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 June 30, 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 August 1, 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>
June 30, September 30,
-------- -------------
1999 1998
---- ----
(Unaudited)
Assets
------
<S> <C> <C>
Cash $ 835,111 $ 1,179,349
Interest bearing deposits in other banks 2,383,086 9,849,431
Federal funds sold 5,263,000 3,394,000
Investments available for sale 20,122,422 15,191,491
Other investments held to maturity 15,300,000 14,600,000
Mortgage backed securities 18,447,277 7,275,803
Loans receivable - net 86,682,421 75,357,978
Accrued interest receivable - loans 354,096 365,022
- investments 555,372 581,865
- mortgage backed securities 99,458 40,979
Premises and equipment - net 858,370 876,926
Federal Home Loan Bank of Atlanta stock, at cost 1,150,000 1,000,000
Investment in and loans to affiliated corporation - 2,575,000
Investment in foreclosed real estate 13,103 -
Deferred income taxes 598,558 170,695
Prepaid and refundable income taxes 149,459 131,353
Other assets 252,103 286,580
----------- -----------
Total assets $153,063,836 $132,876,472
=========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Liabilities
- -----------
Deposits $112,436,133 $ 95,065,922
Checks outstanding in excess of bank balance 51,641 11,077
Borrowings 23,000,000 20,937,168
Advance payments by borrowers for taxes and insurance 1,724,421 314,125
Income taxes payable - 16,780
Other liabilities 244,206 288,684
----------- -----------
Total liabilities 137,456,401 116,633,756
Commitments and contingencies
Stockholders' Equity
- --------------------
Common stock .10 par value; authorized 1,620,062
shares; issued and outstanding 1,353,109 shares at June
30, 1999 and 1,389,002 shares at September 30,1998 135,310 138,900
Additional paid-in capital 7,153,336 7,392,663
Retained earnings (substantially restricted) 9,851,783 9,651,860
Accumulated other comprehensive income, net of taxes (714,630) (25,140)
----------- -----------
16,425,799 17,158,283
Employee Stock Ownership Plan (818,364) (915,567)
----------- -----------
Total stockholders' equity 15,607,435 16,242,716
----------- -----------
Total liabilities and stockholders' equity $153,063,836 $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 Nine Months Ended For Three Months Ended
June 30, June 30,
---------------------------- ------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest and fees on loans $4,620,548 $4,529,548 $1,665,132 $1,497,085
Interest on mortgage backed securities 743,563 219,283 300,203 126,165
Interest and dividends on investment
securities 1,731,214 857,792 622,598 543,263
Other interest income 409,357 458,174 77,766 154,453
--------- --------- --------- ---------
Total interest income 7,504,682 6,064,797 2,665,699 2,320,966
Interest on deposits 3,780,062 2,824,529 1,351,146 1,031,707
Interest on short-term borrowings 288,651 263,058 72,526 121,758
Interest on long term borrowings 588,780 158,078 236,878 152,568
--------- --------- --------- ---------
Total interest expense 4,657,493 3,245,665 1,660,550 1,306,033
--------- --------- --------- ---------
Net interest income 2,847,189 2,819,132 1,005,149 1,014,933
Provision for loan losses 45,000 180,000 15,000 50,000
--------- --------- --------- ---------
Net interest income after provision for
loan losses 2,802,189 2,639,132 990,149 964,933
Non-Interest Income
Fees and charges on loans 29,163 21,766 10,261 6,935
Fees on transaction accounts 40,373 47,944 12,399 14,328
Gain on sale of investments 4,371 - 4,371 -
Other commissions and fees 81,975 119,502 - 50,269
Other income 27,321 24,492 9,221 8,314
--------- --------- --------- ---------
Total non-interest income 183,203 213,704 36,252 79,846
Non-Interest Expenses
Salaries and related expenses 1,354,938 1,323,617 438,580 448,785
Occupancy 121,013 127,856 41,786 39,693
SAIF deposit insurance premium 42,356 35,289 14,736 11,902
Depreciation of equipment 64,193 40,429 22,006 17,415
Advertising 51,670 84,335 16,574 32,582
Data processing costs 77,798 62,219 27,743 22,133
Professional services 125,062 135,085 37,634 48,462
Other expenses 257,337 264,609 71,853 102,948
--------- --------- --------- ---------
Total non-interest expenses 2,094,367 2,073,439 670,912 723,920
--------- --------- --------- ---------
Income before tax provision 891,025 779,397 355,489 320,859
Provision for income taxes 352,489 309,632 128,177 123,814
--------- --------- --------- ---------
Net income $ 538,536 $ 469,765 $ 227,312 $ 197,045
========= ========= ========= =========
Basic earnings per share $ .44 $ .38 $ .18 $ .16
========= ========= ========= =========
Diluted earnings per share $ .44 $ .37 $ .18 $ .15
========= ========= ========= =========
</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 COMPREHENSIVE INCOME (UNAUDITED)
-----------------------------------------------------------
<TABLE>
<CAPTION>
For Nine Months Ended
---------------------------------
June 30, June 30,
-------- --------
1999 1998
---- ----
<S> <C> <C>
Net income $ 538,536 $ 469,765
Unrealized holding losses, net of tax of $438,197 and $28,553
for the nine month periods ended June 30, 1999 and 1998,
respectively (686,848) (45,349)
Reclassification adjustment for gains included in net
income, net of tax of $1,729 for the nine month period
ended June 30, 1999 (2,642) -
-------- -------
Comprehensive income (loss) $(150,954) $ 424,416
======== ========
</TABLE>
<TABLE>
<CAPTION>
For Three Months Ended
---------------------------------
June 30, June 30,
-------- --------
1999 1998
---- ----
<S> <C> <C>
Net income $ 227,312 $ 197,045
Unrealized holding (losses)/gains net of tax of $218,161
and $3,316 for the three month periods ended June 30,
1999 and 1998, respectively (337,137) 5,266
Reclassification adjustment for gains included in net
income, net of tax of $1,729 for the three month period
ended June 30, 1999 (2,642) -
-------- ---------
Comprehensive income (loss) $ (112,467) $ 202,311
======== =========
</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 Nine Months Ended
---------------------
June 30, June 30,
-------- --------
1999 1998
---- ----
Operating Activities
- --------------------
<S> <C> <C>
Net income $ 538,536 $ 469,765
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities
------------------------------------------
Gain on sale of investment available for sale (4,371) -
Net accretion/amortization of premiums and
discounts on mortgage backed securities 4,787 (337)
Amortization of deferred loan fees (136,077) (139,062)
Loan fees deferred 131,236 140,923
Decrease in discount on loans purchased (14,289) (16,406)
Other amortization (100) -
Provision for loan losses 45,000 180,000
Non-cash compensation under stock-based
benefit plans 263,782 279,553
Increase in accrued interest receivable (21,060) (503,089)
Loans sold 500,000 -
Loans originated for sale (500,000) -
Provision for depreciation 74,369 50,604
(Increase) decrease in deferred income tax 6,022 (45,095)
Increase in prepaid income taxes (18,106) (62,408)
(Increase) decrease in other assets 36,447 (12,738)
Increase (decrease) in accrued interest payable 10 (95)
Decrease in income taxes payable (16,780) (64,284)
Increase (decrease) in other liabilities (44,478) 21,892
------------- ------------
Net cash provided by operating activities 844,928 299,223
Cash Flows from Investment Activities
- -------------------------------------
Proceeds from maturing interest bearing deposits - 1,759,019
Purchases of interest bearing deposits (95,000) (1,568,589)
Purchase of securities available for sale (9,487,272) (23,100,050)
Proceeds from sales and maturities of investments
available for sale 3,437,496 5,000,000
Proceeds from maturing investments held to maturity 7,250,000 7,000,000
Purchase of investments held to maturity (7,950,000) (19,350,000)
Purchase of mortgage backed securities - held to maturity (12,473,993) (4,958,225)
Principal collected on mortgage backed securities - held
to maturity 1,297,732 334,645
Net decrease in shorter term loans 41,272 112,570
Loans purchased (207,279) (203,488)
Longer term loans originated or acquired (14,302,155) (9,987,650)
Principal collected on longer term loans 10,437,887 11,844,264
Acquisition of Bankers Affiliate, Inc., principally loans (4,836,311) -
Investment in premises and equipment (54,672) (164,130)
Purchase of stock in Federal Home Loan Bank
of Atlanta (150,000) (246,800)
Decrease in investment in and loans to joint ventures 75,000 350,000
------------- ------------
Net cash used by investment activities (27,017,295) (33,178,434)
</TABLE>
<PAGE>
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
-------------------------------------------
Lutherville, Maryland
---------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-------------------------------------------------
<TABLE>
<CAPTION>
For Nine Months Ended
-----------------------------------
June 30, June 30,
-------- --------
1999 1998
---- ----
<S> <C> <C>
Cash Flows from Financing Activities
- ------------------------------------
Net (decrease) increase in demand deposits, money
market, passbook accounts and advances by
borrowers for taxes and insurance $ 2,300,757 $ (2,680,914)
Net increase in certificates of deposit 16,479,740 19,790,552
Increase in checks outstanding in excess of bank balance 40,564 -
Net increase in borrowings 2,062,832 16,000,000
Dividends on stock (338,613) (306,870)
Stock repurchase (409,496) (53,754)
---------- ----------
Net cash provided by financing activities 20,135,784 32,749,014
---------- ----------
Decrease in cash and cash equivalents (6,036,583) (130,197)
Cash and cash equivalents at beginning of period 14,422,780 7,946,628
---------- ----------
Cash and cash equivalents at end of period $ 8,386,197 $ 7,816,431
========== ==========
The following is a Summary of Cash and Cash Equivalents:
- --------------------------------------------------------
Cash $ 835,111 $ 986,409
Interest bearing deposits in other banks 2,383,086 3,255,271
Federal funds sold 5,263,000 3,822,000
---------- ----------
Balance of cash items reflected on
Statement of Financial Condition 8,481,197 8,063,680
Less - certificates of deposit with original
maturities of more than three months
that are included in interest
bearing deposits in other banks 95,000 247,249
---------- ----------
Cash and cash equivalents reflected on the
Statement of Cash Flows $ 8,386,197 $ 7,816,431
========== ==========
Supplemental Disclosure of Cash Flow Information:
- -------------------------------------------------
Cash paid during the year for:
Interest $ 4,620,854 $ 3,245,570
========== ==========
Taxes $ 516,800 $ 538,851
========== ==========
Transfer from investment in and loans to joint ventures
to loans receivable $ 2,500,000 $ -
========== ==========
</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 nine months ended June 30, 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.
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 $7.3 million.
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.
<PAGE>
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
-------------------------------------------
Lutherville, Maryland
---------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
------------------------------------------------------
Note 3 - Investments Available for Sale
------------------------------
The amortized cost and fair values of investments available for
sale at June 30, 1999 and September 30, 1998 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
June 30, 1999
-------------
Equity investments $ 544,323 $ - $ 146,636 $ 397,688
Federal Home Loan
Mortgage Corporation
Bonds 3,249,031 - 164,499 3,084,532
Federal Home Loan
Bank - Bonds 17,493,341 - 853,139 16,640,202
---------- ----------- --------- ----------
$ 21,286,695 $ - $ 1,164,274 $ 20,122,422
========== =========== ========= ==========
September 30, 1998
------------------
Equity investments $ 727,448 $ - $ 165,823 $ 561,625
Federal Home Loan
Bank - Bonds 14,505,000 124,866 - 14,629,866
---------- ----------- --------- ----------
$ 15,232,448 $ 124,866 $ 165,823 $ 15,191,491
========== =========== ========= ==========
</TABLE>
Note 4 - 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
<PAGE>
WHG BANCSHARES CORPORATION AND SUBSIDIARIES
-------------------------------------------
Lutherville, Maryland
---------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
------------------------------------------------------
Note 4 - Earnings Per Share - Continued
------------------
relating to the calculations of net income per share of common stock
is summarized for the nine and three month periods ended June 30, as
follows:
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
June 30, 1999 June 30, 1998
----------------------------- ----------------------------
Basic Diluted Basic Diluted
----- ------- ----- -------
<S> <C> <C> <C> <C>
Net income $ 538,536 $ 538,536 $ 469,765 $ 469,765
Weighted average shares
outstanding 1,238,004 1,238,004 1,230,887 1,230,887
Diluted securities:
MSBP shares - - - 10,228
Options - - - 40,310
---------- ---------- --------- ----------
Adjusted weighted average
shares 1,238,004 1,238,004 1,230,887 1,281,425
Per share amount $ 0.44 $ 0.44 $ 0.38 $ 0.37
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, 1999 June 30, 1998
----------------------------- ----------------------------
Basic Diluted Basic Diluted
----- ------- ----- -------
<S> <C> <C> <C> <C>
Net income $ 227,312 $ 227,312 $ 197,045 $ 197,045
Weighted average shares
Outstanding 1,237,398 1,237,398 1,233,748 1,233,748
Diluted securities:
MSBP shares - - - 10,400
Options - - - 40,925
---------- ---------- --------- ----------
Adjusted weighted average
shares 1,237,398 1,237,398 1,233,748 1,285,073
Per share amount $ 0.18 $ 0.18 $ 0.16 $ 0.15
</TABLE>
Note 5 - Reclassification
----------------
Certain prior years' amounts have been reclassified to conform to
the current year's method of presentation.
<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
For the quarter ended June 30, 1999, the Company earned $227,000, or
$.18 diluted earnings per share, as compared to net earnings of $197,000, or
$.15 diluted earnings per share, for the comparative 1998 quarter. For the nine
months ended June 30, 1999, the Company earned $539,000, or $.44 diluted
earnings per share, as compared to net earnings of $470,000, or $.37 diluted
earnings per share, for the comparable 1998 period.
Financial Condition
Total assets of the Company were $153,064,000 as of June 30, 1999,
compared to $132,876,000 as of September 30, 1998, an increase of $20,188,000,
or 15.19%. The increase was primarily attributable to increases in investments
available for sale of $4,931,000, mortgage backed securities of $11,171,000. The
aforementioned increases were partially funded by a decrease in interest-bearing
deposits in other banks of $7,466,000 and Federal Home Loan Bank ("FHLB")
advances of $3,000,000. 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.
On April 1, 1999, Heritage Savings Bank, F.S.B. (the "Bank") paid $5.0
million in cash and assumed the remaining assets and liabilities of Bankers
Affiliate, Inc. ("BA"). Additionally, the Bank retired a $2,500,000 note to BA
following the purchase of the remaining interest of the affiliate company. 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 $7.3 million.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Financial Condition - Continued
At June 30, 1999, the Company's investment securities available for
sale portfolio totaled $20.1 million, or 13.1%, of the Company's total
consolidated assets. Pursuant to generally accepted accounting principles, such
securities are recorded at current market value and the change in net unrealized
gains or losses on such securities are excluded from current earnings and
reported net of income taxes as part of comprehensive income. At June 30, 1999
and September 30, 1998, due to increases in market rates, unrealized losses for
such securities were approximately $1.2 million and $166,000, respectively.
Because of interest rate volatility, the Company's accumulated other
comprehensive income (which is comprised solely of net unrealized holding gains
and losses) and stockholders' equity could materially fluctuate for each interim
period and year-end period. The majority of the unrealized losses resulted from
the Company's investment in FHLB bonds. See Note 3 to the consolidated financial
statements.
Total liabilities of the Company were $137,456,000 as of June 30, 1999,
compared to $116,634,000 as of September 30, 1998, an increase of $20,822,000 or
17.85%. The increase was primarily the result of increases in deposits,
primarily certificates of deposit, of $17,370,000, and borrowings of $2,063,000.
The Company's successful advertising campaign in 1998 for certificate of deposit
products contributed to the continued growth in deposit balances. During the
quarter ended June 30, 1999, the Bank borrowed an additional $3,000,000 in long
term FHLB advances. Management's strategy is to take advantage of the low costs
of funds and invest the proceeds in higher yielding investments.
Stockholders' equity was $15,607,000 as of June 30, 1999, compared to
$16,243,000 as of September 30 1998, a decrease of $636,000. The decrease was
the result of an aggregate $409,000 repurchase of the Company's stock, a
$689,000 increase in accumulated other comprehensive income, and dividends
declared totaling $339,000. The decrease was partially offset by net income for
the period of $539,000 and the allocation of shares to the Stock Based Benefit
and Bonus Plans of $263,782.
Results of Operations
Interest Income
Total interest income for the nine and three months ended June 30, 1999
was $7,505,000 and $2,666,000, respectively, compared to $6,065,000 and
$2,321,000 for the same periods in 1998, an increase of $1,440,000 and $345,000,
respectively. The increase for the nine months ended June 30, 1999 was primarily
due to increases of $15,577,000 and $11,872,000 in the average balance of
investment securities and mortgage backed securities, respectively. In addition,
the average balance of investment securities and mortgage backed securities
increased $3,322,000 and $11,076,000, respectively, for the three months ended
June 30, 1999. Offsetting such increases to interest income for the nine-month
and three month periods ended June 30, 1999 was a 22 and 21 basis point decrease
in the weighted average yield on interest-earning assets. The weighted average
yield on interest-earning assets was 7.08% and 7.14% for the nine and
three-month periods ended June 30, 1999, as compared to 7.30% and 7.35% for the
same periods in 1998.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Interest Expense
Total interest expense for the nine and three months ended June 30,
1999 was $4,657,000 and $1,661,000, respectively, compared to $3,246,000 and
$1,306,000 for the same respective periods in 1998, an increase of $1,411,000
and $355,000. The increases resulted from the rise in the average dollar amount
of time deposits for the nine month and three month periods ended June 30, 1999
of $23,738,000 and $23,575,000, respectively. Interest expense also increased
following the rise in the average dollar amount of borrowings, principally
Federal Home Loan Bank advances, of $10,554,000 and $3,606,000, respectively,
for the nine month and three month periods ended June 30, 1999.
Contributing to the increase in interest expense for the respective
nine month and three month periods was an increase in cost of funds of 24 and 16
basis points. The weighted average rates paid on interest-bearing liabilities
was 4.84% for both the nine and three months ended June 30, 1999, respectively,
as compared to 4.60% and 4.68% for the same periods in 1998.
Provision for Loan Losses
The provision for loan losses for the nine and three month periods
ended June 30, 1999 was $45,000 and $15,000, respectively, as compared to
$180,000 and $50,000 for the same respective periods in 1998. At June 30, 1999
and 1998, non-performing loans were $299,000 and $857,000, respectively.
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 June 30, 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.
Other Non-Interest Income
Other income for the nine and three months ended June 30, 1999 was
$183,000 and $36,000, respectively, compared to $214,000 and $80,000 for the
corresponding periods in 1998. The decreases of $31,000 and $44,000 for the
respective nine and three month periods were primarily due to the absence of
commissions and fees from Mapleleaf Mortgage Corporation ("MMC") which ceased
operations during the quarter ended March 31, 1999.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Non-Interest Expense
Total non-interest expense for the nine months ended June 30, 1999 was
$2,094,000, compared to $2,073,000 for the same period in 1998, an increase of
$21,000 or 1.01%.
Total non-interest expense for the three months ended June 30, 1999 was
$671,000, compared to $724,000 for the same period in 1998, a decrease of
$53,000 or 7.32%. Advertising expense decreased $16,000 for the quarter due to
an aggressive advertising campaign for certificates of deposit during the prior
fiscal year. Professional fees decreased $10,000 due to prior year fees related
to strategic planning that were not incurred in the current year. Other expenses
decreased $31,000 as the result of return check losses of $24,000 experienced in
the prior year. The Bank continues to pursue legal action against the
individuals for repayment.
Provision for Income Taxes
The provision for income taxes increased $42,000 and $4,000 for the
nine and three months ended June 30, 1999, as compared to the same periods in
1998. The increases were the result of an increase in net income.
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. The Company
has completed all phases of its Y2K preparedness program. After a thorough
review and assessment of the Company's computer operations, all of its computers
were replaced with Y2K compliant equipment and necessary software upgrades were
made. One hundred percent of the new equipment and software packages have been
tested and found to be Y2K compliant. The Company has coordinated with its
vendors and service providers to assure their readiness for Y2K. All testing in
this area has been completed. The Company's contingency Plan has been developed,
approved, and tested to assure uninterrupted service to its customers. Costs
have been incurred due to the replacement of non-compliant teller hardware and
software. As expected, the related overall costs have not been material in any
single year. The Company has determined that the cost associated with addressing
Y2K concerns should not exceed $190,000, employee time not included, which
includes capital expenditures. At June 30, 1999 approximately $184,000 has been
expended. 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
None.
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: August 11, 1999 By: /s/Peggy J. Stewart
--------------------------------------
Peggy J. Stewart
President and Chief Executive Officer
(duly authorized officer)
Date: August 11, 1999 By: /s/Robin L. Taylor
--------------------------------------
Robin L. Taylor
Controller (chief accounting officer)
<TABLE> <S> <C>
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<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>
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