2002 and 1,285,132 shares at
September 30, 2001 128,505 128,513
Additional paid-in capital 6,909,975 6,854,591
Retained earnings (substantially restricted) 10,321,622 10,267,594
Accumulated other comprehensive (loss) income (89,108) 12,745
Employee Stock Ownership Plan (299,813) (364,615)
------------- -------------
Total stockholders' equity 16,971,181 16,898,828
------------- -------------
Total liabilities and stockholders' equity $ 157,538,053 $ 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
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CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
-------------------------------------------------
For Six Months Ended For Three Months Ended
March 31, March 31,
---------------------------- -----------------------------
2002 2001 2002 2001
---- ---- ---- ----
Interest and fees on loans $4,264,893 $3,780,705 $2,135,364 $1,895,571
Interest on mortgage backed securities 471,188 513,950 257,071 253,076
Interest and dividends on investment
securities 429,020 1,286,470 160,921 641,073
Other interest income 157,263 256,741 51,258 104,810
---------- ---------- ---------- ----------
Total interest income 5,322,364 5,837,866 2,604,614 2,894,530
Interest on deposits 2,833,334 3,270,650 1,315,295 1,632,819
Interest on short-term borrowings 35,511 - 8,732 -
Interest on long term borrowings 560,481 659,403 277,161 300,044
---------- ---------- ---------- ----------
Total interest expense 3,429,326 3,930,053 1,601,188 1,932,863
---------- ---------- ---------- ----------
Net interest income 1,893,038 1,907,813 1,003,426 961,667
Provision for loan losses - 30,000 - -
---------- ---------- ---------- ----------
Net interest income after provision for
loan losses 1,893,038 1,877,813 1,003,426 961,667
Non-Interest Income
Fees and charges on loans 13,691 10,650 7,054 5,488
Fees on transaction accounts 25,760 26,716 10,812 12,704
Gain on sale of investments 7,739 - 7,739 -
Other income 34,689 31,964 14,865 16,627
---------- ---------- ---------- ----------
Total non-interest income 81,879 69,330 40,470 34,819
Non-Interest Expenses
Salaries and related expenses 962,054 965,333 480,891 491,049
Occupancy 90,640 98,332 44,496 49,264
SAIF deposit insurance premium 11,367 11,815 5,630 5,871
Depreciation of equipment 49,132 60,290 24,468 28,001
Advertising 24,499 42,820 11,607 21,093
Data processing costs 65,258 56,262 34,574 28,392
Professional services 109,679 91,642 55,608 47,132
Other expenses 206,706 217,946 100,880 99,034
---------- ---------- ---------- ----------
Total non-interest expenses 1,519,335 1,544,440 758,154 769,836
---------- ---------- ---------- ----------
Income before tax provision 455,582 402,703 285,742 226,650
Provision for income taxes 179,030 162,231 111,913 93,419
---------- ---------- ---------- ----------
Net income $ 276,552 $ 240,472 $ 173,829 $ 133,231
========== =========== ========== ===========
Basic earnings per share $ .22 $ .20 $ .14 $ .11
========== =========== ========== ===========
Diluted earnings per share $ .21 $ .20 $ .13 $ .11
========== =========== ========== ===========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
-4-
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
-------------------------------------------
Lutherville, Maryland
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
-----------------------------------------------------------
For Six Months Ended
March 31, March 31,
----------- ---------
2002 2001
---------- ----------
Net income $ 276,552 $ 240,472
Unrealized holding (losses) gains net of tax of $61,044
and $582,513 for the six month periods ended March 31,
2002 and 2001, respectively (97,155) 925,806
Reclassification adjustment for gains included in net
income, net of tax of $3,041 for the six month period
ended March 31, 2002 (4,698) -
---------- ----------
Comprehensive income $ 174,699 $1,166,278
========== ==========
For Three Months Ended
March 31, March 31,
--------- ---------
2002 2001
--------- ---------
Net income $ 173,829 $ 133,231
Unrealized holding (losses) gains net of tax of $54,581
and $213,461 for the three month periods ended March 31,
2002 and 2001, respectively (86,882) 339,258
Reclassification adjustment for gains included in net
income, net of tax of $3,041 for the three month period
ended March 31, 2002 (4,698) -
--------- ---------
Comprehensive income $ 82,249 $ 472,489
========= =========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
-5-
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
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Lutherville, Maryland
---------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-------------------------------------------------
For Six Months Ended
----------------------------
March 31, March 31,
------------ ------------
2002 2001
------------ ------------
Operating Activities
- --------------------
Net income $ 276,552 $ 240,472
Loss on disposal of equipment - 1,001
Gain on sale of investment available for sale (7,739) -
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities
-------------------------------------
Net accretion/amortization of premiums and
discounts on mortgage backed securities 3,533 1,424
Amortization of deferred loan fees (139,268) (13,134)
Loan fees deferred 190,852 1,558
Decrease in discount on loans purchased (125,097) (76,356)
Amortization of discounts on investments available for sale (1,730) (92)
Provision for loan losses -- 30,000
Non-cash compensation under stock-based benefit plans 121,141 131,232
Decrease in accrued interest receivable 574,529 127,021
Provision for depreciation 64,918 81,234
Decrease in deferred income tax assets -- (24,419)
Increase in prepaid income taxes (96,956) (29,465)
Decrease in other assets 336,843 2,418
(Decrease) increase in accrued interest payable (148) 14
Decrease in income taxes payable (16,014) (31,874)
Decrease in other liabilities (47,928) (42,064)
------------ ------------
Net cash provided by operating activities 1,133,488 398,970
Cash Flows from Investment Activities
- -------------------------------------
Proceeds from sales and calls of investments
available for sale 12,917,364 --
Proceeds from calls of investments held to maturity 9,500,000 200,000
Purchase of mortgage backed securities available for sale (4,027,500) --
Purchase of mortgage backed securities held to maturity (2,873,946) --
Principal collected on mortgage backed securities - available
for sale 17,006 --
Principal collected on mortgage backed securities - held
to maturity 1,987,565 882,018
Net decrease (increase) in shorter term loans 157,802 (24,549)
Longer term loans originated (20,160,826) (4,279,528)
Principal collected on longer term loans 10,435,185 3,510,174
Investment in premises and equipment (20,040) (255,177)
------------ ------------
Net cash provided by investment activities 7,932,610 32,938
-6-
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
-------------------------------------------
Lutherville, Maryland
---------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-------------------------------------------------
For Six Months Ended
-------------------------
March 31, March 31,
----------- ----------
2002 2001
----------- -----------
Cash Flows from Financing Activities
- ------------------------------------
Net increase in demand deposits, money
market, passbook accounts and advances by
borrowers for taxes and insurance $ 1,904,243 $ 3,538,765
Net (decrease) increase in certificates of deposit (6,844,521) 1,588,777
Increase in checks outstanding in excess of bank balance 980,871 394,815
Net decrease in borrowings (2,750,000) (3,000,000)
Dividends on stock (222,524) (218,795)
Stock repurchase (963) (5,009)
----------- -----------
Net cash (used) provided by financing activities (6,932,894) 2,298,553
----------- -----------
Increase in cash and cash equivalents 2,133,204 2,730,461
Cash and cash equivalents at beginning of period 4,063,299 5,994,277
----------- -----------
Cash and cash equivalents at end of period $ 6,196,503 $ 8,724,738
=========== ===========
The following is a Summary of Cash and Cash Equivalents:
- --------------------------------------------------------
Cash $ 1,167,550 $ 1,249,632
Interest bearing deposits in other banks 1,297,103 3,428,106
Federal funds sold 3,731,850 4,047,000
----------- -----------
Cash and Cash Equivalents $ 6,196,503 $ 8,724,738
=========== ===========
Supplemental Disclosure of Cash Flow Information:
- -------------------------------------------------
Cash paid during the year for:
Interest $ 3,431,960 $ 3,977,091
=========== ===========
Taxes $ 310,000 $ 266,000
=========== ===========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
-7-
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
-------------------------------------------
Lutherville, Maryland
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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 six and three
months ended March 31, 2002 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
---- ----- ------ -----
March 31, 2002
- --------------
Equity investments $ 196,573 $ - $ 17,173 $ 179,400
Federal Home Loan
Bank Bonds 5,519,512 - 102,068 5,417,444
Federal Home Loan
Mortgage Corporation
Bonds - - - -
---------- ---------- ---------- ----------
$5,716,085 $ - $ 119,241 $5,596,844
========== ========== ========== ==========
-8-
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
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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 - Mortgage Backed Securities Available for Sale
---------------------------------------------
The amortized cost and fair values of mortgage backed
securities available for sale at are as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
March 31, 2002
- --------------
GNMA ARM $4,010,217 $ - $ 25,933 $3,984,284
$4,010,217 $ - $ 25,933 $3,984,284
========== ========== ========== ==========
There were no mortgage backed securities available for sale
at September 30, 2001.
-9-
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
- -------------------------------------------
Lutherville, Maryland
- ---------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- ------------------------------------------------------
Note 5 - 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 six and three month
periods ended March 31, as follows:
For the Six Months Ended For the Three Months Ended
------------------------ --------------------------
March 31, March 31, March 31, March 31,
---------- ---------- ---------- ----------
2002 2001 2002 2002
---------- ---------- ---------- ----------
Net income $ 276,552 $ 240,472 $ 173,829 $ 133,231
========== ========== ========== ==========
Weighted Average Shares
Outstanding basic EPS 1,230,790 1,197,572 1,233,291 1,200,038
Diluted Items:
Stock options 57,384 12,007 73,368 18,933
Unvested stock awards 962 1,895 1,656 3,174
---------- ---------- ---------- ----------
Adjusted weighted average shares
Used for dilutive EPS 1,289,136 1,211,474 1,308,315 1,222,145
========== ========== ========== ==========
Note 6 - Merger Agreement
----------------
On February 27, 2002, BCSB Bankcorp, Inc. ("BCSB Bankcorp"),
the holding company for Baltimore County Savings Bank, F.S.B.,
("Baltimore County Savings") and WHG Bancshares Corporation ("WHG"),
the holding company for Heritage Savings Bank, F.S.B. ("Heritage"),
announced jointly that they entered into a definitive agreement under
which Baltimore County Savings and WHG would merge in an all-cash
transaction valued at $14.25 per share, or approximately $18 million
in total. The merger transaction is expected to be consummated on or
about September 2002.
-10-
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
On February 27, 2002, BCSB Bankcorp, Inc. ("BCSB Bankcorp"), the
holding company for Baltimore County Savings Bank, F.S.B., ("Baltimore County
Savings") and WHG Bancshares Corporation ("WHG"), the holding company for
Heritage Savings Bank, F.S.B. ("Heritage"), announced jointly that they entered
into a definitive agreement under which Baltimore County Savings and WHG would
merge in an all-cash transaction valued at $14.25 per share, or approximately
$18 million in total. The merger transaction is expected to be consummated on or
about September 2002.
For the six months ended March 31, 2002, net earnings increased $37,000
to $277,000 or $.21 per diluted share, from $240,000, or $.20 per diluted share,
for the comparative fiscal 2001 period. In general, the increased net earnings
for the current six-month period resulted from the combination of a decrease in
the provision for loan loss and a decrease in non-interest expenses.
For the three months ended March 31, 2002, net earnings increased
$41,000 to $174,000, or $.13 diluted earnings per share, from $133,000, or $.11
diluted earnings per share, for the comparative 2001 period. Our earnings
increased primarily due to an increase in net interest income and a decrease in
non-interest expense.
-11-
Financial Condition
Our assets at March 31, 2002 decreased $6,701,000, or 4.1%, to
$157,538,000 from $164,239,000 at September 30, 2001. Our liabilities at March
31, 2002 decreased $6,773,000, or 4.6%, to $140,567,000 from $147,340,000 at
September 30, 2001. At March 31, 2002 we used approximately $22,250,000 of our
proceeds from investments called by issuers to fund a net increase in loans
receivable of $9,600,000, purchase mortgage backed securities of $6,901,000, and
repay $2,750,000 of our long-term debt.
At March 31, 2002, our net worth increased by $72,000, or .4%, to
$16,971,000 from $16,899,000 at September 30, 2001. The increase primarily
reflects the current periods net income and the reduction of stock-based benefit
plan obligations, partially offset by the $102,000 increase in accumulated other
comprehensive loss and $223,000 of dividend declarations. Because of interest
rate volatility, accumulated other comprehensive (loss) income and stockholders'
equity could materially fluctuate for each interim period and year-end period.
See Notes 3 and 4 to the consolidated financial statements.
Results of Operations
Net Interest Income
Net interest income decreased $15,000, or .8%, to $1,893,000 for the
six months ended March 31, 2002 from $1,908,000 for the comparable 2001 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 slightly to 1.99% from 2.00% for the six month periods
ended March 31, 2002 and 2001.
Net interest income increased $41,000, or 4.3%, to $1,003,000 for the
three months ended March 31, 2002 from $962,000 for the comparable 2001 period.
The interest rate spread, increased for the three months ended March 31, 2002 to
2.18% from 2.02% for the comparable 2001 period. The increase in interest rate
spread is primarily the result of a decrease in rates paid on deposits partially
offset by a decrease in the average yield on interest earning assets,
predominantly loans, federal funds sold and interest bearing deposits in other
banks.
Interest Income
Total interest income for the six and three month periods ended March
31, 2002 was $5,322,000 and $2,605,000, compared to $5,838,000 and $2,895,000,
respectively, for the same periods in fiscal 2001. Total average interest rate
yields for the six months and three month periods ended March 31, 2002 were
6.76% and 6.75%, respectively, compared to 7.34%, for each of the same periods
in fiscal 2001. The decrease in total interest income was primarily related to
the decrease in the total average balance of investments and lower average
interest rate yields earned on total interest earning assets, offset by
increases in the total average balances of loans receivable and other interest
earning assets.
-12-
Interest and fees on loans increased $484,000 and $239,000 for the
current six months and three month periods to $4,265,000 and $2,135,000,
respectively. The increases were the result of an increase in the average dollar
amount of loans outstanding partially offset by a slight decline in the average
interest rate yield. The average dollar amount of loans outstanding for the
current six months and three months periods was $113,910,000 and $117,447,000,
respectively, as compared to $97,425,000 and $97,696,000, respectively, for the
comparable periods in the prior year. The average yield on average loans for the
six and three months ended March 31, 2002, decreased to 7.49% and 7.27%,
respectively, compared to 7.76% for each of the same periods in 2001. The
decrease resulted from rate modifications of higher yielding 1 to 4 family
mortgage loans to lower yielding mortgage loans, which were partially offset by
higher yielding commercial and real estate investment loan originations.
Interest and dividend income on investment securities decreased
$857,000 and $480,000 to $429,000 and $161,000, respectively, for the six and
three months ended March 31, 2002 from $1,286,000 and $641,000, respectively,
for the 2001 comparable periods. Such decreases for the current six and three
month periods were due to the decreases in average investment balances at
amortized cost of $27,209,000 and $28,337,000, respectively, as a result of
investments called by issuers.
Interest income on mortgage backed securities decreased $43,000 to
$471,000 for the current six month period from $514,000. The decrease was
primarily the result of a decrease in the average interest rate yield of 5.79%
from 6.44% for the comparable 2001 period. An increase in the average dollar
amount of mortgage backed securities of $3,500,000 offset by a decline in the
average interest yield to 5.36% resulted in a slight increase in income for the
current three month period.
Other interest income decreased $100,000 and $54,000 for the current
six and three month periods to $157,000 and $51,000, respectively, from $257,000
and $105,000 for the comparable 2001 periods. As the result of short-term market
rate decreases, the yield on our other interest earning assets decreased 429 and
392 basis points to 1.93% and 2.58%, respectively, for the six and three months
ended March 31, 2002 from 6.22% and 6.50%, for the same period in 2001. The
average dollar amount of other interest-earning assets, predominantly
interest-bearing deposits in other banks and federal funds sold, increased for
the six and three month periods to $8,026,000 and $1,483,000, respectively.
Proceeds from the investment calls were deposited in other banks and federal
funds sold until such time they were reinvested in loans originations, other
higher yielding investments or reduced higher yielding borrowings and funded
deposit withdrawals.
Interest Expense
Total interest expense decreased $501,000 and $332,000 for the six and
three month periods ended March 31, 2002 to $3,429,000 and $1,601,000,
respectively, compared to $3,930,000 and $1,933,000, respectively, for the same
periods in fiscal 2001. The cost of funds for total interest bearing liabilities
for the current six and three month periods decreased 57 and 75 basis points,
respectively, to 4.77% and 4.57% from 5.34% and 5.32%, respectively. In general,
the decrease in interest expense for the current respective periods principally
resulted from decreases in the average cost of funds for deposits and decreases
in the average balances of certificates of deposits.
-13-
Interest expense on certificates of deposit for the six and three
months periods ended March 31, 2002 decreased $293,000 and $220,000,
respectively, as compared to the fiscal 2001 respective periods. The rates paid
on certificates of deposit for the current six and three month periods decreased
30 and 53 basis points to 5.65% and 5.47%, respectively. The yield decrease was
the result of older high-yielding deposits renewing at lower rates. In addition,
the average balances of certificates of deposits for the current six and three
month periods decreased $5,221,000 and $6,777,000, respectively.
Interest expense on demand deposits for the six and three months
periods ended March 31, 2002 decreased $144,000 and $97,000, respectively, as
compared to the fiscal 2001 respective periods. The decrease followed a 125 and
149 basis point decline in the average rate paid on demand deposits, partially
offset by increases in the average balances of demand deposits for the current
six and three month periods.
Interest on total borrowings decreased $63,000, or 9.6%, and $14,000,
or 4.7%, to $596,000 and $286,000, respectively, for the six and three month
periods ended March 31, 2002 from $659,000 and $300,000, respectively, for the
comparable 2001 periods. The decrease resulted from a $1,832,000 and $1,677,000
decrease in average borrowings outstanding, for the six and three month periods.
Provision for Loan Losses
For the six months ended March 31, 2002, we had no provision for loan
losses compared to a $30,000 provision for comparable prior year's period. 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. 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 Income
Non-interest income for the six and three month periods ended March 31,
2002 was $81,000 and $40,000, relatively unchanged from the same periods in
fiscal 2001.
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Non-Interest Expense
Total non-interest expenses decreased $25,000, or 1.6%, and $12,000, or
1.6%, to $1,519,000 and $758,000 for the six and three months ended March 31,
2002 from $1,544,000 and $770,000, respectively, for the comparable 2001
periods. The decline in salaries and related expenses reflect a $67,000 and
$34,000, respectively, 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. Increases in salaries and related expenses were
partially offset by annual performance incentives and an increase of $36,000 and
$17,000, respectively, in Employee Stock Ownership Plan compensation following
the appreciation of our common stock. Occupancy expense decreased due to
non-recurring branch maintenance and repairs in fiscal 2001. 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 six and three months ended March 31, 2002. Advertising
decreased primarily due to an advertising campaign for 18 and 25 month
certificates of deposit and commercial and home equity loans during the prior
2001 period. Data processing costs rose due to annual price adjustments and an
increase in communication charges. 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 for the six months and three month
periods ended March 31, 2002 was $179,000 and $112,000, compared to $162,000 and
$93,000, respectively, for the same periods in fiscal 2001. The increases for
the current period were primarily the result of increases in net income. The
effective tax rates for the current six and three month periods decreased
slightly to 39.3% and 39.2%, respectively, as compared to 40.2% and 41.0%,
respectively, for the comparative periods in fiscal 2001. The rate decreases
were due to non-deductible stock-based compensation-related expenses recognized
in the prior fiscal year.
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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
(a)
2.0 Agreement and Plan of Merger*******
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) On March 1, 2002, the company filed a Form 8-K (Items 5 and 7) to
announce the merger agreement with BCSB Bankcorp, Inc.
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* 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.
******* Incorporated by reference to the Form 8-K filed with the SEC on
March 1, 2002.
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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: May 13, 2002 By: /s/Peggy J. Stewart
-------------------------------------
Peggy J. Stewart
President and Chief Executive Officer
(duly authorized officer)
Date: May 13, 2002 By: /s/Robin L. Taylor
-------------------------------------
Robin L. Taylor
Controller (chief accounting officer)
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