U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-22997
WSB HOLDING COMPANY
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(Exact name of Registrant as specified in its Charter)
Pennsylvania 23-2908963
- ------------------------------- -------------------------------------
(State or othe jurisdiction of I.R.S. Employer Identification Number
incorporation or organization)
807 Middle Street, Pittsburgh, Pennsylvania 15212
- ------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (412) 231-7297
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Indicate by check mark whether the registrant (1) has files 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.
X Yes No
--- ---
As of September 30, 1997, there were 330,600 shares of the Registrant's
common stock, par value $0.10 per share, outstanding. The Registrant has no
other classes of common equity outstanding.
Transitional small business disclosure format:
Yes X No
--- ---
WSB HOLDING COMPANY AND SUBSIDIARY
PITTSBURGH, PENNSYLVANIA
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - (Unaudited) as of
September 30, 1997 and June 30, 1997 3
Consolidated Statements of Income - (Unaudited) for
the three months ended September 30, 1997 and 1996 4
Consolidated Statements of Cash Flows - (Unaudited)
for the three months ended September 30, 1997 and 1996 5
Notes to (unaudited) Consolidated Financial Statements 7
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 and use of Proceeds 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)
WSB HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS
September 30, June 30,
1997 1997
------------ ------------
Cash and cash equivalents:
Interest bearing $ 4,654,344 $ 2,547,897
Non-interest bearing 346,667 256,907
Securities held-to-maturity (estimated fair
value of $ 12,138,093 and $ 11,980,618) 12,110,919 12,007,456
Securities available-for-sale, at fair value 2,371,913 2,684,039
Loans and real estate, (net of allowance
for loan losses of $ 217,490 and $ 208,791) 14,557,232 14,590,996
Federal Home Loan Bank stock, at cost 153,300 153,300
Accrued interest receivable 265,900 299,469
Premises and equipment, net 1,043,428 1,057,667
Other assets 89,304 146,503
Deferred income taxes 43,896 52,426
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TOTAL ASSETS $ 35,636,903 $ 33,796,660
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 28,463,500 $ 28,405,775
Federal Home Loan Bank advances 2,000,000 3,000,000
Advances from borrowers for taxes and insurance 141,895 233,818
Accrued expenses and other liabilities 122,294 113,272
Accrued income taxes 5,373 -
------------ ------------
TOTAL LIABILITIES 30,733,062 31,752,865
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Commitments and contingencies
Stockholders' equity:
Preferred stock ($ .10 par value, 1,000,000 shares
authorized, none outstanding) - -
Common stock ($ .10 par value, 4,000,000 shares
authorized; 330,600 shares issued and outstanding
at September 30, 1997) 33,060 -
Paid-in capital 3,021,533 -
Retained earnings, substantially restricted 2,112,418 2,063,990
Net unrealized gain (loss) on securities
available-for-sale, net of applicable
income taxes of $ (594) and $ (9,124) (890) (20,195)
Unearned Employee Stock Ownership Plan shares (ESOP) (262,280) -
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 4,903,841 2,043,795
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 35,636,903 $ 33,796,660
============ ============
See accompanying notes to the unaudited consolidated financial statements.
(3)
WSB HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended
September 30,
1997 1996
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INTEREST AND DIVIDEND INCOME
Loans $ 316,266 $ 289,231
Investments 259,479 233,945
Other interest earning assets 69,930 24,389
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TOTAL INTEREST AND DIVIDEND INCOME 645,675 547,565
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INTEREST EXPENSE
Deposits 332,670 320,925
Advances from FHLB 43,928 588
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TOTAL INTEREST EXPENSE 376,598 321,513
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NET INTEREST INCOME 269,077 226,052
PROVISION FOR LOAN LOSSES 8,700 9,624
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 260,377 216,428
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NONINTEREST INCOME
Service charges and other fees 20,812 21,300
Income from real estate rental 975 1,125
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TOTAL NONINTEREST INCOME 21,787 22,425
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NONINTEREST EXPENSE
Compensation and benefits 117,880 93,830
Occupancy and equipment expense 34,688 30,735
Insurance premiums 6,248 181,204
Other 69,547 61,601
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TOTAL NONINTEREST EXPENSE 228,363 367,370
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INCOME (LOSS) BEFORE INCOME TAXES 53,801 (128,517)
INCOME TAX EXPENSE (BENEFIT) 5,373 (64,935)
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NET INCOME (LOSS) $ 48,428 $ (63,582)
========== ==========
EARNINGS PER SHARE (since inception) $ .16 N/A
===== ===
See accompanying notes to the unaudited consolidated financial statements.
(4)
WSB HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
September 30,
1997 1996
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OPERATIONS
Net income (loss) $ 48,428 $ (63,582)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Amortization of:
Deferred loan origination fees (826) (657)
Premiums and discounts on loans
and investment securities (2,767) 1,200
Unearned ESOP shares 2,915 -
Provision for loan losses 8,700 9,624
Depreciation of premises and equipment 14,239 13,239
(Increase) decrease in:
Accrued interest receivable 33,569 (11,542)
Other assets 57,199 (4,204)
Deferred income taxes - (84,088)
Increase (decrease) in:
Accrued expenses and other liabilities 9,022 157,566
Accrued income taxes 5,373 6,157
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NET CASH PROVIDED BY OPERATIONS 175,852 23,713
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INVESTING ACTIVITIES
Purchases of securities held-to-maturity (2,650,000) (1,200,000)
Proceeds from maturities of and principal
repayments on securities held-to-maturity 2,546,537 886,700
Proceeds from maturities of and principal
repayments on securities available-for-sale 342,728 85,349
Net loan originations and principal
repayments on loans 25,890 (96,013)
Capitalized improvements on real estate owned - (2,150)
Purchases of premises and equipment - (17,573)
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NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 265,155 (343,687)
---------- ----------
See accompanying notes to the unaudited consolidated financial statements.
(5)
WSB HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
September 30,
1997 1996
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FINANCING ACTIVITIES
Net increase (decrease) in deposits 57,725 (403,984)
Net increase (decrease) FHLB advances (1,000,000) 1,000,000
Proceeds from issuance of common stock 3,041,520 -
Payment of conversion costs (252,122) -
Net decrease in advances from borrowers
for taxes and insurance (91,923) (79,090)
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NET CASH PROVIDED BY FINANCING ACTIVITIES 1,755,200 516,926
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NET INCREASE IN CASH AND CASH EQUIVALENTS 2,196,207 196,952
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,804,804 1,206,031
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CASH AND CASH EQUIVALENTS AT END OF YEAR $ 5,001,011 $ 1,402,983
============ ============
SUPPLEMENTAL DISCLOSURES Cash paid during the period for:
Interest on deposits, advances,
and other borrowings $ 369,305 $ 318,892
Income taxes $ - $ -
See accompanying notes to the unaudited consolidated financial statements.
(6)
WSB HOLDING COMPANY AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ORGANIZATION
WSB Holding Company (the "Company") was incorporated under the laws of the
Commonwealth of Pennsylvania for the purpose of becoming the holding company of
Workingmens Bank (the "Bank") in connection with the Bank's conversion from a
federally chartered mutual savings bank to a federally chartered stock savings
bank, pursuant to its Plan of Conversion. The Company commenced operations on
August 27, 1997, the date of a Subscription Offering of its shares in connection
with the conversion of the Savings Bank (the "Conversion"). The financial
statements of the Bank are presented on a consolidated basis with those of the
Company.
The consolidated financial statements included herein are for the Company, the
Bank and the Bank's wholly owned subsidiary, Workingmens Service Corporation
(WSC). The impact of WSC on the consolidated financial statements is
insignificant.
NOTE B - BASIS OF PREPARATION
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-QSB and therefore, do not include all
disclosures necessary for a complete presentation of the consolidated balance
sheets, consolidated statements of income, consolidated statements of
stockholders' equity, and consolidated statements of cash flows in conformity
with generally accepted accounting principles. However, all adjustments which
are, in the opinion of management, necessary for the fair presentation of the
interim financial statements have been included. All such adjustments are of a
normal recurring nature. The statement of income for the three month period
ended September 30, 1997 is not necessarily indicative of the results which may
be expected for the entire year or any other interim period.
These consolidated financial statements should be read in conjunction with the
audited consolidated financial statements and notes thereto for the Company for
the year ended June 30, 1997 which are included in the Form SB-2 (file no.
333-29389).
NOTE C - EARNINGS PER SHARE
Earnings per share amounts for the three month period ended September 30, 1997
are based on the average number of shares outstanding throughout the periods,
except that the initial issue has been given an effective date of July 1, 1997.
No comparative amounts have been presented for the three month period ended
September 30, 1996 because no shares were outstanding during the period.
Unallocated ESOP shares are not considered as outstanding for purposes of this
calculation.
(7)
WSB HOLDING COMPANY AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE D - STOCKHOLDERS' EQUITY
The Company was incorporated under Pennsylvania law in June 1997 to acquire and
hold all the outstanding common stock of the Bank, as part of the Bank's
conversion from a federally chartered mutual savings bank to a federally
chartered stock savings bank. In connection with the conversion, which was
consummated on August 27, 1997, the Company issued and sold 330,600 shares of
common stock at a price of $ 10.00 per share for total net proceeds of $
3,053,878 after conversion expenses of $ 252,122. The Company retained $
1,416,520 of the proceeds and used the remaining proceeds to purchase the newly
issued capital stock of the Bank in the amount of $ 1,372,878 and a loan to the
ESOP of $ 264,480.
The Bank may not declare or pay a cash dividend if the effect thereof would
cause its net worth to be reduced below either the amounts required for the
liquidation account discussed below or the regulatory capital requirements
imposed by federal and state regulations.
At the time of conversion, the Bank established a liquidation account in an
amount equal to its retained income as reflected in the latest consolidated
balance sheet used in the final conversion prospectus. The liquidation account
is maintained for the benefit of eligible account holders who continue to
maintain their deposit accounts in the Bank after conversion. In the event of a
complete liquidation of the Bank (and only in such an event), eligible
depositors who continue to maintain accounts shall be entitled to receive a
distribution from the liquidation account before any liquidation may be made
with respect to common stock.
NOTE E - EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
As part of the conversion discussed in Note D, an Employee Stock Ownership Plan
(ESOP) was established for all employees who have completed one year of service
and have attained the age of 21. The ESOP borrowed $ 264,480 from the Company
and used the funds to purchase 26,448 shares of common stock of the Company
issued in the offering. The loan will be repaid principally from the Bank's
discretionary contributions to the ESOP over a period of 10 years. On September
30, 1997, the loan had an outstanding balance of $ 264,480 and an interest rate
of 8.5%. The loan obligation of the ESOP is considered unearned compensation
and, as such, recorded as a reduction of the Company's stockholders' equity.
Both the loan obligation and the unearned compensation are reduced by an amount
of the loan repayments made by the ESOP. Shares purchased with the loan proceeds
are held in a suspense account for allocation among participants as the loan is
repaid. Contributions to the ESOP and shares released from the suspense account
are allocated among participants on the basis of compensation in the year of
allocation. Benefits become fully vested at the end of seven years of service
under the terms of the ESOP Plan. Benefits may be payable upon retirement,
death, disability, or separation from service. Since the Bank's annual
contributions are discretionary, benefits payable under the ESOP cannot be
estimated. Compensation expenses are recognized to the extent of the fair value
of shares committed to be released.
(8)
WSB HOLDING COMPANY AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended September 30, 1997, compensation from the ESOP of $
2,915 was expensed. Compensation is recognized at the average fair value of the
ratably released shares during the accounting period as the employees performed
services. At September 30, 1997, the ESOP had 220 allocated shares and 26,228
unallocated shares.
The ESOP administrators will determine whether dividends on allocated and
unallocated shares will be used for debt service. Any allocated dividends used
will be replaced with common stock of equal value. For the purpose of computing
earnings per share, all ESOP shares committed to be released have been
considered outstanding.
NOTE F - ASSET QUALITY
At September 30, 1997, the Company had total nonperforming loans (i.e., loans
which are contractually past due 90 days or more) of approximately $ 831,000.
Nonperforming loans were 5.6% of total loans at September 30, 1997. Total
nonperforming assets as a percent of total assets at September 30, 1997 was
2.3%.
(9)
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
The following discussion and analysis is intended to assist in understanding the
financial condition and the results of operations of the Company. References to
the "Company" and "Bank" include WSB Holding Company and/or Workingmens Bank as
appropriate.
Comparison of Financial Condition at September 30, 1997 and June 30, 1997.
Total consolidated assets increased by approximately 1.8 million, or 5.4% to $
35.6 million at September 30, 1997 from $ 33.8 million at June 30, 1997. The
increase in total assets was primarily attributable to the net proceeds received
from the initial public offering.
Savings deposits remained consistent from June 30, 1997 to September 30, 1997,
while total interest bearing liabilities decreased $ 1 million, or 3.0% to $
30.5 million at September 30, 1997 from $ 31.4 million at June 30, 1997. The
decrease reflects a $ 1 million repayment on borrowings from the FHLB.
Comparison of Results of Operations for the three months ended September 30,
1997 and 1996.
Net Income. Net income increased $ 112,000 from a loss of $ 64,000 for the three
months ended September 30, 1996 to a profit of $ 48,000 for the three months
ended September 30, 1997. The change was primarily the result of the 1996
recognition of the one-time SAIF special insurance assessment in the amount of
$108,000 (after taxes).
Net Interest Income. Net interest income increased $ 43,000 or 19.0% from $
226,000 for the three months ended September 30, 1996 to $ 269,000 for the three
months ended September 30, 1997. The improvement in net interest income
primarily reflects an increase in average interest-earning assets over average
interest-bearing liabilities for the Company of $ 1.4 million or 179% for the
three months ended September 30, 1997 as compared to 1996. This was primarily as
a result of the proceeds from the stock offering. The interest rate spread
remained consistent at 2.97% for three months ending September 30, 1997 and
1996.
Provision for Loan Losses. At September 30, 1997, we had loans totalling
$831,000 in our loan portfolio that were classified as nonperforming loans, on
which we are not receiving any interest. Of this amount, payment of $665,000 was
due from one borrower on June 30, 1997 and was not received. This borrower held
16 individual loans that ranged from $30,000 to $100,000 and were secured by
one- to four-family residences in the city of Pittsburgh. Subsequent to June 30,
1997, this borrower declared bankruptcy. The bankruptcy proceeding might delay
foreclosure proceedings for a prolonged period of time. If so, we will lose the
ability to use any monies that we might receive from the sale of these
properties and there is no guarantee that the value of these properties will be
maintained or that the value of the properties received from foreclosure will be
sufficient to pay the amounts outstanding on these loans. While we believe our
loan loss allowance is adequate, there can be no assurance that our allowance
for loan loss will be adequate to cover significant losses that we might incur
in the future. Also, risks associated with these loans and losses incurred on
these loans might result in higher provisions for loan losses in the future.
(10)
Noninterest Expense. Our noninterest expense decreased by $ 139,000 or 37.9%
from $ 367,000 for the three months ended September 30, 1996 to $ 228,000 for
the three months ended September 30, 1997. The decrease was primarily
attributable to a decrease in our insurance premiums due the 1996 one-time
special SAIF assessment of $ 161,000 offset by an increase in our compensation,
pension and ESOP expenses of $ 24,000.
A great deal of information has been disseminated about the global computer year
2000. Many computer programs that can only distinguish the final two digits of
the year entered (a common programming practice in earlier years) are expected
to read entries for the year 2000 as the year 1900 and compute payment, interest
or delinquency based on the wrong date or are expected to be unable to compute
payment, interest or delinquency. Rapid and accurate data processing is
essential to the operation of the Bank. Date processing is also essential to
most other financial institutions and many other companies. All of the material
data processing of the Bank that could be affected by this problem is provided
by a third party service bureau. The service bureau of the Bank has advised the
Bank that it expects to resolve this potential problem before the year 2000.
However, if the service bureau is unable to resolve this potential problem in
time, the Bank would likely experience significant data processing delays,
mistakes or failures. These delays, mistakes or failures could have a
significant adverse impact on the financial condition and results of operations
of the Bank.
Income Tax Expense (Benefit). Our income tax expense for the three months ended
September 30, 1997 was $ 5,000 compared to a benefit of $ 65,000 for the three
months ended September 30, 1996. The $ 70,000 change in expense was the result
of pre-tax income increasing by $ 183,000, which was primarily the result of the
SAIF special insurance assessment and the increase in our net interest income
offset by an increase in our compensation and benefits. Additionally, we invest
in tax-exempt securities which provides us with nontaxable income.
Liquidity and Capital Resources
The Company's primary sources of funds are new deposits, proceeds from principal
and interest payments of loans, and repayments on mortgage-backed securities.
While maturities and scheduled amortization of loans are a predictable source of
funds, deposit flows and mortgage prepayments are greatly influenced by general
interest rates, economic conditions and competition. The Company maintains
liquidity levels adequate to fund loan commitments, investment opportunities,
deposit withdrawals and other financial commitments. At September 30, 1997, the
Bank had obligations to fund outstanding loan commitments of approximately
$472,000.
At September 30, 1997, management had no knowledge of any trends, events or
uncertainties that will have or are reasonably likely to have material effects
on the liquidity, capital resources or operations of the Company. Further at
September 30, 1997, management was not aware of any current recommendations by
the regulatory authorities which, if implemented, would have such an effect.
(11)
The Bank exceeded all of its capital requirements at September 30, 1997. The
Bank had the following capital ratios at September 30, 1997:
(IN THOUSANDS)
For Capital Categorized as
Actual Adequacy Purposes "Well Capitalized"
------------------------ ----------------------- ----------------------------
Amount Ratio Amount Ratio Amount Ratio
------------------------ ----------------------- ----------------------------
As of September 30, 1997:
Total Risk-Based Capital
(To risk weighted assets) $ 3,664 25.4% $ 1,152 8.0% $ 1,445 10.0%
Tier I Capital
(To risk weighted assets) $ 3,484 24.1% $ 578 4.0% $ 867 6.0%
Tier I Capital
(To total assets) $ 3,484 9.8% $ 1,425 4.0% $ 1,782 5.0%
Tangible Capital
(To total assets) $ 3,484 9.8% $ 535 1.5% $ 1,782 5.0%
(12)
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
From time to time, the Company and its subsidiaries may be a party
to various legal proceedings incident to its or their business. At
September 30, 1997, there were no legal proceedings to which the
Company or any subsidiary was a party, or to which of any of their
property was subject, which were expected by management to result
in a material loss.
Item 2. Changes in Securities and use of Proceeds
-----------------------------------------
(d) Use of Proceeds
(1) The effective date of the Form SB-2 was July 15, 1997
and the Commission file number was 333-29389.
(2) The Offering commenced on July 25, 1997.
(3) Not applicable.
(4) (i) The Offering has terminated but did not terminate before the
sale of all securities registered;
(ii) The name of the managing underwriter: Trident Securities,
Inc;
(iii) Common stock, par value $.10 per share was registered;
(iv) Amount registered - 330,600 shares;
Aggregate price of offering amount
registered - $3,306,000;
Amount sold - 330,600 shares;
Aggregate offering price of the stock
sold to date - $3,306,000;
(v) Expenses of the offering which were direct
or indirect payments to others:
Underwriting discounts and commissions -
$60,000;
Expenses paid to and for underwriters -
$26,694;
Other Expenses - $165,428 (Estimate);
Total Expenses - $252,122 (Estimate);
(vi) Net offering proceeds - $3,053,878;
(vii) Direct or indirect payments to affiliates -
Loan to ESOP of subsidiary bank - $264,480;
Purchase outstanding stock of subsidiary bank -
$1,372,878;
Short Term investments - Passbook savings
account of subsidiary bank - $1,416,520;
(vii) Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
None
(13)
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a)
(3)(i) Articles of Incorporation of WSB Holding Company (incorporated by
reference to the registration statement on Form SB-2 (333-29389).
(3)(ii) Bylaws of Incorporation of WSB Holding Company (incorporated by
reference to the registration statement on Form SB-2 (333-29389).
(4) Specimen Stock Certificate of WSB Holding Company (incorporated
by reference to the registration statement on Form SB-2 (333-
29389).
(10) Form of employment agreement with Robert Neudorfer (incorporated
by reference to the registration statement on Form SB-2 (333-
29389).
(27) Financial Data Schedule (electronic filing only)
(b) Reports on Form 8-K
None.
(14)
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.
WSB Holding Company
Date: November 7, 1997 By /s/ Robert D. Neudorfer
------------------ --------------------
Robert D. Neudorfer, President
Date: November 7, 1997 By /s/ Ronald W. Moreschi
------------------ -------------------
Ronald W. Moreschi
Vice President and Treasurer
(15)