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, 1999
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 7, 1999: 1,353,109
Transitional Small Business Disclosure Format (check one)
YES NO X
--------- ----------
<PAGE>
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
-------------------------------------------
Lutherville, Maryland
---------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
<TABLE>
<CAPTION>
March 31, September 30,
--------- -------------
1999 1998
---- ----
(Unaudited)
Assets
<S> <C> <C>
Cash $ 759,141 $ 1,179,349
Interest bearing deposits in other banks 3,728,779 9,849,431
Federal funds sold 3,619,000 3,394,000
Investments available for sale 20,900,052 15,191,491
Other investments held to maturity 14,600,000 14,600,000
Mortgage backed securities 18,880,122 7,275,803
Loans receivable - net 79,588,200 75,357,978
Accrued interest receivable - loans 343,095 365,022
- investments 624,807 581,865
- mortgage backed securities 101,840 40,979
Premises and equipment - net 862,813 876,926
Federal Home Loan Bank of Atlanta stock, at cost 1,000,000 1,000,000
Investment in and loans to affiliated corporation 2,525,000 2,575,000
Deferred income taxes 359,733 170,695
Prepaid and refundable income taxes 175,973 131,353
Other assets 216,326 286,580
----------- -----------
Total assets $148,284,881 $132,876,472
=========== ===========
Liabilities and Stockholders' Equity
Liabilities
Deposits $111,026,236 $ 95,065,922
Checks outstanding in excess of bank balance -- 11,077
Borrowings 20,000,000 20,937,168
Advance payments by borrowers for taxes and insurance 1,197,786 314,125
Income taxes payable 44,517 16,780
Other liabilities 257,758 288,684
----------- -----------
Total liabilities 132,526,297 116,633,756
Commitments and contingencies
Stockholders' Equity
Common stock .10 par value;
authorized 1,620,062 shares; issued and
outstanding 1,353,109 shares at March 31,
1999 and 1,389,002 shares at September 30, 1998 135,311 138,900
Additional paid-in capital 7,088,158 7,392,663
Retained earnings (substantially restricted) 9,735,591 9,651,860
Accumulated other comprehensive income, net of taxes (349,711) (25,140)
----------- -----------
16,609,349 17,158,283
Employee Stock Ownership Plan (850,765) (915,567)
----------- -----------
Total stockholders' equity 15,758,584 16,242,716
----------- -----------
Total liabilities and stockholders' equity $148,284,881 $132,876,472
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<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,
---------------------------- -------------------------
1999 1998 1999 1998
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Interest and fees on loans $2,955,416 $ 3,032,462 $1,480,153 $1,518,535
Interest and dividends on investment securities 1,108,616 314,529 579,351 222,540
Interest on mortgage backed securities 443,360 93,118 270,609 45,967
Other interest income 331,591 303,721 153,325 153,175
--------- ---------- ---------- ---------
Total interest income 4,838,983 3,743,830 2,483,438 1,940,217
Interest on deposits 2,428,916 1,792,822 1,265,524 924,690
Interest on short-term borrowings 216,125 141,300 87,541 79,919
Interest on long-term borrowings 351,902 5,510 188,325 5,510
--------- ---------- --------- ---------
Total interest expense 2,996,943 1,939,632 1,541,390 1,010,119
--------- --------- --------- ---------
Net interest income 1,842,040 1,804,198 942,048 930,098
Provision for loan losses 30,000 130,000 15,000 115,000
--------- ---------- --------- ---------
Net interest income after provision
for loan losses 1,812,040 1,674,198 927,048 815,098
Non-Interest Income
Fees and charges on loans 18,902 14,831 8,702 5,118
Fees on transaction accounts 27,974 33,616 14,339 17,313
Other commissions and fees 81,975 69,233 16,640 50,499
Other income 18,100 16,178 9,037 7,953
--------- ---------- --------- ---------
Total non-interest income 146,951 133,858 48,718 80,883
Non-Interest Expenses
Salaries and related expenses 916,358 874,832 451,446 444,253
Occupancy 69,082 69,953 34,099 38,662
FDIC deposit insurance premium 27,620 23,387 14,406 11,589
Depreciation of equipment 42,187 23,014 20,973 12,893
Advertising 35,096 51,753 20,776 24,443
Data processing costs 50,055 40,086 26,762 21,219
Professional services 87,428 86,623 35,626 47,025
Other expenses 195,629 179,871 98,728 89,170
--------- ---------- --------- ---------
Total non-interest expenses 1,423,455 1,349,519 702,816 689,254
--------- ---------- --------- ---------
Income before tax provision 535,536 458,537 272,950 206,727
Provision for income taxes 224,312 185,818 122,860 87,477
--------- ---------- --------- ---------
Net income $ 311,224 $ 272,719 $ 150,090 $ 119,250
======== ======== ======== ========
Basic earnings per share $ .25 $ .22 $ .12 $ .10
======== ======== ======== ========
Diluted earnings per share $ .24 $ .21 $ .12 $ .09
======== ======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
-------------------------------------------
Lutherville, Maryland
---------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-------------------------------------------------
<TABLE>
<CAPTION>
For Six Months Ended
March 31,
--------------------------------
1999 1998
---- ----
<S> <C> <C>
Net income $311,224 $272,719
Unrealized losses on available-for-sale securities,
net of tax of $220,036 and $31,849, for the six month
periods ended March 31, 1999 and 1998, respectively (349,711) (50,615)
-------- -------
Comprehensive income $ (38,487) $222,104
======== =======
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
-------------------------------------------
Lutherville, Maryland
---------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-------------------------------------------------
<TABLE>
<CAPTION>
For Six Months Ended
March 31,
-------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Operating Activities
Net income $ 311,224 $ 272,719
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities
-------------------------------------
Net accretion/amortization of premiums and discounts
on mortgage backed securities 4,061 (413)
Amortization of deferred loan fees (107,658) (81,693)
Loan fees deferred 77,616 96,773
Decrease in discount on loans purchased (9,541) (11,636)
Other amortization (79) (111)
Provision for loan losses 30,000 130,000
Non-cash compensation under stock-based
benefit plans 166,204 164,053
Increase in accrued interest receivable (81,876) (140,444)
Loans sold 500,000 750,000
Loans originated for sale (500,000) (750,000)
Provision for depreciation 48,971 23,014
(Increase) decrease in deferred income tax assets 15,180 (46,314)
Increase in prepaid income taxes (44,620) --
(Increase) decrease in other assets 70,254 (58,794)
Increase (decrease) in accrued interest payable 114 (164)
Increase in income taxes payable 27,737 84,025
Decrease in other liabilities (30,926) (2,048)
------------- -------------
Net cash provided by operating activities 476,661 428,967
Cash Flows from Investment Activities
- -------------------------------------
Proceeds from maturing interest bearing deposits -- 1,562,019
Purchases of interest bearing deposits (95,000) (1,369,272)
Purchase of investment securities available for sale (9,487,272) (11,958,262)
Proceeds from maturing investments available for sale 3,250,000 --
Purchase of other investments (7,250,000) (11,850,000)
Proceeds from maturing other investments 7,250,000 2,500,000
Purchase of mortgage backed securities (12,473,993) --
Principal collected on mortgage backed securities 865,612 196,301
Net decrease in shorter term loans 58,628 26,297
Loans purchased (207,279) (203,488)
Longer term loans originated or acquired (10,077,415) (6,272,637)
Principal collected on longer term loans 6,005,428 7,440,875
Investment in premises and equipment (34,858) (98,167)
Purchase of stock in Federal Home Loan Bank of Atlanta -- (46,800)
Decrease on investments in and loans to joint ventures 50,000 275,000
------------- ------------
Net cash used by investment activities (22,146,149) (19,798,134)
</TABLE>
<PAGE>
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
-------------------------------------------
Lutherville, Maryland
---------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-------------------------------------------------
<TABLE>
<CAPTION>
For Six Months Ended
March 31,
1999 1998
---- ----
<S> <C> <C>
Cash Flows from Financing Activities
- ------------------------------------
Net increase (decrease) in demand deposits, money
market, passbook accounts and advances by
borrowers for taxes and insurance $ 2,322,740 $(3,062,529)
Net increase in certificates of deposit 14,521,121 13,763,043
Decrease in checks outstanding in excess of bank balances (11,077) --
Net increase (decrease) in borrowings (937,168) 9,000,000
Dividends on stock (227,492) (204,853)
Stock repurchase (409,496) (53,754)
----------- -----------
Net cash provided by financing activities 15,258,628 19,441,907
----------- -----------
(Decrease) increase in cash and cash equivalents (6,410,860) 72,740
Cash and cash equivalents at beginning of period 14,422,780 7,946,628
----------- -----------
Cash and cash equivalents at end of period $ 8,011,920 $ 8,019,368
=========== ===========
The following is a Summary of Cash and Cash Equivalents:
- --------------------------------------------------------
Cash $ 759,141 $ 1,501,680
Interest bearing deposits in other banks 3,728,779 5,442,620
Federal funds sold 3,619,000 1,320,000
----------- -----------
Balance of cash items reflected on
statement of financial condition 8,106,920 8,264,300
Less - certificates of deposit with original maturities of more
than three months that are included in
interest-bearing deposits in other banks 95,000 244,932
----------- -----------
Cash and cash equivalents reflected on the
Statement of Cash Flows $ 8,011,920 $ 8,019,368
=========== ===========
Supplemental Disclosure of Cash Flow Information:
- -------------------------------------------------
Cash paid during the period for:
Interest $ 2,991,687 $ 1,840,534
=========== ===========
Taxes $ 241,800 $ 177,500
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
-------------------------------------------
Lutherville, Maryland
---------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
------------------------------------------------------
Note 1 - Basis of Presentation
---------------------
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and in accordance with the instructions to Form 10-QSB. 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, 1999 are not necessarily indicative of the results that may be
expected for the entire fiscal year September 30, 1999 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, 1998. During the three month period ended March 31, 1999, the
Bank's subsidiary, Mapleleaf Mortgage Corporation "Mapleleaf" ceased operations.
Note 2 - Cash Flow Presentation
----------------------
For purposes of the statements of cash flows, cash and cash equivalents
include cash and amounts due from depository institutions, investments in
federal funds, and certificates of deposit with maturities of 90 days or less.
Note 3 - Earnings Per Share
------------------
Basic EPS is computed by dividing net income by the weighted average
number of common shares outstanding for the appropriate period. Unearned ESOP
shares are not included in outstanding shares. Diluted EPS is computed by
dividing net income by the weighted average shares outstanding as adjusted for
the dilutive effect of stock options and unvested stock awards based on the
"treasury stock" method. Information relating to the calculations of net income
per share of common stock is summarized for the three and six month periods
ended March 31, as follows:
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
March 31, 1999 March 31, 1998
------------------------------ ------------------------------
Basic Diluted Basic Diluted
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Net income $ 311,224 $ 311,224 $ 272,719 $ 272,719
Weighted average shares
outstanding 1,245,044 1,245,044 1,229,457 1,229,457
Diluted securities:
MSBP shares -- 42,658 -- 10,170
Options -- -- -- 40,103
----------- ----------- ----------- -----------
Adjusted weighted average
shares 1,245,044 1,287,702 1,229,457 1,279,730
Per share amount $ 0.25 $ 0.24 $ 0.22 $ 0.21
</TABLE>
<PAGE>
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
-------------------------------------------
Lutherville, Maryland
---------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
------------------------------------------------------
Note 3 - Earnings Per Share - Continued
------------------
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1999 March 31, 1998
Basic Diluted Basic Diluted
<S> <C> <C> <C> <C>
Net income $ 150,090 $ 150,090 $ 119,250 $ 119,250
Weighted average shares
outstanding 1,244,016 1,244,016 1,230,508 1,230,508
Diluted securities:
MSBP shares -- 42,658 -- 11,072
Options -- 247 -- 43,336
---------- ----------- ------------ ------------
Adjusted weighted average
shares 1,244,016 1,286,921 1,230,508 1,284,916
Per share amount $ 0.12 $ 0.12 $ 0.10 $ 0.09
</TABLE>
Note 4 - Reclassification
----------------
Certain prior years' amounts have been reclassified to conform to the
current year's method of presentation.
Note 5 - Subsequent Event
----------------
On April 1, 1999, the Bank paid $5.0 million in cash and assumed the
remaining assets and liabilities of Bankers Affiliate, Inc. ("BA"). Prior to the
purchase, the Bank had a 33-1/3% investment in BA. The purchase of BA increased
the Bank's loan portfolio by approximately $7.0 million.
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 contains safe
harbor provisions regarding forward-looking statements. When used in this
discussion, the words "believes", "anticipates", "contemplates", "expects", and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties which could cause
actual results to differ materially from those projected. Those risks and
uncertainties include changes in interest rates, the ability to control costs
and expenses, and general economic conditions. WHG Bancshares Corporation
undertakes no obligation to publicly release the results of any revisions to
those forward-looking statements which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Overview
WHG Bancshares Corporation is the holding company for Heritage Savings
Bank, F.S.B. (collectively, the "Company" or the "Bank"). For the quarter ended
March 31, 1999, the Company earned $150,000, or $.12 diluted earnings per share,
as compared to net earnings of $119,000, or $.09 diluted earnings per share, for
the comparative 1998 quarter. For the six months ended March 31, 1999, the
Company earned $311,000, or $.24 diluted earnings per share, as compared to net
earnings of $273,000, or $.21 diluted earnings per share, for the comparable
1998 period.
During the quarter ended March 31, 1999, Mapleleaf Mortgage Corporation
("MMC") ceased operations. MMC, a subsidiary of the Bank, was formed in June
1996 to engage in mortgage brokerage operations. MMC was not a material
investment of the Bank.
On April 1, 1999, the Bank paid $5.0 million in cash and assumed the
remaining assets and liabilities of Bankers Affiliate, Inc. ("BA"). Prior to the
purchase, the Bank had a 33-1/3% investment in BA. The purchase of BA increased
the Bank's loan portfolio by approximately $7.0 million.
Financial Condition
Total assets of the Company were $148,285,000 as of March 31, 1999,
compared to $132,876,000 as of September 30, 1998, an increase of $15,409,000 or
11.60%. The increase was primarily attributable to increases in investments
available for sale of $5,709,000, mortgage backed securities of $11,604,000, and
loans receivable $4,230,000. The aforementioned increases were partially funded
by a decrease in interest-bearing deposits in other banks of $6,121,000. The net
increase in the Company's assets was primarily the result of management's
continued strategy to maximize the high level of equity, diversify the Company's
balance sheet and increase profitability.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Financial Condition - Continued
Total liabilities of the Company were $132,526,000 as of March 31,
1999, compared to $116,634,000 as of September 30, 1998, an increase of
$15,892,000. The increase was the result of an increase in deposits, primarily
certificates of deposit, of $15,960,000, and advance payments by borrowers for
taxes and insurance of $884,000. The Company's successful advertising campaign
in 1998 for certificate of deposit products contributed to the continued growth
in deposit balances. 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. Additionally,
the Company had an option to repurchase a note in the amount of $937,000 any
time after February 1, 1999 and exercised such option.
Stockholders' equity was $15,759,000 as of March 31, 1999, compared to
$16,243,000 as of September 30 1998, a decrease of $484,000. The decrease was
the result of an aggregate $409,000 repurchase of the Company's stock, a
$325,000 increase in unrealized losses on investment securities, and dividend
declaration totaling $227,000. The decrease was partially offset by net income
for the period of $311,000 and the allocation of shares to the Stock Based
Benefit Plan of $166,000.
Results of Operations
Interest Income
Total interest income for the six and three months ended March 31, 1999
was $4,839,000 and $2,483,000, respectively, compared to $3,744,000 and
$1,940,000 for the same periods in 1998, an increase of $1,095,000 and $543,000,
respectively. The increase for the six months ended March 31, 1999 was primarily
due to increases of $21,704,000 and $12,270,000 in the average balance of
investment securities and mortgage backed securities. In addition, the average
balance of investment securities and mortgage backed securities increased
$16,635,000 and $14,994,000, respectively, for the three months ended March 31,
1999. Offsetting such increases to interest income for the six month and three
month periods ended March 31, 1999, was a 21 and 19 basis point decrease in the
weighted average yield on interest-earning assets. The weighted average yield on
interest-earning assets was 7.05% and 6.96% for the six and three month periods
ended March 31, 1999, as compared to 7.26% and 7.15% for the same periods in
1998.
Interest Expense
Total interest expense for the six and three months ended March 31,
1999 was $2,997,000 and $1,541,000, respectively, compared to $1,940,000 and
$1,010,000 for the same respective periods in 1998, an increase of $1,057,000
and $531,000. The increases resulted from the rise in the average dollar amount
of time deposits for the six month and three month periods ended March 31, 1999
of $23,669,000 and $25,908,000, respectively. Interest expense also increased
following the rise in the average dollar amount of borrowings, principally
Federal Home Loan Bank advances, of $14,028,000 and $11,857,000, respectively,
for the six month and three month periods ended March 31, 1999.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Interest Expense - Continued
Contributing to the increase in interest expense for the respective six
month and three month periods was an increase in cost of funds of 31 and 33
basis points. The weighted average rates paid on interest-bearing liabilities
were 4.84% and 4.76% for the six and three months ended March 31, 1999,
respectively, as compared to 4.53% and 4.43% for the same periods in 1998.
Provision for Loan Losses
The provision for loan losses for the six and three month periods ended
March 31, 1999 was $30,000 and $15,000, respectively, as compared to $130,000
and $115,000 for the same respective periods in 1998. 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, thereby increasing non-performing loans in 1998 of $420,000 to
$1,257,000. At March 31, 1999, non-performing loans were $66,000.
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 March 31, 1999, management
believes the allowance for loan losses is sufficient since the loans are
adequately secured. The assessment of the adequacy of the allowance for loan
losses involves subjective judgment regarding future events and there can be no
assurance that additional provisions for loan losses will not be required in
future periods.
As discussed in the Overview section herein, the Bank, on April 1,
1999, purchased all of the assets and assumed all of the liabilities of Bankers
Affiliate, Inc. Such purchase contributed approximately $7.0 million to the
Company's loans receivable portfolio primarily in consumer and home equity
loans. Due to the possible greater risk of loss of these additional loan types,
and the overall increase in the loan portfolio, the Company may increase its
provision for loan losses in future periods.
Other Non-Interest Income
Other income for the six and three months ended March 31, 1999 was
$147,000 and $49,000, respectively, compared to $134,000 and $81,000 for the
corresponding periods in 1998. The increase of $13,000 for the six month periods
was primarily due to increased commissions and fees from MMC's mortgage
brokerage operation activities during the first quarter of fiscal 1999. The
$32,000 decrease for the three month periods resulted from a decline in other
commission and fees as MMC wound down operations in preparation for its closure
in March, 1999.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Non-Interest Expense
Total non-interest expense for the six months ended March 31, 1999 was
$1,423,000, compared to $1,350,000 for the same period in 1998, an increase of
$73,000 or 5.41%. Depreciation expense increased $19,000 for the six month
period as the result of the purchase of new equipment. The equipment purchased
was in part in response to the Company's Year 2000 Compliance Plan. Advertising
expense decreased $17,000 for the six months due to an aggressive advertising
campaign for certificates of deposit during the prior fiscal year. Data
processing cost increased $10,000 for the six month period as a result of the
purchase of additional programs and an increase in fees charged by the Bank's
service provider.
Total non-interest expense for the three months ended March 31, 1999
was $703,000, compared to $689,000 for the same period in 1998, an increase of
$14,000 or 2.03%. Depreciation expense increased $8,000 as discussed in the
preceding paragraph. Professional fees decreased $12,000 due to the reversal of
the accrued accounting fees for MMC and prior year fees related to strategic
planning that were not incurred in the current year.
Provision for Income Taxes
The provision for income taxes increased $38,000 and $36,000 for the
six and three months ended March 31, 1999, as compared to the same periods in
1998. The increases were the result of an increase in net income before
provision for income taxes and the write-off of the deferred income tax asset of
MMC. In addition, MMC generated a loss during the six and three month periods
ended March 31, 1999 for which no income tax benefit was recognized.
Year 2000
During fiscal 1998, the Company adopted a Year 2000 Compliance Plan
(the "Plan") and established a Year 2000 Compliance Committee (the "Committee").
The objectives of the Plan and the Committee are to prepare the Company for the
new millennium. As recommended by the Federal Financial Institutions Examination
Council, the Plan encompasses the following phases: Awareness, Assessment,
Renovation, Validation, and Implementation. These phases will enable the Company
to identify risks, develop an action plan, perform adequate testing and complete
certification that its processing systems will be Year 2000 ready. Execution of
the Plan is currently on target. The Company is currently in Phase 4,
Validation, which includes testing and verifications of corrective actions.
Concurrently, the Company is also addressing some issues related to subsequent
phases. Prioritization of the most critical applications has been addressed,
along with contract and service agreements. The primary operating software for
the Company is obtained and maintained by an external provider of software (the
"External Provider"). The Company has maintained ongoing contact with this
vendor so that modification of the software for Year 2000 readiness is a top
priority and the testing Phase was completed in August of 1998. The Company has
contacted all other material vendors and suppliers regarding their Year 2000
state of readiness. Each of these third parties has delivered written assurance
to the Company that they expect to be Year 2000 compliant prior to the Year
2000. The
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Year 2000 - Continued
Company is in the process of contacting all material customers and
non-information technology suppliers (i.e. utility systems, telephone systems
and security systems) regarding their Year 2000 state of readiness. The next
Phase, the Implementation Phase, is to certify that systems are Year 2000 ready,
along with assurances that any new systems are compliant on a going-forward
basis. The Implementation Phase is targeted for completion by September 30,
1999.
Costs will be incurred due to the replacement of non-compliant teller
hardware and software. The Company does not anticipate that the related overall
costs will be material in any single year. In total, the Company estimates that
its cost for compliance will amount to approximately $186,000, employee time not
included. No assurance can be given that the Year 2000 Compliance Plan will be
completed successfully by the Year 2000, in which event the Company could incur
significant costs. If the External Provider is unable to resolve the potential
problem in time, the Company would likely experience significant data processing
delays, mistakes or failures. These delays, mistakes or failures could have a
significant adverse impact on the financial statements of the Company.
The Bank is currently developing a contingency plan (the "Plan")
specific to the Year 2000. The Plan will address the actions that would be
undertaken if critical business functions cannot be carried out in the normal
manner upon entering the next century due to computer system or supplier
failure. If such events occur, the Bank will input a manual posting plan that
will entail manual postings of transactions to the general ledger and hand
calculations of interest for both savings accounts and mortgages as well as the
calculations of dividends. The Bank has a number of employees who have been
employed by the Bank for at least 25 years who have experience in the manual
postings to the general ledger as well as the hand calculations of interest and
dividends. The Bank is currently devising a training program for all essential
personnel. Additionally, the Bank will have management personnel on site at each
office on the first business day of the Year 2000 to answer any concerns the
customer may have and offer any assistance to the Bank's employees.
Successful and timely completion of the Year 2000 project is based on
management's best estimates derived from various assumptions of future events,
which are inherently uncertain, including the progress and results of the
Company's External Provider, testing plans, and all vendors, suppliers and
customer readiness.
<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
None.
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 19,
1999 and the following matters were voted upon:
Proposal I - Election of directors with terms to expire in 2002.
For Withheld
---------- --------
Phillip W. Chase, Jr. 1,140,334 115,483
Edwin C. Muhly, Jr. 1,140,729 115,088
Peggy J. Stewart 1,140,729 115,088
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule (electronic filing only)
(b) None.
<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, 1999 By: /s/ Peggy J. Stewart
------------------------------------------
Peggy J. Stewart
President and Chief Executive Officer
(duly authorized officer)
Date: May 12, 1999 By: /s/Robin L. Taylor
------------------------------------------
Robin L. Taylor
Controller (chief accounting officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 759
<INT-BEARING-DEPOSITS> 3,729
<FED-FUNDS-SOLD> 3,619
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 20,900
<INVESTMENTS-CARRYING> 33,480
<INVESTMENTS-MARKET> 33,035
<LOANS> 79,588
<ALLOWANCE> 320
<TOTAL-ASSETS> 148,285
<DEPOSITS> 111,026
<SHORT-TERM> 6,000
<LIABILITIES-OTHER> 1,500
<LONG-TERM> 14,000
0
0
<COMMON> 135
<OTHER-SE> 15,623
<TOTAL-LIABILITIES-AND-EQUITY> 148,285
<INTEREST-LOAN> 2,955
<INTEREST-INVEST> 1,552
<INTEREST-OTHER> 332
<INTEREST-TOTAL> 4,839
<INTEREST-DEPOSIT> 2,429
<INTEREST-EXPENSE> 2,997
<INTEREST-INCOME-NET> 1,842
<LOAN-LOSSES> 30
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,423
<INCOME-PRETAX> 536
<INCOME-PRE-EXTRAORDINARY> 536
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 311
<EPS-PRIMARY> .25
<EPS-DILUTED> .24
<YIELD-ACTUAL> 2.21
<LOANS-NON> 66
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 301
<CHARGE-OFFS> 11
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 320
<ALLOWANCE-DOMESTIC> 320
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
