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, 1996
-----------------
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 10, 1997: 1,620,062
Transitional Small Business Disclosure Format (check one)
YES NO X
------- ---------
<PAGE>
WHG BANCSHARES CORPORATION AND SUBSIDIARY
Contents
--------
<TABLE>
<CAPTION>
<S> <C>
PART I - FINANCIAL INFORMATION Pages
-----
Item 1. Financial Statements....................................................3
Consolidated statements of financial condition at December 31, 1996
(unaudited) and September 30, 1996............................................3
Consolidated statements of operations (unaudited) for the three months
Ended December 31, 1996 and December 31, 1995.................................4
Consolidated statements of cash flows (unaudited) for the three months
Ended December 31, 1996 and December 31, 1995...............................5-6
Notes to financial statements...............................................7-8
Item 2. Management's Discussion and Analysis or Plan of Operation............9-17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings......................................................18
Item 2. Changes in Securities..................................................18
Item 3. Defaults upon Senior Securities........................................18
Item 4. Submission of Matters to a Vote of Security-Holders....................18
Item 5. Other Information......................................................18
Item 6. Exhibits and Reports on Form 8-K.......................................18
Signatures..........................................................................19
</TABLE>
-2-
<PAGE>
PART I. FINANCIAL INFORMATION
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
-------------------------------------------
Lutherville, Maryland
---------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
<TABLE>
<CAPTION>
December 31, September 30,
1996 1996
---- ----
(Unaudited)
Assets
------
<S> <C> <C>
Cash $ 1,347,677 $ 1,583,482
Interest bearing deposits in other banks 3,668,725 4,076,776
Federal funds sold 1,021,210 2,427,851
Securities purchased under agreements to resell - 2,000,000
Other investments - (fair value $3,432,568 and
$2,385,000, respectively) 3,500,000 2,500,000
Mortgage backed securities - (fair value $2,907,683
and $2,884,212, respectively) 2,985,402 3,021,998
Loans receivable - net 78,412,682 75,736,786
Accrued interest receivable - loans 347,854 373,792
- investments 65,954 62,755
- mortgage backed
securities 16,815 17,030
Premises and equipment - net 717,593 734,443
Federal Home Loan Bank of Atlanta stock, at cost 682,800 682,800
Investment in and loans to affiliated corporation 2,775,000 2,825,000
Prepaid income taxes 59,556 5,198
Deferred income taxes 73,716 273,589
Other assets 186,544 206,614
---------- ----------
Total assets $95,861,528 $96,528,114
========== ==========
Liabilities and Stockholders' Equity
------------------------------------
Liabilities
- -----------
Deposits $71,305,018 $72,100,572
Federal Home Loan Bank advance 1,000,000 -
Advance payments by borrowers for taxes
and insurance 895,823 322,610
Income taxes payable 31,668 237,456
Other liabilities 110,885 621,419
---------- ----------
Total liabilities 73,343,394 73,282,057
Commitments and contingencies
Stockholders' Equity
- --------------------
Common stock .10 par value; authorized 1,620,062
shares; issued and outstanding 1,620,062 shares 162,006 162,006
Additional paid-in capital 14,569,425 15,403,857
Retained earnings (substantially restricted) 8,991,804 8,911,434
---------- ----------
23,723,235 24,477,297
Employee Stock Ownership Plan (1,205,101) (1,231,240)
---------- ----------
Total stockholders' equity 22,518,134 23,246,057
---------- ----------
Total liabilities and stockholders' equity $95,861,528 $96,528,114
========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
-3-
<PAGE>
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
-------------------------------------------
Lutherville, Maryland
---------------------
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
-------------------------------------------------
For Three Months Ended
December 31,
---------------------------
1996 1995
---------- -----------
Interest and fees on loans $1,448,451 $1,441,647
Interest and dividends on investment
securities 61,776 26,248
Interest on mortgage backed securities 50,893 10,048
Other interest income 143,709 94,087
--------- ---------
Total interest income 1,704,829 1,572,030
Interest on deposits 801,641 872,844
Interest on short-term borrowings 4,484 3,744
--------- ---------
Total interest expense 806,125 876,588
--------- ---------
Net interest income 898,704 695,442
Provision for loan losses 15,644 11,786
--------- ---------
Net interest income after provision for
loan losses 883,060 683,656
Non-Interest Income
- -------------------
Fees and charges on loans 7,703 6,652
Fees on transaction accounts 13,332 11,478
Other income 12,089 22,653
--------- ---------
Total non-interest income 33,124 40,783
Non-Interest Expenses
- ---------------------
Salaries and related expenses 420,696 306,221
Occupancy 44,167 34,045
SAIF deposit insurance premium 33,230 44,758
Depreciation of equipment 12,273 19,626
Advertising 5,336 15,429
Data processing costs 18,096 18,631
Professional services 45,919 6,910
Other expenses 77,131 68,995
--------- ---------
Total non-interest expenses 656,848 514,615
--------- ---------
Income before tax provision 259,336 209,824
Provision for income taxes 104,227 84,386
--------- ---------
Net income $ 155,109 $ 125,438
========= =========
Net income per share $ .10 $ -
========= =========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
-4-
<PAGE>
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
-------------------------------------------
Lutherville, Maryland
---------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-------------------------------------------------
<TABLE>
<CAPTION>
For Three Months Ended
December 31,
-----------------------------
1996 1995
---- ----
Operating Activities
- --------------------
<S> <C> <C>
Net income $ 155,109 $ 125,438
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities
-------------------------------------
Amortization of discount on mortgage backed
securities (206) -
Amortization of deferred loan fees (44,970) (39,081)
Loan fees deferred 60,121 6,925
Decrease in discount on loans purchased (5,016) (7,152)
Other amortization - (13,698)
Provision for loan losses 15,644 11,786
Non-cash compensation under stock-based
benefit plans 80,896 -
Decrease in accrued interest receivable 22,954 4,236
Provision for depreciation 16,850 20,260
Decrease in deferred income taxes 199,873 -
Increase in prepaid income taxes (54,358) -
(Increase) decrease in other assets 20,070 (90,842)
Decrease in accrued interest payable (904) (220)
Decrease in income taxes payable (205,788) (615)
Decrease in other liabilities (510,532) (81,669)
---------- ----------
Net cash used by operating activities (250,257) (64,632)
Cash Flows from Investment Activities
- -------------------------------------
Proceeds from maturing interest
bearing deposits 783,000 1,076,000
Purchases of interest bearing deposits (685,000) (978,000)
Decrease in securities purchased under agreement
to resell 2,000,000 -
Purchase of other investments (1,000,000) -
Principal collected on mortgage backed securities 36,802 21,019
Net (increase) decrease in shorter term loans (173,600) 167,336
Longer term loans originated or acquired (2,956,342) (3,660,641)
Principal collected on longer term loans 428,267 2,040,521
Decrease on investments in and loans to
joint ventures 50,000 -
---------- ----------
Net cash used by investment activities (1,516,873) (1,333,765)
</TABLE>
-5-
<PAGE>
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
-------------------------------------------
Lutherville, Maryland
---------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-------------------------------------------------
<TABLE>
<CAPTION>
For Three Months Ended
December 31,
-----------------------------
1996 1995
---- ----
Cash Flows from Financing Activities
- ------------------------------------
Net increase in demand deposits, money
market, passbook accounts and advances by
<S> <C> <C>
borrowers for taxes and insurance $ 491,395 $ 709,503
Net decrease in certificates of deposit (712,832) (2,158,447)
Net increase in short-term borrowings 1,000,000 1,000,000
Management Stock Bonus Plan (882,927) -
Dividends on stock (81,003) -
---------- ----------
Net cash used by financing activities (185,367) (448,944)
---------- ----------
Decrease in cash and cash equivalents (1,952,497) (1,847,341)
Cash and cash equivalents at beginning of period 7,305,109 7,880,281
---------- ----------
Cash and cash equivalents at end of period $ 5,352,612 $ 6,032,940
========== ==========
The following is a Summary of Cash and Cash Equivalents:
- -------------------------------------------------------
Cash $ 1,347,677 $ 1,349,595
Interest bearing deposits in other banks 3,668,725 4,563,076
Federal funds sold 1,021,210 1,098,269
---------- ----------
Balance of cash items reflected on
Statement of Financial condition 6,037,612 7,010,940
Less - certificates of deposit with original
maturities of more than three months
that are included in interest bearing
deposits in other banks 685,000 978,000
---------- ----------
Cash and cash equivalents reflected on the
Statement of Cash Flows $ 5,352,612 $ 6,032,940
========== ==========
Supplemental Disclosure of Cash Flow Information:
- ------------------------------------------------
Cash paid during the period for:
Interest $ 807,029 $ 876,808
========== ==========
Taxes $ 72,500 $ 85,000
========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
-6-
<PAGE>
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
-------------------------------------------
Lutherville, Maryland
---------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
------------------------------------------------------
Note 1 - Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of WHG Bancshares
Corporation ("the Company") and its wholly-owned subsidiary, Heritage Savings
Bank, F.S.B. ("the Bank") and the Bank's subsidiary, Mapleleaf Mortgage
Corporation. All intercompany accounts and transactions have been eliminated in
the accompanying consolidated financial statements.
Note 2 - Business
--------
The Bank's primary business activity is the accepting of deposits from the
general public and using the proceeds for investments and loan originations. The
Bank is subject to competition from other financial institutions. The Bank is
subject to the regulations of certain federal agencies and undergoes periodic
examinations by those regulatory authorities.
Note 3 - 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-Q. 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 interim
periods are not necessarily indicative of the results that may be expected for
the entire fiscal year.
Note 4 - 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 maturities of 90 days or less.
Note 5 - Earnings Per Share
------------------
Earnings per share of common stock for the three months ended December 31,
1996 is computed by dividing net income by 1,499,098 by the weighted average
number of shares of common stock outstanding for the three months. Included in
this amount are only the shares that have been allocated to the Employee Stock
Ownership Plan.
Earnings per share amounts for the three month period ended December 31,
1995 have not been presented because the Bank had not converted to stock form as
of December 31, 1995.
-7-
<PAGE>
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
- -------------------------------------------
Lutherville, Maryland
- ---------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- ------------------------------------------------------
Note 6 - Recent Accounting Pronouncements
--------------------------------
FASB Statement on Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities - In June 1996, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 125, which will become effective on a prospective basis for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996. This Statement will require the Bank to
record at fair value assets and liabilities resulting from a transfer of
financial assets. The impact of adopting this Statement is not expected to be
material to the Bank's financial statements.
-8-
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
Total assets of the Company were $95,862,000 as of December 31, 1996,
compared to $96,528,000 as of September 30, 1996, a decrease of $666,000 or
.69%. The decrease was primarily attributable to a decrease in securities
purchased under agreement to resell of $2,000,000 or 100% and a decrease in
cash, interest-bearing deposits in other banks and federal funds sold of
$2,050,000 or 25.35%. This exceeded an increase in loans receivable of
$2,676,000 or 3.53% and an increase in other investments of $1,000,000 or 40%.
Total liabilities of the Company were $73,343,000 as of December 31, 1996,
compared to $73,282,000 as of September 30, 1996, an increase of $61,000 or
.08%. The increase was due to an increase in Federal Home Loan Bank ("FHLB of
Atlanta") advances of $1,000,000 and advance payments by borrowers for taxes and
insurance ("advance payment") of $573,000 or 177.68%. This was offset by a
decrease in deposits of $796,000 or 1.10%, a decrease of $511,000 or 82.28% in
other liabilities and a decrease in income taxes payable of $206,000 or 86.66%.
The increase in advance payments by borrowers was due to the cyclical nature of
this account as borrowers increased the accounts monthly and disbursements are
made primarily in July through September.
Stockholders' equity was $22,518,134 as of December 31, 1996, compared to
$23,246,057 as of September 30 1996, a decrease of $727,923. The decrease was
primarily the result of a decrease in additional paid-in capital as a result of
the Bank funding the acquisition of 64,802 shares of common stock in the
approximate amount of $845,000 for the trust of the Management Stock Bonus Plan
("MSBP"). The decrease was also affected by the payment of dividends, partially
off-set by net income for the period.
-9-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Results of Operations
General
Net income for the three months ended December 31, 1996 was $155,000, as
compared to $125,000 for the same period in 1995, an increase of $30,000 or
24.00%. The increase in net income was primarily the result of an increase in
net interest income partially off-set by a decrease in non-interest income, and
an increase in non-interest expense.
Net interest income for the three months ended December 31, 1996 was
$899,000 as compared to $695,000 for the same period in 1995, an increase of
$204,000 or 29.35%. The increase was primarily due to an increase in total
interest income and a decrease in total interest expense.
Interest Income
Total interest income for the three months ended December 31, 1996 was
$1,705,000, compared to $1,572,000 for the same period in 1995, an increase of
$133,000 or 8.46%. Interest on loans increased slightly by $7,000 or .49%. This
increase was attributable to a $6,926,000 increase in the average balance of
loans outstanding partially offset by a decrease in the average yield on the
loan portfolio to 7.45% for the three months ended December 31, 1996, compared
to 8.14% for the same period in 1995. Interest and dividends on investment
securities increased by $36,000 or 135.43% for the three months ended December
31, 1996, compared to December 31, 1995. The increase was a result of an
increase in the average dollar amount of investments outstanding of $2,329,000,
offset by the decline in the weighted average rate to 7.03% for December 31,
1996, compared to 8.85% for December 31, 1995. Interest income on mortgage
backed securities increased by $41,000 or 406.50% for the three months ended
December 31, 1996, compared to December 31, 1995. The increase was primarily due
to an increase in the average dollar amount outstanding of
-10-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Interest Income - continued
$2,471,000, offset in part by a decrease in the average yield to 6.79% for the
three months ended December 31, 1996, compared to 7.61% for the same period in
1995. The decline in the average yield is the result of purchasing $2.6 million
in mortgage backed securities at a lower yielding rate, than those previously on
the books. Other interest income increased by $50,000 or 53.19% for the three
months ended December 31, 1996, compared to the same period in 1995. The
increase was primarily due to the increase in the average dollar amount of other
interest-earning assets outstanding of $355,000, combined with an increase in
the weighted average rate of 6.51% for December 31, 1996, compared to 4.36% for
December 31, 1995.
The weighted average yield on interest-earning assets was 7.33% for the
three months ended December 31, 1996, compared to 7.75% for the same period in
1995.
Interest Expense
Total interest expense for the three months ended December 31, 1996 was
$806,000, compared to $877,000 for the same period in 1995, a decrease of
$71,000 or 8.10%. Interest on deposits decreased by $71,000 or 8.13% for the
three months ended December 31, 1996, compared to December 31, 1995. The
decrease resulted from a decrease in the average dollar amount of deposits of
$2,527,000 as depositors withdrew funds to purchase stock during Heritage's
stock conversion, and a withdrawal of maturing certificates of deposit by
depositors for investment in higher yielding mutual funds and a decrease in the
weighted average rate paid. Other interest expense did not change significantly
for the three month period.
The weighted average rate paid on interest-bearing liabilities was 4.49%
for the three months ended December 31, 1996, as compared to 4.72% for December
31, 1995.
-11-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Provision for Loan Losses
The provision for loan losses for December 31, 1996 was $16,000, compared
to $12,000 for 1995, an increase of $4,000 or 33.33%. Management monitors and
adjusts its loan loss reserves based upon its analysis of the loan portfolio.
Reserves are increased by a charge to income, the amount of which depends upon
an analysis of the changing risks inherent in the Company's loan portfolio and
the relative status of the real estate market and the economy in general. The
Company has historically experienced a limited amount of loan charge-offs and
delinquencies. At December 31, 1996, the allowance represented .26% of loans
receivable, as compared to .21% at December 31, 1995. The allowance for loan
losses decreased as a percentage of nonperforming loans to 53.28% at December
31, 1996 from 77.26% at December 31, 1995.
Other Non-Interest Income
Other income for the three months ended December 31, 1996 was $33,000,
compared to $41,000 for the same period in 1995, with a decrease of $8,000 or
19.51%. The decrease was due to a decrease in miscellaneous income of $11,000 or
47.38% as a result of an insurance recovery for storm damage in the period ended
December 31, 1995. This was offset by an increase of $3,000 or 16.67% in fees
and charges on loans and fees on transaction accounts.
Non-Interest Expense
Total non-interest expense for the three months ended December 31, 1996
was $657,000, compared to $515,000 for December 31, 1995, representing an
increase of $142,000 or 27.57%. The increase for the three month period was the
result of increases in salaries and related expenses, occupancy and professional
services.
-12-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Non-Interest Expense - Continued
Those increases were partially offset by decreases in SAIF deposit insurance
premiums, depreciation of equipment and advertising. The rate of SAIF deposit
insurance premiums is expected to decline by approximately 70% from the rate in
effect prior to September 30, 1996. Salaries and related expense increased as a
result of the adoption of the Employee Stock Ownership Plan ("ESOP") and the
implementation of the Management Stock Bonus Plan ("MSBP"). These expenses are
expected to continue to increase in future periods as a result of increases in
those benefits and revisions to the Savings Bank's pension plan required by the
Retirement Protection Act. Professional services increased primarily as a direct
result of the stock conversion, which resulted in additional services being
required for filings with the Securities and Exchange Commission and also with
the implementation of the ESOP and MSBP.
Income Taxes
The Company's income tax expense for the three months ended December 31,
1996 was $104,000, compared to $84,000 for the three months ended December 31,
1995, an increase of $20,000 or 23.81%. The increase was primarily the result of
an increase in pretax income.
Liquidity and Capital Resources
The Company is required by OTS regulations to maintain, for each calendar
month, a daily average balance of cash and eligible liquid investments of not
less than 5% of the average daily balance of its net withdrawable savings and
borrowings (due in one year or less) during the preceding calendar month. This
liquidity requirement may be changed from time to time by the OTS to any amount
within the range of 4% to 10%. The Savings Bank's liquidity ratio was 7.03% at
December 31, 1996 and 10.5% at September 30, 1996.
-13-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Liquidity and Capital Resources - Continued
The Bank's sources of liquidity have historically included principal and
interest payments on loans and securities, maturities of investment securities,
deposit inflows, collateralized borrowings from the FHLB of Atlanta and
operations. The Bank invests excess funds in overnight deposits, which not only
serve as liquidity, but also earn interest as income until funds are needed to
meet required loan funding.
Liquidity may be adversely affected by unexpected deposit outflows,
excessive interest rates paid by competitors, adverse publicity relating to the
savings and loan industry and similar matters. For the three month period ended
December 31, 1996, management used a portion of cash flows from Federal Home
Loan Bank advances, securities purchased under agreement to resell and cash to
fund loan originations and deposit outflows. Management believes it has ample
cash flows and liquidity to meet its loan commitments in the amount of $754,500
as of December 31, 1996. The Bank has the ability to reduce its commitments for
new loan originations and to adjust other cash outflows.
Under the regulatory capital requirements of the Office of Thrift
Supervision ("OTS"), savings banks are required to maintain minimal capital
requirements by satisfying three capital standards: a tangible capital
requirement, a leverage ratio requirement and a risk-based capital requirement.
Under the tangible capital requirement, the Bank's tangible capital (the amount
of stock and retained earnings computed under generally accepted accounting
principles) must be equal to 1.5% of adjusted total assets. Under the leverage
ratio requirement, the Bank's core capital must be equal to 3.0% of adjusted
total assets. In addition, under the risk-based capital requirement, the Bank
must maintain core and supplemental capital (core capital plus any general loss
reserves) equal to 8% of risk-weighted assets (total assets plus
off-balance-sheet items multiplied by the appropriate risk weights).
-14-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Liquidity and Capital Resources - Continued
The Federal Deposit Insurance Corporation Improvement Act (FDICIA) of 1991
was signed into law on December 19, 1991, and regulations implementing the
prompt corrective action provisions became effective on December 12, 1992. The
prompt corrective action regulations define specific capital categories based on
an institution's capital ratios. The capital categories, in declining order, are
"well capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized," and "critically undercapitalized". Institutions categorized
as "undercapitalized" or lower are subject to certain restrictions, including
the requirement to file a capital plan with its primary federal regulator,
prohibitions on the payment of dividends and management fees, restrictions on
executive compensation, and increased supervisory monitoring, among other
things. To be considered "well capitalized," an institution must generally have
a leverage capital ratio of at least 5%, a tier one risk-based capital ratio of
at least 6% and a total risk-based capital ratio of at least 10%. At December
31, 1996, the Bank met the criteria required to be considered "well capitalized"
under this regulation.
The following table presents the Bank's capital position based on the
December 31, 1996 financial statements.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
---------------------- -------------------- ---------------------
Amount % Amount % Amount %
------ --- ------ --- ------ ---
<S> <C> <C> <C> <C> <C> <C>
Tangible (A) $14,620,104 15.3% $1,429,389 1.5% $4,764,630 5.0%
Core (B) 14,620,104 15.3% 2,858,778 3.0% 2,978,580 6.0%
Risk-weighted (C) 14,825,104 29.9% 3,971,440 8.0% 4,964,300 10.0%
</TABLE>
(A) Percentage of capital to assets at December 31, 1996.
(B) Percentage of capital to assets at December 31, 1996 for actual
and capital adequacy purposes and percentage of capital to risk- weighted
assets to be well capitalized under prompt corrective action provisions.
(C) Percentage of capital to risk-weighted assets.
-15-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Liquidity and Capital Resources - Continued
The following table presents the calculation of risk-based capital and
tangible assets used to determine the Bank's capital position.
Current Requirements
Total stockholders' equity $22,518,134
Less: Non-allowable items
Equity of parent company 7,896,030
Goodwill and other intangible assets 2,000
----------
Tangible and core capital 14,620,104
General valuation allowance 205,000
----------
Risk-based capital $14,825,104
==========
Total assets $95,861,528
Add: pro-rata share of non-consolidated
subsidiary 11,000
Less: Non-includable
Asset of parent company 577,935
Goodwill and other intangible assets 2,000
----------
Tangible and adjusted tangible assets $95,292,593
==========
Risk-weighted assets $49,643,000
==========
The OTS has adopted an interest rate component to the regulatory capital
requirements. The rule requires additional capital to be maintained if the
Bank's interest rate risk exposure, measured by the decline in the market value
of the Bank's net portfolio value, exceeds 2% of assets as a result of a 200
basis point shift in interest rates. As of December 31, 1996, the rule is not
yet in effect and the Bank is not subject to the interest rate risk requirement.
For the purpose of granting to eligible savings account holders a priority
in the event of future liquidation, the Bank established a special account at
the time of conversion to the stock form of ownership in an amount equal to its
total retained earnings at December 31, 1995. In the event of future liquidation
of the Bank (and only in such an event), an eligible account holder who
continues to maintain his savings account shall be entitled to receive a
distribution from the special account. The amount
-16-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Liquidity and Capital Resources - Continued
of the special account will be decreased in an amount proportionately
corresponding to decreases in the savings account balances of eligible account
holders on each subsequent annual determination date. The balance of the special
account at December 31, 1996 is included in retained earnings. No dividends may
be paid to the stockholders if such dividends would reduce regulatory capital of
the Bank below the amount required for the special account.
OTS regulations limit the payment of dividends and other capital
distributions by the Bank. The Bank is able to pay dividends during a calendar
year without regulatory approval to the extent of the greater of (i) an amount
which will reduce by one-half its surplus capital ratio at the beginning of the
year plus all its net income determined on the basis of generally accepted
accounting principles for that calendar year or (ii) 75% of net income for the
last four calendar quarters.
The Bank is restricted in paying dividends on its stock to the greater of
the restrictions described in the preceding paragraph, or an amount that would
reduce its retained earnings below its regulatory capital requirement, the
accumulated bad debt deduction, or the liquidation account described in the
second preceding paragraph.
-17-
<PAGE>
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
Not applicable.
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) Not applicable.
(b) Not applicable.
-18-
<PAGE>
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 10 , 1997 By: /s/Peggy J. Stewart
---- -------------------
Peggy J. Stewart
President and Chief Executive Officer
(duly authorized officer)
Date: February 10 , 1997 By: /s/Robin L. Taylor
---- ------------------
Robin L. Taylor
Controller (chief accounting officer)
-19-
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