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, 1998
--------------
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 May 12, 1998: 1,389,002
Transitional Small Business Disclosure Format (check one)
YES NO X
--- ---
<PAGE>
WHG BANCSHARES CORPORATION AND SUBSIDIARY
Contents
--------
<TABLE>
<CAPTION>
Pages
-----
<S> <C> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.........................................................................................3
Consolidated statements of financial condition at March 31, 1998
(unaudited) and September 30, 1997...............................................................................3
Consolidated statements of operations (unaudited) for six months and three months
Ended March 31, 1998 and March 31, 1997..........................................................................4
Consolidated statements of cash flows (unaudited) for the six months
Ended March 31, 1998 and March 31, 1997........................................................................5-6
Notes to financial statements..................................................................................7-9
Item 2. Management's Discussion and Analysis or Plan of Operation................................................10-14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings...........................................................................................15
Item 2. Changes in Securities.......................................................................................15
Item 3. Defaults upon Senior Securities.............................................................................15
Item 4. Submission of Matters to a Vote of Security-Holders.........................................................15
Item 5. Other Information...........................................................................................15
Item 6. Exhibits and Reports on Form 8-K............................................................................15
Signatures.................................................................................................................16
</TABLE>
- 2 -
<PAGE>
PART I. FINANCIAL INFORMATION
WHG BANCSHARES CORPORATION AND SUBSIDIARIESPRIVATE ~
----------------------------------------------------
Lutherville, Maryland
---------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
<TABLE>
<CAPTION>
March 31, September 30,
--------- -------------
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
Assets
------
Cash $ 1,501,680 $ 1,003,528
Interest bearing deposits in other banks 5,442,620 3,898,946
Federal funds sold 1,320,000 3,481,833
Investment securities available for sale 11,875,909 --
Other investments 13,100,000 3,750,000
Mortgage backed securities 2,649,322 2,845,210
Loans receivable - net 77,325,879 78,450,370
Accrued interest receivable - loans 382,432 374,561
- investments 202,917 69,230
- mortgage backed securities 14,884 15,998
Premises and equipment - net 797,085 721,932
Federal Home Loan Bank of Atlanta stock, at cost 800,000 753,200
Investment in and loans to affiliated corporation 2,650,000 2,925,000
Deferred income taxes 194,557 116,394
Other assets 209,311 150,517
------------- --------------
Total assets $ 118,466,596 $ 98,556,719
============= ==============
Liabilities and Stockholders' Equity
------------------------------------
Liabilities
- -----------
Deposits $ 83,889,622 $ 74,186,112
Federal Home Loan Bank advances 13,000,000 4,000,000
Advance payments by borrowers for taxes and insurance 1,327,511 330,671
Income taxes payable 148,309 64,284
Other liabilities 144,471 146,519
------------- --------------
Total liabilities 98,509,913 78,727,586
Stockholders' Equity
- --------------------
Common stock $.10 par value; authorized 1,620,062 shares;
issued and outstanding 1,389,002 shares in 1998 and
1,392,415 shares in 1997 138,900 139,241
Additional paid-in capital 11,436,150 11,390,312
Retained earnings (substantially restricted) 9,449,639 9,381,773
---------- ----------
21,024,689 20,911,326
Unrealized loss on investment securities available for sale (50,615) --
Employee Stock Ownership Plan (1,017,391) (1,082,193)
------------- --------------
Total stockholders' equity 19,956,683 19,829,133
------------- --------------
Total liabilities and stockholders' equity $ 118,466,596 $ 98,556,719
============= ==============
</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)
-------------------------------------------------
<TABLE>
<CAPTION>
For Six Months Ended For Three Months Ended
March 31, March 31,
------------------------ ------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest and fees on loans $3,032,462 $2,925,285 $1,518,535 $1,476,835
Interest on mortgage backed securities 93,118 101,109 45,967 50,216
Interest and dividends on investment securities 314,529 170,190 222,540 108,414
Other interest income 303,721 265,095 153,175 121,385
--------- --------- --------- ---------
Total interest income 3,743,830 3,461,679 1,940,217 1,756,850
Interest on deposits 1,792,822 1,579,665 924,690 778,024
Interest on short-term borrowings 141,300 44,151 79,919 39,667
Interest on long-term borrowings 5,510 -- 5,510 --
--------- --------- --------- ---------
Total interest expense 1,939,632 1,623,816 1,010,119 817,691
--------- --------- --------- ---------
Net interest income 1,804,198 1,837,863 930,098 939,159
Provision for loan losses 130,000 30,644 115,000 15,000
--------- --------- --------- ---------
Net interest income after provision
for loan losses 1,674,198 1,807,219 815,098 924,159
Non-Interest Income
- -------------------
Fees and charges on loans 14,831 14,622 5,118 6,918
Fees on transaction accounts 33,616 22,321 17,313 8,989
Other income 16,178 24,114 7,953 12,025
--------- --------- --------- ---------
Total non-interest income 64,625 61,057 30,384 27,932
Non-Interest Expenses
- ---------------------
Salaries and related expenses 805,599 802,575 393,754 381,879
Occupancy 79,058 84,295 38,662 40,128
FDIC deposit insurance premium 23,387 44,853 11,589 11,623
Depreciation of equipment 23,014 23,889 12,893 11,615
Advertising 51,753 16,875 24,443 11,540
Data processing costs 40,086 38,254 21,219 20,158
Professional services 86,623 85,299 47,025 39,380
Other expenses 170,766 171,330 89,170 94,199
--------- --------- --------- ---------
Total non-interest expenses 1,280,286 1,267,370 638,755 610,522
Income before tax provision 458,537 600,906 206,727 341,569
Provision for income taxes 185,818 242,889 87,477 138,662
--------- --------- --------- ---------
Net income $ 272,719 $ 358,017 $ 119,250 $ 202,907
========= ========= ========= =========
Basic earnings per share $ .22 $ .25 $ .10 $ .14
========= ========= ========= =========
Diluted earnings per share $ .21 $ .25 $ .09 $ .14
========= ========= ========= =========
</TABLE>
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 Six Months Ended
March 31,
------------------------------
1998 1997
<S> <C> <C>
Operating Activities
- --------------------
Net income $ 272,719 $ 358,017
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities
-------------------------------------
Amortization of discount on mortgage backed
securities (413) (413)
Amortization of deferred loan fees (81,693) (93,863)
Loan fees deferred 96,773 43,937
Decrease in discount on loans purchased (11,636) (10,031)
Other amortization (111) --
Provision for loan losses 130,000 30,644
Non-cash compensation under stock-based
benefit plans 164,053 164,581
Increase in accrued interest receivable (140,444) (40,478)
Loans sold 750,000 --
Loans originated for sale (750,000) --
Provision for depreciation 23,014 30,112
(Increase) decrease in deferred income tax assets (46,314) 202,158
(Increase) decrease in other assets (58,794) 45,122
Increase (decrease) in accrued interest payable (164) 149
Increase (decrease) in income taxes payable 84,025 (143,769)
Decrease in other liabilities (2,048) (518,471)
----------- ----------
Net cash provided by operating activities 428,967 67,695
Cash Flows from Investment Activities
- -------------------------------------
Proceeds from maturing interest bearing deposits 1,562,019 783,000
Purchases of interest bearing deposits (1,369,272) (336,583)
Decrease in securities purchased under agreement to resell -- 2,000,000
Purchase of investment securities available for sale (11,958,262) --
Purchase of other investments (11,850,000) (3,000,000)
Proceeds from maturing other investments 2,500,000 --
Principal collected on mortgage backed securities 196,301 76,035
Net decrease (increase) in shorter term loans 26,297 (239,846)
Loans purchased (203,488) --
Longer term loans originated or acquired (6,272,637) (5,269,574)
Principal collected on longer term loans 7,440,875 2,706,076
Investment in premises and equipment (98,167) (9,765)
Purchase of stock in Federal Home Loan Bank of Atlanta (46,800) (70,400)
Decrease on investments in and loans to joint ventures 275,000 50,000
----------- ----------
Net cash used by investment activities (19,798,134) (3,311,057)
</TABLE>
- 5 -
<PAGE>
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
-------------------------------------------
Lutherville, Maryland
---------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-------------------------------------------------
<TABLE>
<CAPTION>
For Six Months Ended
March 31,
-----------------------------
1998 1997
---- ----
<S> <C> <C> <C>
Cash Flows from Financing Activities
Net increase in demand deposits, money
market, passbook accounts and advances by
borrowers for taxes and insurance $ (3,062,529) $ 1,418,854
Net increase (decrease) in certificates of deposit 13,763,043 (1,132,228)
Net increase in borrowings 9,000,000 4,000,000
Management Stock Bonus Plan -- (882,927)
Dividends on stock (204,853) (149,479)
Stock repurchase (53,754) (1,184,669)
----------- ----------
Net cash provided by financing activities 19,441,907 2,069,551
----------- ----------
(Decrease) increase in cash and cash equivalents 72,740 (1,173,811)
Cash and cash equivalents at beginning of period 7,946,628 7,305,109
----------- -----------
Cash and cash equivalents at end of period $ 8,019,368 $ 6,131,298
=========== ===========
The following is a Summary of Cash and Cash Equivalents:
- --------------------------------------------------------
Cash $ 1,501,680 $ 302,938
Interest bearing deposits in other banks 5,442,620 3,875,503
Federal funds sold 1,320,000 2,289,440
Balance of cash items reflected on ----------- -----------
Statement of Financial condition 8,264,300 6,467,881
Less - certificates of deposit with original maturities
of more than three months that are included in
interest-bearing deposits in other banks 244,932 336,583
----------- -----------
Cash and cash equivalents reflected on the
Statement of Cash Flows $ 8,019,368 $ 6,131,298
=========== ===========
Supplemental Disclosure of Cash Flow Information:
- -------------------------------------------------
Cash paid during the period for:
Interest $ 1,840,534 $ 1,623,667
=========== ===========
Taxes $ 177,500 $ 184,500
=========== ===========
</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 - 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.
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 months
ended March 31, 1998 are not necessarily indicative of the results that may be
expected for the entire fiscal year September 30, 1998 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, 1997.
Note 3 - Federal Home Loan Advances
--------------------------
During the quarter ended March 31, 1998, the Bank obtained the
following advances:
Description Rate Amount Maturity
----------- ---- ------ --------
FHLB advances 5.71% $1,000,000 1/08/99
FHLB advances 5.70% 5,000,000 5/26/98
FHLB advances 5.51% 6,000,000 3/26/08
-7-
<PAGE>
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
- -------------------------------------------
Lutherville, Maryland
- ---------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- ------------------------------------------------------
Note 4 - Earnings Per Share
------------------
As required, the Company adopted statement of Financial Accounting
Standards No. 128 during the quarter ended December 31, 1997. This Statement
requires dual presentation of basic and diluted earnings per share ("EPS") with
a reconciliation of the numerator and denominator of the EPS computations. Basic
per share amounts are based on the weighted average shares of common stock
outstanding. Diluted earnings per share assume the conversion, exercise or
issuance of all potential common stock instruments such as options, warrants and
convertible securities, unless the effect is to reduce a loss or increase
earnings per share. No adjustments were made to net income (numerator) for all
periods presented. Accordingly, this presentation has been adopted for all
periods presented. The basic and diluted weighted average shares outstanding for
the three and six month periods are as follows:
Six Months Ended Six Months Ended
March 31, 1998 March 31, 1997
----------------------- -----------------------
Basic Diluted Basic Diluted
----- ------- ----- -------
Net income $ 272,719 $ 272,719 $ 358,017 $ 358,017
Weighted average shares
outstanding 1,229,457 1,229,457 1,434,566 1,434,566
Diluted securities:
MSBP shares -- 10,170 -- --
Options -- 40,103 -- 2,460
--------- --------- ---------- ---------
Adjusted weighted average
shares 1,229,457 1,279,730 1,434,566 1,437,026
Per share amount $ 0.22 $ 0.21 $ 0.25 $ 0.25
- 8 -
<PAGE>
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
- -------------------------------------------
Lutherville, Maryland
- ---------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- ------------------------------------------------------
Note 4 - Earnings Per Share - Continued
------------------
Three Months Ended Three Months Ended
March 31, 1998 March 31, 1997
----------------------- ---------------------
Basic Diluted Basic Diluted
Net income $ 119,250 $ 119,250 $ 202,907 $ 202,907
Weighted average shares
outstanding 1,230,508 1,230,508 1,434,836 1,434,836
Diluted securities:
MSBP shares -- 11,072 -- 1,110
Options -- 43,336 -- 7,789
--------- --------- --------- ---------
Adjusted weighted average
shares 1,230,508 1,284,916 1,434,836 1,443,735
Per share amount $ 0.10 $ 0.09 $ 0.14 $ 0.14
- 9 -
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
Total assets of the Company were $118,467,000 as of March 31, 1998,
compared to $98,557,000 as of September 30, 1997, an increase of $19,910,000 or
20.20%. The increase was primarily attributable to an increase in investment
securities of $21,226,000 and an increase in interest-bearing deposits in other
banks of $1,544,000. These increases were slightly offset by a decrease in
federal funds sold of $2,162,000. The purchase of investments toward the end of
March 1998 is part of management's strategy to maximize the high level of equity
and to increase profitability. As liquidity levels increased with the inflow of
deposits and FHLB advances, the funds were transferred from federal funds to
higher yielding bonds. Approximately half of the investments are held as
"available for sale" as it is management's intention to use these bonds to fund
future loan originations.
Total liabilities of the Company were $98,510,000 as of March 31, 1998,
compared to $78,728,000 as of September 30, 1997, an increase of $19,782,000 or
25.13%. The increase was due to a net increase in deposits of $9,704,000,
Federal Home Loan Bank ("FHLB of Atlanta") advances of $9,000,000 and advance
payments by borrowers for taxes and insurance of $997,000. The increase in
deposits was due to an increase in certificates of deposit of $13,763,000,which
was slightly offset by a decline in other deposits of $3,063,000. During the
quarter ended March 31, 1998, the Bank borrowed an additional $12,000,000 in
short and long term FHLB advances. Management's plan was to take advantage of
the low costs of funds and invest the proceeds in higher yielding investments
and loan originations. As the borrowings mature, they will be repaid with
deposits. 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 $19,957,000 as of March 31, 1998, compared to
$19,829,000 as of September 30 1997, an increase of $128,000. The increase was
due to net income for the period of $273,000 and the allocation of shares to the
Stock Based Benefit Plan of $164,000. The increase was offset by a dividend of
$205,000, the repurchase of shares of the Company's own stock of $54,000 and a
net unrealized loss on securities available for sale of $51,000.
Results of Operations
General
Net income for the six and three months ended March 31, 1998 was
$273,000 and $119,000 respectively, as compared to $358,000 and $203,000 for the
same period in 1997. The decrease in net income of $85,000 for the six months
ended March 31, 1998 as compared with the same period in 1997 was primarily the
result of increases in provision for loan losses, total interest expense and
non-interest expense off-set by increases in total interest income and
non-interest income.
- 10 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Interest Income
Total interest income for the six and three months ended March 31, 1998
was $3,744,000 and $1,940,000, respectively, compared to $3,462,000 and
$1,757,000 for the same periods in 1997, an increase of $282,000 or 8.15% and
$183,000 or 10.42%, respectively. The increase was primarily due to an increase
of $7,016,000 and$12,128,000 in the average balance of investment securities for
the six and three months ended March 31, 1998.
The weighted average yield on interest-earning assets was 7.26% and
7.15% for the six and three month periods ended March 31, 1998, as compared to
7.33% for both of the same periods in 1997.
Interest Expense
Total interest expense for the six and three months ended March 31,
1998 was $1,940,000 and $1,010,000, respectively, compared to $1,624,000 and
$818,000 for the same respective periods in 1997, an increase of $316,000 or
19.46% and $192,000 or 23.47%. The increases resulted primarily from increases
in the average dollar amount of deposits of $7,236,000 and $10,339,000,
respectively, as the Bank conducted an aggressive advertising campaign for
certificates of deposits. The average yields paid were 4.56% and 4.53% for the
six and three month periods, compared to 4.43% and 4.36% for the same periods in
1997. The change in yields had little effect on the increases in interest
expense. The increases were also the result of increases in the average dollar
amount of borrowings of $5,230,000 and $6,261,000, respectively.
The weighted average rates paid on interest-bearing liabilities were
4.53% and 4.43% for the six and three months ended March 31, 1998, respectively,
as compared to 4.44% and 4.38% for the same periods in 1997.
Provision for Loan Losses
The provision for loan losses for the six and three month periods ended
March 31, 1998 was $130,000 and $115,000, respectively, as compared to $31,000
and $15,000 for the same respective periods in 1997.
During the quarter ended March 31, 1998, the Bank increased its
allowance for loan losses by $115,000. Of this increase, $84,000 related to two
residential mortgage loans in the amount of $579,000. Subsequent to the quarter
ended, the Bank became aware of circumstances that would affect the borrowers'
ability to repay their loans. One of the borrowers declared bankruptcy before
foreclosure proceedings were initiated and the other borrower's property is
scheduled for foreclosure during May 1998. Based upon the additions to the
allowance for loan losses, management believes the allowance for loan losses is
adequate, however, there can be no assurance that the allowance for loan losses
will be adequate to cover significant losses that the Bank might incur in the
future.
- 11 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Provision for Loan Losses - Continued
The following tables set forth information with respect to the Bank's
allowance for loan losses and non-accrual loans at the dates indicated:
<TABLE>
<CAPTION>
March September
31, 1998 30, 1997
-------- --------
<S> <C> <C>
Balance at beginning of period $ 250,000 $ 195,000
Charge-Offs:
Real estate - mortgage (76,000) (6,000)
Addition to loan loss provision 130,000 61,000
----------- -----------
$ 304,000 $ 250,000
=========== ===========
Ratio of net charge-offs during the period to
Average loans outstanding during the period
0.10% 0.01%
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
At March At September
31, 1998 30, 1997
----------- -----------
<S> <C> <C>
Loans accounted for on a non-accrual basis:
Real estate:
Permanent loans secured by 1-4 dwelling units $ 1,187,000 $ 767,000
Commercial 70,000 70,000
---------- ----------
Total $ 1,257,000 $ 837,000
========== ==========
Accruing loans which are contractually past due 90 days or more:
Real estate:
Permanent loans secured by 1-4 dwelling units $ -- $ --
Commercial -- --
Total $ -- $ --
========== ==========
Total non-performing loans $ 1,257,000 $ 837,000
========== ==========
Total non-accrual loans to net loans 1.63% 1.07%
========== ==========
Allowance for loan losses to total non-performing
loans 24.18% 29.86%
========== ==========
</TABLE>
- 12 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Other Non-Interest Income
Other income for the six and three months ended March 31, 1998 was
$65,000 and $30,000, respectively, compared to $61,000 and $28,000 for the same
respective periods in 1997, increases of $4,000 and $2,000, respectively. The
increases for the six and three month periods were primarily due to an increase
in transaction accounts of $11,000 and $8,000, respectively. The increases in
fees on transaction accounts were due to increased fees on NOW accounts and the
Bank installing Automatic Teller Machines and charging customers for usage. The
increases were partially off-set by decreases in other income for the same
periods.
Non-Interest Expense
Total non-interest expense for the six and three months ended March 31,
1998 was $1,280,000 and $639,000, respectively, compared to $1,267,000 and
$611,000 for the same respective periods in 1997, increases of $13,000 or 1.03%
and $28,000 or 4.58%, respectively. The increases for the six and three month
periods were the result of increases in salaries and related expenses,
advertising and professional services. Those increases were partially off-set by
decreases in SAIF deposit insurance premiums, occupancy and other expenses. The
increase in advertising of $35,000 or 205.88% and $13,000 or 108.33% for the six
and three months ended March 31, 1998 as compared to the same period in 1997 was
due to an aggressive advertising campaign for certificates of deposits. The rate
of FDIC deposit insurance premiums declined by approximately 70% from the rate
in effect prior to September 30,1996 due to the one time special assessment in
1996 of $506,000. As of January 1,1997, the Bank's premium was reduced to .064%
from .23% of insured deposits.
A great deal of publicity has been made about the Computer Year 2000. The Bank
uses a third party service bureau to process the calculation and processing
payments, interest and delinquencies. The service bureau for the Bank has
advised the Bank that the problem is being resolved and that the year 2000 will
not affect the Bank's operations. In addition, the Bank is taking steps
internally to ensure that all in-house computers are in compliance with the Year
2000 requirements. The cost to the Bank to rectify the Year 2000 computer
problems includes hardware and software costs. To date, the Bank has spent
$83,000 on these costs and expects to spend an additional $95,000, of which a
significant portion has or will be capitalized.
- 13 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Income Taxes
The Company's income tax expense for the six and three months ended
March 31, 1998 was $186,000 and $87,000, respectively, compared to $243,000 and
$139,000 for the same periods in 1997, representing a decrease of $57,000 or
23.46% and $52,000 or 37.41%, respectively. The changes were primarily the
result of the variations in pretax income. The effective tax rate for the six
and three months ended March 31, 1998, was 40.52% and 42.25%, respectively,
compared to 40.42% and 40.60% for the same periods in 1997.
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 4% 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 Bank's liquidity ratio was 8.44% at
March 31, 1998 and 9.79% at September 30, 1997.
The Bank is currently able to fund its operations internally.
Additional sources of funds include the ability to utilize Federal Home Loan
Bank ("FHLB") of Atlanta advances and the ability to borrow against mortgage
backed and investment securities. As of March 31, 1998, the Bank had a line of
credit with the FHLB of Atlanta of $20,000,000 and had outstanding advances of
$13,000,000. Management believes it has ample cash flows and liquidity to meet
its loan and investment commitments in the amount of $8,253,000 as of March 31,
1998.
The following table presents the Bank's capital position based on the
March 31, 1998 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 (1) $15,748,869 13.41% $1,761,983 1.50% $ N/A
Tier I capital (2) 15,748,869 28.63% N/A 3,300,420 6.00%
Core (1) 15,748,869 13.41% 4,698,623 4.00% 5,873,278 5.00%
Risk-weighted (2) 15,968,834 29.03% 4,400,560 8.00% 5,500,700 10.00%
</TABLE>
(1) To adjusted total assets.
(2) To risk-weighted assets.
-14-
<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 the 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
The annual meeting of shareholders of the Company was held on
January 20, 1998 and the following matters were voted upon:
Proposal I - Election of directors with terms to expire in 2001.
FOR WITHHELD
Herbert A. Davis 1,206,182 31,285
D. Edward Lauterbach, Jr. 1,206,182 31,285
August J. Seifert 1,205,182 32,285
Herbert W. Spath 1,205,182 32,285
Proposal II - The ratification of the amendment to the WHG
Bancshares Corporation 1996 Stock Option Plan
FOR: 1,058,967
AGAINST: 137,810
ABSTAIN: 2,810
Proposal III - The ratification of the amendment to the Heritage
Savings Bank, F.S.B. Management Stock Bonus Plan
FOR: 1,088,817
AGAINST: 128,410
ABSTAIN: 15,860
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
a) 10.5 Amendment to the 1996 Stock Option Plan*
10.6 Amendment to the Bank's Management Stock Bonus Plan and
Trust Agreement*
27 Financial Data Schedule (electronic filing only)
-15-
<PAGE>
* Incorporated by reference to the definitive proxy
statement for the special meeting of shareholders on
January 20, 1998, filed on December 19, 1997 (file No.
0-27606)
b) There were no Form 8-K's filed during the quarter.
-16-
<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: May 12, 1998 By: /s/Peggy J. Stewart
----------------------------------------
Peggy J. Stewart
President and Chief Executive Officer
(duly authorized officer)
Date: May 12, 1998 By: /s/Robin L. Taylor
----------------------------------------
Robin L. Taylor
Controller (chief accounting officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION DERIVED FROM
THE QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,502
<INT-BEARING-DEPOSITS> 5,443
<FED-FUNDS-SOLD> 1,320
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 11,876
<INVESTMENTS-CARRYING> 15,749
<INVESTMENTS-MARKET> 15,650
<LOANS> 77,326
<ALLOWANCE> 304
<TOTAL-ASSETS> 118,467
<DEPOSITS> 83,890
<SHORT-TERM> 7,000
<LIABILITIES-OTHER> 1,620
<LONG-TERM> 6,000
0
0
<COMMON> 139
<OTHER-SE> 19,818
<TOTAL-LIABILITIES-AND-EQUITY> 118,467
<INTEREST-LOAN> 3,032
<INTEREST-INVEST> 408
<INTEREST-OTHER> 304
<INTEREST-TOTAL> 3,744
<INTEREST-DEPOSIT> 1,793
<INTEREST-EXPENSE> 1,940
<INTEREST-INCOME-NET> 1,804
<LOAN-LOSSES> 130
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,280
<INCOME-PRETAX> 459
<INCOME-PRE-EXTRAORDINARY> 459
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 273
<EPS-PRIMARY> .22
<EPS-DILUTED> .21
<YIELD-ACTUAL> 2.73
<LOANS-NON> 1,257
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 250
<CHARGE-OFFS> 76
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 304
<ALLOWANCE-DOMESTIC> 304
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
