As filed with the Securities and Exchange Commission on June 17, 1997
Registration No. 333-_______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
WSB Holding Company
(Exact name of Small Business Issuer as specified in charter)
Pennsylvania 6035 Requested
- ---------------------------- ------------------------- -------------------
(State or other jurisdiction (Primary SIC No.) (I.R.S. Employer
of incorporation or Identification No.)
organization)
807 Middle St., Pittsburgh, Pennsylvania 15212
(412) 231-7297
- --------------------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code,
of principal executive offices and principal place of business)
Mr. Robert Neudorfer
President and Chief Executive Officer
WSB Holding Company
807 Middle St., Pittsburgh, Pennsylvania 15212
(412) 231-7297
- --------------------------------------------------------------------------------
(Name, address and telephone number of agent for service)
Please send copies of all communications to:
Samuel J. Malizia, Esq.
Gregory J. Rubis, Esq.
Felicia C. Battista, Esq.
MALIZIA, SPIDI, SLOANE & FISCH, P.C.
1301 K Street, N.W., Suite 700 East, Washington, D.C. 20005
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
Title of Dollar Proposed Proposed Amount
Each Class of Amount Maximum Maximum Aggregate of
Securities to be Offering Price Offering Registration
To Be Registered Registered Per Unit Price(1) Fee
- --------------------------------------------------------------------------------
Common Stock,
$.10 Par Value $3,306,000 $10.00 $3,306,000 $1,001.82
- --------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee.
<PAGE>
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS
Up to 287,500 Shares of Common Stock
WSB HOLDING COMPANY
807 Middle St.
Pittsburgh, Pennsylvania 15212
(412) 231-7297
================================================================================
Workingmens Savings Bank, FSB is converting from the mutual form to the
stock form of organization. As part of the conversion, Workingmens Savings Bank,
FSB will become Workingmens Bank, a wholly owned subsidiary of WSB Holding
Company. WSB Holding Company was formed in June 1997 and upon consummation of
the conversion will own all of the shares of Workingmens Bank. The common stock
of WSB Holding Company is being offered to the public in accordance with a Plan
of Conversion. The Plan of Conversion must be approved by a majority of the
votes eligible to be cast by members of Workingmens Savings Bank, FSB and by the
Office of Thrift Supervision. No common stock will be sold if Workingmens
Savings Bank, FSB does not receive these approvals and WSB Holding Company does
not receive orders for at least the minimum number of shares.
================================================================================
TERMS OF OFFERING
An independent appraiser has estimated the market value of the
converted Workingmens Savings Bank, FSB to be between $2,125,000 to $2,875,000,
which establishes the number of shares to be offered. Subject to Office of
Thrift Supervision approval, up to 330,600 shares, an additional 15% above the
maximum number of shares, may be offered. Based on these estimates, we are
making the following offering of shares of common stock:
o Price Per Share: $10
o Number of Shares
Minimum/Maximum: 212,500 to 287,500
o Underwriting Commissions and Expenses
Minimum/Maximum: $280,000
o Net Proceeds to WSB Holding Company
Minimum/Maximum: $1,845,000 to $2,595,000
o Net Proceeds Per Share $8.68 to $9.03
Please refer to Risk Factors beginning on page 1 of this document.
These securities are not deposits or accounts and are not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
Neither the Securities and Exchange Commission, Office of Thrift Supervision,
nor any state securities regulator has approved or disapproved these securities
or determined if this prospectus is accurate or complete. Any representation to
the contrary is a criminal offense.
For information on how to subscribe, call the Stock Information Center at
(412) __________
TRIDENT SECURITIES, INC.
__________ ____, 1997
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Questions and Answers About the Stock Offering................................................... (i)
Summary.......................................................................................... (iii)
Selected Financial and Other Data................................................................ (vi)
Risk Factors..................................................................................... 1
Proposed Purchases by Directors and Officers..................................................... 3
Use of Proceeds.................................................................................. 4
Dividends........................................................................................ 4
Market for the Common Stock...................................................................... 5
Capitalization................................................................................... 6
Pro Forma Data................................................................................... 7
Historical and Pro Forma Capital Compliance...................................................... 12
The Conversion................................................................................... 13
Consolidated Statements of Income of
Workingmens Savings Bank, FSB.................................................................. 25
Management's Discussion and Analysis of
Financial Condition and Results of Operations.................................................. 26
Business of WSB Holding Company.................................................................. 36
Business of Workingmens Savings Bank, FSB........................................................ 37
Regulation....................................................................................... 53
Taxation......................................................................................... 58
Management of WSB Holding Company................................................................ 60
Management of Workingmens Savings Bank, FSB...................................................... 60
Restrictions on Acquisitions of WSB Holding Company.............................................. 65
Description of Capital Stock..................................................................... 68
Legal and Tax Matters............................................................................ 70
Experts.......................................................................................... 70
Registration Requirements........................................................................ 70
Where You Can Find Additional Information........................................................ 71
Index to Consolidated Financial Statements of
Workingmens Savings Bank, FSB.................................................................. 72
</TABLE>
This document contains forward-looking statements which involve risks
and uncertainties. WSB Holding Company's actual results may differ significantly
from the results discussed in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed in
"Risk Factors" beginning on page 1 of this document.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
QUESTIONS AND ANSWERS ABOUT THE STOCK OFFERING
Q: How will I benefit from the Offering?
A: The offering means that you will have the chance to become a
stockholder of our newly formed holding company, WSB Holding Company
which will allow you to share in our future as a federal stock savings
bank. The stock offering will increase our capital and funds for
lending and investment activities. As a stock savings institution
operating through a holding company structure, we will have greater
flexibility for investments.
Q: How do I purchase the stock?
A: You must complete and return the Stock Order Form to us together with
your payment, on or before __________ ____, 1997. See pages __ to __.
Q: How much stock may I purchase?
A: The minimum purchase is 25 shares (or $250). The maximum purchase is
7,500 shares (or $75,000), for any individual person or persons
ordering through a single account. In addition, no person, together
with associates of and persons acting in concert with such persons, may
purchase more than 12,500 shares. However, no persons together with
associates of and persons acting in concert with such persons, may
purchase more than 5% of the amount of stock sold (i.e. 10,625 shares
at the minimum of 212,500 shares). We may decrease or increase the
maximum purchase limitation without notifying you. In the event that
the offering is oversubscribed, shares will be allocated based upon a
formula. See pages 22 to 23.
Q: What happens if there are not enough shares to fill all orders?
A: You might not receive any or all of the shares you want to purchase. If
there is an oversubscription, the stock will be offered on a priority
basis to the following persons:
o Persons who had a deposit account of at least $50 with us on
March 31, 1996. Any remaining shares will be offered to:
o Tax Qualified Employee Plans, including the employee stock
ownership plan of Workingmens Bank. Any remaining shares will
be offered to:
o Persons who had a deposit account of at least $50 with us on
June 30, 1997. Any remaining shares will be offered to:
o Other persons entitled to vote on the approval of the
Conversion.
If the above persons do not subscribe for all of the shares, the remaining
shares may be offered through Trident Securities, Inc. ("Trident") to certain
persons in a public offering. We have the right to reject any stock order in the
public offering.
- --------------------------------------------------------------------------------
(i)
<PAGE>
- --------------------------------------------------------------------------------
Q: What particular factors should I consider when deciding whether to buy
the stock?
A: Because of the small size of the offering, there is not expected to be
an active market for the shares, which may make it difficult to resell
any shares you may own. Also, before you decide to purchase stock, you
should also read the Risk Factors section on pages 1-3 of this
document.
Q: As a depositor or borrower member of Workingmens Savings Bank, FSB,
what will happen if I do not purchase any stock?
A: You presently have voting rights while we are in the mutual form;
however, once we convert, voting rights will be held by stockholders.
You are not required to purchase stock. Your deposit account,
certificate accounts and any loans you may have with us will be not be
affected. See pages 14 to 16.
Q: Who can help answer any other questions I may have about the stock
offering?
A: In order to make an informed investment decision, you should read this
entire document. This section highlights selected information and may
not contain all of the information that is important to you. In
addition, you should contact:
Stock Information Center
WSB Holding Company
5035 Curry Road
Pittsburgh, Pennsylvania
(412) __________
- --------------------------------------------------------------------------------
(ii)
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY
This summary highlights selected information from this document and may
not contain all the information that is important to you. To understand the
stock offering fully, you should read carefully this entire document, including
the consolidated financial statements and the notes to the consolidated
financial statements of Workingmens Savings Bank, FSB. References is this
document to "we", "us", and "our" refer to Workingmens Savings Bank, FSB or
Workingmens Bank after the Conversion. In certain instances where appropriate,
"us" or "our" refers collectively to WSB Holding Company and Workingmens Savings
Bank, FSB including Workingmens Bank. References in this document to "WSB"
refers to WSB Holding Company
The Companies
WSB Holding Company
807 Middle St.
Pittsburgh, Pennsylvania 37643-3378
(412) 231-7297
WSB Holding Company is not an operating company and has not engaged in
any significant business to date. It was formed in June 1997 as a
Pennsylvania-chartered corporation to be the holding company for Workingmens
Savings Bank, FSB. The holding company structure will provide greater
flexibility in terms of operations, expansion and diversification. See page 36.
Workingmens Savings Bank, FSB
807 Middle St.
Pittsburgh, Pennsylvania 37643-3378
(412) 231-7297
Workingmens Savings Bank, FSB began operations in 1881 under the name,
"Workingmens Premium and Loan Association of Allegheny County." We are a
community and customer oriented federal mutual savings bank. We provide
financial services to individuals, families and small business. Historically, we
have emphasized residential mortgage lending, primarily originating one- to
four-family mortgage loans. At March 31, 1997 we had total assets of $33.1
million, deposits of $27.9 million, and total equity of $2.0 million. After the
completion of the conversion, we will change our name to "Workingmens Bank." See
pages 37 to 52.
The Stock Offering
Between 212,500 and 287,500 shares of common stock are being offered at
$10 per share. As a result of changes in market and financial conditions prior
to completion of the Conversion or to fill the order of our employee stock
ownership plan and subject to the Office of Thrift Supervision approval, the
offering may be increased to 330,600 shares without further notice to you. In
such event, you will not have the opportunity to change or cancel any stock
order previously delivered to us.
Stock Purchases
The shares of common stock will be offered on the basis of priorities.
As a depositor or borrower member, you will receive subscription rights to
purchase the shares. The shares will be offered first in a Subscription Offering
and any remaining shares will be offered in a Public Offering. See pages __ to
__.
- --------------------------------------------------------------------------------
(iii)
<PAGE>
- --------------------------------------------------------------------------------
Subscription Rights
You may not sell or assign your subscription rights. Any transfer of
subscription rights is prohibited by law.
The Offering Range and Determination of the Price Per Share
The offering range is based on an independent appraisal of the pro
forma market value of the common stock by Ferguson & Company, ("Ferguson"), an
appraisal firm experienced in appraisals of savings institutions. Ferguson has
estimated, that in its opinion as of June 6, 1997 the aggregate pro forma market
value of the common stock ranged between $2,125,000 and $2,875,000 (with a
mid-point of $2,500,000). The pro forma market value of the shares is our market
value after giving effect to the sale of shares in this offering. The appraisal
was based in part upon our financial condition and operations and the effect of
the additional capital raised by the sale of common stock in this offering. The
$10.00 price per share
was determined by our board of directors and is the price most commonly
used in stock offerings involving conversions of mutual savings institutions.
The independent appraisal will be updated prior to the consummation of the
Conversion. If the pro forma market value of the Common Stock is either below
$2,125,000 or above $3,306,000, you will be notified and will have the
opportunity to modify or cancel your order. See pages 21 to 22.
Termination of the Offering
The Subscription Offering will terminate at 12:00 p.m., Eastern Time,
on __________ ____, 1997. The Public Offering, if any, may terminate at any time
without notice but no later than __________ ____, 1997, without approval by the
OTS.
Benefits to Management from the Offering
Our full-time employees will participate in the offering through
individual purchases and purchases of stock by our employee stock ownership
plan, which is a form of retirement plan. We also intend to implement a
restricted stock plan and a stock option plan following completion of the
Conversion, which will benefit the President and other officers and directors.
However, the restricted stock plan and stock option plan may not be adopted
until after the Conversion and are subject to stockholder approval and
compliance with OTS regulations. See pages 63 to 65.
Use of the Proceeds Raised from the Sale of Common Stock
WSB Holding Company will use approximately 50% of the net proceeds from
the stock offerings to purchase all the common stock to be issued by us in the
Conversion and to make a loan to our employee stock ownership plan to fund its
purchase of stock in the Conversion. The balance of the funds will be retained
as WSB Holding Company's initial capitalization. See page 4.
Dividends
WSB does not expect to establish a cash dividend policy during the
first year following the Conversion.
- --------------------------------------------------------------------------------
(iv)
<PAGE>
- --------------------------------------------------------------------------------
Market for the Common Stock
Since the size of the offering is relatively small, it is unlikely that
an active and liquid trading market for the trading market will develop and be
maintained. Investors should have a long-term investment intent. Persons
purchasing shares may not be able to sell their shares when they desire or sell
them at a price equal to or above $10.00. See page 5.
Important Risks in Owning WSB Holding Company's Common Stock
Before you decide to purchase stock in the offering, you should read
the Risk Factors section on pages 1-3 of this document.
- --------------------------------------------------------------------------------
(v)
<PAGE>
- --------------------------------------------------------------------------------
SELECTED FINANCIAL AND OTHER DATA
We are providing the following summary financial information about us
for your benefit. This information is derived from our 1996 and 1995 audited
financial statements as well as our unaudited period March 31, 1997, as shown
below. The following information is only a summary and you should read it in
conjunction with our consolidated (including consolidated data from operations
of our subsidiary) financial statements and notes beginning on page F-1.
Selected Financial and Other Data
<TABLE>
<CAPTION>
At March 31, At June 30,
------------------ -----------------------------------------
1997 1996 1995
------------------ ----------------- ---------------------
(Dollars in Thousands)
<S> <C> <C> <C>
Total Amount of:
Total assets.............................. $33,127 $30,579 $28,282
Loans receivable, net..................... 14,125 13,629 12,798
Securities held-to maturity .............. 12,989 10,892 8,941
Federal home loan bank advances........... 3,000 -- --
Securities available for sale............. 2,758 3,318 1,402
Deposits.................................. 27,860 28,157 25,779
Retained earnings......................... 2,020 2,091 2,101
Number of:
Deposit accounts.......................... 4,791 4,732 4,358
Full service offices...................... 2 2 2
</TABLE>
- --------------------------------------------------------------------------------
(vi)
<PAGE>
- --------------------------------------------------------------------------------
Summary of Operations
<TABLE>
<CAPTION>
For the Nine Months Ended For the Years Ended
March 31, June 30,
----------------------------------- ----------------------------------
1997 1996 1996 1995
---------------- ---------------- --------------- ----------------
(In Thousands)
<S> <C> <C> <C> <C>
Interest and dividend income........... $1,675 $1,528 $2,053 $1,805
Interest expense....................... 990 940 1,257 1,039
----- ------ ----- -----
Net interest income.................... 685 588 796 766
Provision for loan losses.............. 128 13 35 19
------ ------ ------ ------
Net interest income after
provision for loan losses............ 557 575 761 747
Noninterest income..................... 65 65 82 114
Noninterest expense.................... 774(1) 603 798 700
----- ----- ----- -----
Income before income taxes............. (152) 37 45 161
Income tax expense (benefit)........... (77) 6 10 11
------ ----- ----- -----
Net income (loss)...................... $ (75) $ 31 $ 35 $ 150
====== ====== ====== ======
</TABLE>
- --------------------
(1) Includes a non-recurring expense of $161 for the nine months ended
March 31, 1997 for a one-time deposit premium to recapitalize the SAIF.
Key Operating Ratios
<TABLE>
<CAPTION>
At or For the At and For the
Nine Months Ended Years Ended
March 31, June 30,
----------------------------- ---------------------------
1997(1) 1996(1) 1996 1995
------------ -------------- ------------ ----------
<S> <C> <C> <C> <C>
Performance Ratios:
Return on average assets
(net income divided by average total assets)....... (0.32)% 0.14% 0.12% 0.55%
Return on average equity
(net income divided by average equity)............. (4.88) 1.96 1.65 7.42
Ratio of average equity to average total assets
(average equity divided by average total assets)... 6.45 7.12 7.12 7.48
Equity to assets at period end....................... 6.10 6.82 6.84 7.43
Interest rate spread................................. 2.92 2.57 2.59 2.61
Net interest margin.................................. 3.02 2.78 2.81 2.90
Average interest-earning assets to average
interest-bearing liabilities....................... 102.43 104.71 104.98 107.20
Net interest income after provision for loan losses,
to total noninterest expense....................... 71.85 95.20 95.38 106.77
Asset Quality Ratios:
Non-performing loans to total assets................. 2.34 2.31 2.38 2.55
Non-performing assets to total assets................ 2.34 2.31 2.38 2.91
Non-performing loans to total loans.................. 5.42 5.30 5.30 5.60
Allowance for loan losses to total loans
at end of period................................... 1.40 0.48 0.55 0.69
Allowance for loan losses to non-performing
loans.............................................. 25.86 8.97 10.41 12.33
</TABLE>
- -----------------
(1) Ratios for nine month periods are stated on an annualized basis. Such
ratios and results are not necessarily indicative of results that may
be expected for the full year.
- --------------------------------------------------------------------------------
(vii)
<PAGE>
RISK FACTORS
In addition to the other information in this document, you should
consider carefully the following risk factors in evaluating an investment in our
common stock.
Lack of Active Market for Common Stock
Due to the small size of the offering, it is highly unlikely that an
active trading market will develop and be maintained. If an active market does
not develop, you may not be able to sell your shares promptly or perhaps at all,
or sell your shares at a price equal to or above the price you paid for the
shares. The common stock may not be appropriate as a short-term investment. See
"Market for the Common Stock."
Potential Impact of Changes in Interest Rates and the Current Interest Rate
Environment
Our ability to make a profit, like that of most financial institutions,
is substantially dependent on our net interest income, which is the difference
between the interest income we earn on our interest-earning assets (such as
mortgage loans and investment securities) and the interest expense we pay on our
interest-bearing liabilities (such as deposits and borrowings). All of our
mortgage loans have rates of interest which are fixed for the term of the loan
("fixed rate") and are originated with terms of 15 years, while deposit accounts
have significantly shorter terms to maturity. Because our interest-earning
assets generally have fixed rates of interest and have longer effective
maturities than our interest-bearing liabilities, the yield on our
interest-earning assets generally will adjust more slowly to changes in interest
rates than the cost of our interest-bearing liabilities. As a result, our net
interest income will be adversely affected by material and prolonged increases
in interest rates. In addition, rising interest rates may adversely affect our
earnings because there might be a lack of customer demand for loans. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Asset/Liability Management."
Changes in interest rates also can affect the average life of loans and
mortgage-backed securities. Historically lower interest rates in recent periods
have resulted in increased prepayments of loans and mortgage-backed securities,
as borrowers refinanced their mortgages in order to reduce their borrowing cost.
Under these circumstances, we are subject to reinvestment risk to the extent
that we are not able to reinvest such prepayments at rates which are comparable
to the rates on the prepaid loans or securities.
Asset Quality
At March 31, 1997, we had loans totalling $769,000 in our loan
portfolio that were classified as nonperforming loans. Payment of $736,000 is
due from one borrower on June 30, 1997. In the beginning of June 1997, certain
circumstances came to our attention that the borrower might have difficulty in
repaying the loans on June 30, 1997. If payment is not received, we will begin
foreclosure on the loan in July 1997 and the loans will be classified as other
real estate owned. This borrower held 16 individual loans, that ranged from
$30,000 to $100,000, and were secured by one- to four-family residences in the
city of Pittsburgh. While we believe our loan loss reserve was adequate, there
can be no assurance that our allowance for loan loss will be adequate to cover
all losses that we might incur in the future. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Results of
Operations for the Nine Months Ended March 31, 1997 and 1996 - Provision for
Loan Losses."
1
<PAGE>
Decreased Return on Average Equity and Increased Expenses Immediately After
Conversion
As a result of the Conversion, our equity will increase substantially.
Our expenses also will increase because of the costs associated with our
employee stock ownership plan, restricted stock ownership plan, and the costs of
being a public company. Because of the increases in our equity and expenses, our
return on equity may decrease as compared to our performance in previous years.
Initially, we intend to invest the net proceeds in short term investments which
generally have lower yields than residential mortgage loans. A lower return on
equity could reduce the trading price of our shares. See "Use of Proceeds."
Anti-Takeover Provisions and Statutory Provisions That Could Discourage Hostile
Acquisitions of Control
Provisions in WSB's articles of incorporation and bylaws, the general
corporation law of the Commonwealth of Pennsylvania, and certain federal
regulations may make it difficult and expensive to pursue a tender offer, change
in control or takeover attempt which we oppose. As a result, stockholders who
might desire to participate in such a transaction may not have an opportunity to
do so. Such provisions will also render the removal of the current board of
directors or management of WSB more difficult. In addition, these provisions may
reduce the trading price of our stock. These provisions include: restrictions on
the acquisition of WSB's equity securities and limitations on voting rights; the
classification of the terms of the members of the board of directors; certain
provisions relating to the meeting of stockholders; denial of cumulative voting
by stockholders in the election of directors; the issuance of preferred stock
and additional shares of common stock without shareholder approval; and
supermajority provisions for the approval of certain business combinations. See
"Restrictions on Acquisitions of WSB Holding Company"
Possible Voting Control by Directors and Officers
The proposed purchases of the common stock by our directors, officers
and employee stock ownership plan, as well as the potential acquisition of the
common stock through the stock option plan and restricted stock plan, could make
it difficult to obtain majority support for stockholder proposals which are
opposed by us. In addition, the voting of those shares could enable us to block
the approval of transactions (i.e., business combinations and amendment to our
articles of incorporation and bylaws) requiring the approval of 80% of the
stockholders under the WSB's articles of incorporation. See "Management of
Workingmens Savings Bank, FSB -- Executive Compensation," "Description of
Capital Stock," and "Restrictions on Acquisitions of WSB Holding Company"
Possible Dilutive Effect of RSP and Stock Options
If the Conversion is completed and shareholders approve the restricted
stock plan and stock option plan, we will issue stock to our officers and
directors through these plans. If the shares for the restricted stock plan and
stock options are issued from our authorized but unissued stock, your ownership
percentage could be cumulatively diluted by up to approximately 12.3% and the
trading price of our stock may be reduced. See "Pro Forma Data," "Management of
Workingmens Savings Bank, FSB -- Proposed Future Stock Benefit Plans," and "--
Restricted Stock Plan."
2
<PAGE>
Financial Institution Regulation and Future of the Thrift Industry
We are subject to extensive regulation, supervision, and examination by the
OTS and FDIC. Bills have been introduced in Congress that could consolidate the
OTS with the Office of the Comptroller of the Currency ("OCC") and require the
Bank to adopt a commercial charter. If we become a commercial bank, our
investment authority and the ability of WSB to engage in diversified activities
may be limited, which could affect our value and profitability. See
"Regulation."
Restrictions on Repurchase of Shares
Generally, during the first year following the Conversion, WSB may not
repurchase its shares. During each of the second and third years following the
Conversion, WSB may repurchase up to 5% of its outstanding shares. During those
periods, if we decide that additional repurchases would be a good use of funds,
we would not be able to do so, without obtaining OTS approval. There is no
assurance that OTS approval would be given. See "The Conversion -- Restrictions
on Repurchase of Stock."
PROPOSED PURCHASES BY DIRECTORS AND OFFICERS
The following table sets forth the approximate purchases of common stock by
each director and executive officer and their associates in the Conversion. All
shares will be purchased for investment purposes and not for purposes of resale.
The table assumes that 250,000 shares (the midpoint of the estimated valuation
range, "EVR") of the common stock will be sold at $10.00 per share and that
sufficient shares will be available to satisfy subscriptions in all categories.
However, officers and directors and their associates may not buy more than 35%
of the total amount of shares sold in the Conversion. Aggregate Total Price of
Percent Shares Shares of Shares Name Position Purchased(1) Purchased(1)
Purchased(1)
<TABLE>
<CAPTION>
Aggregate
Total Price of Percent
Shares Shares of Shares
Name Position Purchased(1) Purchased(1) Purchased(1)
- ---- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Joseph J. Manfred Chairman and
Director 7,500 $ 75,000 3.0%
Robert Neudorfer President and
Director 12,500 125,000 5.0%
Stanford H. Rosenberg Vice-President and
Director 12,500 125,000 5.0%
Johanna C. Guehl Secretary and
Director 12,500 125,000 5.0%
John P. Mueller Director 12,500 125,000 5.0%
John T. Ringland Director 12,500 125,000 5.0%
Ronald W. Moreschi Vice-President and
Treasurer 7,500 75,000 3.0%
----- ------ ---
77,500 $775,000 31.0%
====== ======== ====
</TABLE>
- --------------------
(1) Does not include shares purchased by the ESOP.
3
<PAGE>
USE OF PROCEEDS
WSB will use 50% of the net proceeds from the offering to purchase all
of the capital stock we will issue in connection with the Conversion. A portion
of the net proceeds to be retained by WSB will be loaned to our employee stock
plan to fund its purchase of up to 8% of the shares sold in the Conversion. On a
short-term basis, the balance of the net proceeds retained by WSB initially will
be invested in short-term investments. Although there are no current plans, the
net proceeds subsequently may be used to diversify activities. The net proceeds
may also serve as a source of funds for the payment of dividends to stockholders
or for the repurchase of the shares. A portion of the net proceeds may also be
used to fund the purchase of 4% of the shares for a restricted stock plan (the
RSP) which is anticipated to be adopted following the Conversion. See "Pro Forma
Data."
The funds we received from the sale of our capital stock to WSB will be
added to our general funds and be used for general corporate purposes including:
(i) investment in mortgages and other loans, (ii) U.S. Government and federal
agency securities, (iii) mortgage-backed securities, (iv) funding loan
commitments or (v) repaying FHLB advances. However, initially we intend to
invest the net proceeds in short-term investments until we can deploy the
proceeds into higher yielding loans. The funds added to our capital will further
strengthen our capital position.
If additional benefit plans, such as the RSP, are adopted within one
year and our tangible capital is not equal to or greater than 10% of total
assets at the time, WSB will provide additional capital to us so that tangible
capital equals 10% of total assets to comply with OTS rules requiring such
capital prior to implementation of the RSP. See footnote (1) under "Historical
and Pro Forma Capital Compliance."
The net proceeds may vary because the total expenses of the Conversion
may be more or less than those estimated. We expect our estimated expenses to be
$280,000. Our estimated net proceeds will range from $1,845,000 to $2,595,000
(or up to $3,026,000 in the event the maximum of the estimated valuation range
is increased to $3,306,000). See "Pro Forma Data." The net proceeds will also
vary if expenses are different or if the number of shares to be issued in the
Conversion is adjusted to reflect a change in our estimated pro forma market
value. Payments for shares made through withdrawals from existing deposit
accounts with us will not result in the receipt of new funds for investment by
us but will result in a reduction of our liabilities and interest expense as
funds are transferred from interest-bearing certificates or accounts.
DIVIDENDS
Upon Conversion, WSB's board of directors will have the authority to
declare dividends on the shares, subject to statutory and regulatory
requirements. WSB does not expect to establish a cash dividend policy during the
first year after the Conversion. Declarations of dividends by the board of
directors will depend upon a number of factors, including: (i) the amount of the
net proceeds retained by WSB in the Conversion, (ii) investment opportunities
available, (iii) capital requirements, (iv) regulatory limitations, (v) results
of operations and financial condition, (vi) tax considerations, and (vii)
general economic conditions. Upon review of such considerations, the board may
authorize future dividends if it deems such payment appropriate and in
compliance with applicable law and regulation. For a period of one year
following the completion of the Conversion, we will not pay any dividends that
would be construed as a return of capital nor take any actions to pursue or
propose such dividends. In addition, there can be no assurance that regular or
special dividends will be paid, or, if paid, will continue to be paid. See
"Historical and Pro Forma Capital Compliance," "The Conversion -- Effects
4
<PAGE>
of Conversion to Stock Form on Savers and Borrowers of Workingmens Savings Bank,
FSB -- Liquidation Account" and "Regulation -- Dividend and Other Capital
Distribution Limitations."
WSB is not subject to OTS regulatory restrictions on the payment of
dividends to its stockholders although the source of such dividends will be
dependent in part upon the receipt of dividends from us. WSB is subject,
however, to the requirements of Pennsylvania law, which generally limit the
payment of dividends to amounts that will not affect the ability of WSB, after
the dividend has been distributed, to pay its debts in the ordinary course of
business.
In addition to the foregoing, the portion of our earnings which has
been appropriated for bad debt reserves and deducted for federal income tax
purposes cannot be used by us to pay cash dividends to WSB without the payment
of federal income taxes by us at the then current income tax rate on the amount
deemed distributed, which would include the amount of any federal income taxes
attributable to the distribution. See "Taxation -- Federal Taxation" and Note J
to the Consolidated Financial Statements. WSB does not contemplate any
distribution by us that would result in a recapture of our bad debt reserve or
otherwise create federal tax liabilities.
MARKET FOR THE COMMON STOCK
As a newly organized company, WSB has never issued capital stock, and
consequently there is no established market for the common stock. Following the
completion of the offering, it is anticipated that the common stock will be
traded on the over-the-counter market with quotations available through the OTC
Electronic Bulletin Board. Trident Securities is expected to make a market in
the common stock. Making a market may include the solicitation of potential
buyers and sellers in order to match buy and sell orders. However, Trident
Securities will not be subject to any obligation with respect to such efforts.
If the common stock cannot be quoted and traded on the OTC Bulletin Board it is
expected that the transactions in the common stock will be reported in the pink
sheets of the National Quotation Bureau, Inc.
The development of an active trading market depends on the existence of
willing buyers and sellers. Due to the small size of the offering, it is highly
unlikely that an active trading market will develop and be maintained. You could
have difficulty disposing of your shares and you should not view the shares as a
short-term investment. You may not be able to sell your shares at a price equal
to or above the price you paid for the shares.
5
<PAGE>
CAPITALIZATION
The following table presents, as of March 31, 1997, our historical
capitalization and the consolidated capitalization of WSB after giving effect to
the Conversion and the other assumptions set forth below and under "Pro Forma
Data," based upon the sale of shares at the minimum, midpoint, maximum, and 15%
above the maximum of the EVR at a price of $10.00 per share:
<TABLE>
<CAPTION>
Pro Forma Consolidated Capitalization
Based on the Sale of (2)(3)
-----------------------------------------------------------------------------------
Historical 212,500 250,000 287,500 330,600
Capitalization Shares at Shares at Shares at Shares At
at March 31, $10.00 $10.00 $10.00 $10.00
1997 Per Share Per Share Per Share Per Share
------ --------- --------- --------- ---------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Deposits(1) .................................. $27,860 $27,860 $27,860 $27,860 $27,860
Other Borrowings.............................. 3,000 3,000 3,000 3,000 3,000
------- ------- ------- ------- -------
Total deposits and other borrowings......... $30,860 $30,860 $30,860 $30,860 $30,860
====== ====== ====== ====== ======
Stockholders' Equity:
Preferred Stock, $.10 par value per share,
1,000,000 shares authorized; none to be
issued..................................... $ - $ - $ - $ - $ -
Common Stock, $.10 par value, 4,000,000
shares authorized; total shares to be
issued as reflected........................ - 21 25 29 33
Additional paid in capital.................... - 1,824 2,195 2,566 2,994
Stockholders' equity(4)..................... 2,020 2,020 2,020 2,020 2,020
Less:
Common Stock acquired by ESOP............... - (170) (200) (230) (265)
Common Stock acquired by RSP................ - (85) (100) (115) (132)
------ ------ ------ ------ -----
Total stockholders' equity.................... $ 2,020 $ 3,610 $ 3,940 $ 4,270 $ 4,650
====== ====== ====== ====== ======
</TABLE>
- ---------------------
(1) Excludes accrued interest payable on deposits. Withdrawals from savings
accounts for the purchase of stock have not been reflected in these
adjustments. Any withdrawals will reduce pro forma capitalization by
the amount of such withdrawals.
(2) Does not reflect the increase in the number of shares of common stock
after the Conversion in the event of implementation of the Option Plan
or RSP. See "Management of Workingmens Savings Bank, FSB - Proposed
Future Stock Benefit Plans -- Stock Option Plan" and "-- Restricted
Stock Plan."
(3) Assumes that 8% and 4% of the shares issued in the Conversion will be
purchased by the ESOP and RSP, respectively. No shares will be
purchased by the RSP in the Conversion. It is assumed on a pro forma
basis that the RSP will be adopted by the board of directors, approved
by stockholders of WSB, and reviewed by the OTS. It is assumed that the
RSP will purchase common stock in the open market within one year of
the Conversion in order to give an indication of its effect on
capitalization. The pro forma presentation does not show the impact of:
(a) results of operations after the Conversion, (b) changing market
prices of shares of common stock after the Conversion, or (c) a smaller
than 4% or 8% purchase by the RSP or ESOP, respectively. Assumes that
the funds used to acquire the ESOP shares will be borrowed from WSB for
a ten year term at the prime rate as published in The Wall Street
Journal. For an estimate of the impact of the ESOP on earnings, see
"Pro Forma Data." The Bank intends to make contributions to the ESOP
sufficient to service and ultimately retire its debt. The amount to be
acquired by the ESOP and RSP is reflected as a reduction of
stockholders' equity. The issuance of authorized but unissued shares
for the RSP in an amount equal to 4% of the outstanding shares of
common stock will have the effect of diluting existing stockholders'
interests by 3.9%. There can be no assurance that stockholder approval
of the RSP will be obtained. See "Management of Workingmens Savings
Bank, FSB - Proposed Future Stock Benefit Plans - Restricted Stock
Plan."
(4) The equity of the Bank will be substantially restricted after the
Conversion. See "Dividends," "Regulation - Dividends and Other Capital
Distribution Limitations," "The Conversion - Effects of Conversion to
Stock Form on Depositors and Borrowers of Workingmens Savings Bank, FSB
- Liquidation Account" and Note R to the Consolidated Financial
Statements.
6
<PAGE>
PRO FORMA DATA
The actual net proceeds from the sale of the common stock cannot be
determined until the Conversion is completed. However, net proceeds are
currently estimated to be between $1.8 million and $3.0 million at the minimum
and maximum, as adjusted, of the EVR, based upon the following assumptions: (i)
8% of the shares will be sold to the ESOP and 77,500 shares will be sold to
officers, directors, and members of their immediate families; (ii) Trident will
have received sales fees including expenses of $85,000; (iii) no shares will be
sold in a Public Offering; (iv) other Conversion expenses, excluding the sales
fees paid to Trident, will be $195,000; and (v) 4% of the shares will be sold to
the RSP. Because management of the Savings Bank presently intends to adopt the
RSP within the first year following the Conversion, a purchase by the RSP in the
Conversion has been included with the pro forma data to give an indication of
the effect of a 4% purchase by the RSP, at a $10.00 per share purchase price in
the market, even though the RSP does not currently exist and is prohibited by
OTS regulation from purchasing shares in the Conversion. The pro forma
presentation does not show the effect of: (a) results of operations after the
Conversion, (b) changing market prices of the shares after the Conversion or (c)
less than a 4% purchase by the RSP.
The following table sets forth, our historical net earnings and
stockholders' equity prior to the Conversion and the pro forma consolidated net
earnings and stockholders' equity of WSB following the Conversion. Unaudited pro
forma consolidated net earnings and stockholders' equity have been calculated
for the nine months ended March 31, 1997 and fiscal year ended June 30, 1996 as
if the common stock to be issued in the Conversion had been sold at July 1, 1996
and July 1, 1995, and the estimated net proceeds had been invested at 6%,
respectively for the fiscal year ended June 30, 1996 and the nine months ended
March 31, 1997, which was approximately equal to the one-year U.S. Treasury bill
rate at March 31, 1997. The one-year U.S. Treasury bill rate, rather than an
arithmetic average of the average yield on interest-earning assets and average
rate paid on deposits, has been used to estimate income on net proceeds because
it is believed that the one-year U.S. Treasury bill rate is a more accurate
estimate of the rate that would be obtained on an investment of net proceeds
from the offering. In calculating pro forma income, an effective state and
federal income tax rate of 33% has been assumed for the respective periods,
resulting in an after tax yield of 4.02% for the nine months ended March 31,
1997 and the fiscal year ended June 30, 1996. Withdrawals from deposit accounts
for the purchase of shares are not reflected in the pro forma adjustments. The
computations are based upon the assumptions that 212,500 shares (minimum of EVR)
shares, 250,000 (midpoint of EVR), 287,500 shares (maximum of EVR) or 330,600
shares (maximum, as adjusted, of the EVR) are sold at a price of $10.00 per
share. As discussed under "Use of Proceeds," WSB expects to retain 50% of the
net Conversion proceeds, part of which will be loaned to the ESOP to fund its
anticipated purchase of 8% of shares issued in the Conversion. It is assumed
that the yield on the net proceeds of the Conversion retained by WSB will be the
same as the yield on the net proceeds of the Conversion transferred to us.
Historical and pro forma per share amounts have been calculated by dividing
historical and pro forma amounts by the indicated number of shares. Per share
amounts have been computed as if the shares had been outstanding at the
beginning of the periods or at the dates shown, but without any adjustment of
per share historical or pro forma stockholders' equity to reflect the earnings
on the estimated net proceeds.
The stockholders' equity information is not intended to represent the
fair market value of the shares, or the current value of our assets or
liabilities, or the amounts, if any, that would be available for distribution to
stockholders in the event of liquidation. For additional information regarding
the liquidation account, see "The Conversion -- Certain Effects of the
Conversion to Stock Form on Savers and Borrowers of Workingmens Savings Bank,
FSB -- Liquidation Account" and Note R to the Consolidated Financial Statements.
The pro forma income derived from the assumptions set forth above should not be
considered indicative of the actual results of our
7
<PAGE>
operations for any period. Such pro forma data may be materially affected by a
change in the price per share or number of shares to be issued in the Conversion
and by other factors. For information regarding investment of the proceeds see
"Use of Proceeds" and "The Conversion -- Stock Pricing" and "-- Number of Shares
to be Issued in the Conversion."
<TABLE>
<CAPTION>
At or For the Nine Months Ended March 31, 1997
-------------------------------------------------------------
212,500 250,000 287,500 330,600
Shares at Shares at Shares at Shares at
$10.00 $10.00 $10.00 $10.00
per share per share per share per share
--------- --------- --------- ---------
(Dollars in Thousands, except per share amounts)
<S> <C> <C> <C> <C>
Gross proceeds..................................................... $ 2,125 $ 2,500 $ 2,875 $ 3,306
Less estimated offering expenses................................... (280) (280) (280) (280)
--------- --------- --------- ---------
Estimated net proceeds........................................... 1,845 2,220 2,595 3,026
Less: ESOP funded by the Company................................. (170) (200) (230) (265)
RSP funded by the Company................................ (85) (100) (115) (132)
--------- --------- --------- ---------
Estimated investable net proceeds:............................... $ 1,590 $ 1,920 $ 2,250 $ 2,630
======== ======== ======== ========
Net income:
Historical net income............................................ $ (75) $ (75) $ (75) $ (75)
Pro forma earnings on investable net proceeds.................... 48 58 68 79
Pro forma ESOP adjustment(1)..................................... (9) (10) (12) (13)
Pro forma RSP adjustment(2)...................................... (9) (10) (12) (13)
-------- -------- --------- ---------
..Total............................................................ $ (44) $ (37) $ (30) $ (22)
========= ======== ========= =========
Net income per share:
Historical net income per share.................................. $ (0.38) $ (0.32) $ (0.28) $ (0.24)
Pro forma earnings on net proceeds............................... 0.24 0.25 0.25 0.26
Pro forma ESOP adjustment(1)..................................... (0.04) (0.04) (0.04) (0.04)
Pro forma RSP adjustment(2)...................................... (0.04) (0.04) (0.04) (0.04)
--------- --------- --------- ---------
..Total(5)......................................................... $ (0.22) $ (0.16) $ (0.11) $ (0.07)
========= ========= ========= =========
Stockholders' equity:(3)
Historical....................................................... $ 2,020 $ 2,020 $ 2,020 $ 2,020
Estimated net proceeds........................................... 1,845 2,220 2,595 3,026
Less: Common stock acquired by ESOP(1)........................... (170) (200) (230) (265)
.. Common stock acquired by RSP(2)............................ (85) (100) (115) (132)
--------- --------- --------- ---------
..Total............................................................ $ 3,610 $ 3,940 $ 4,270 $ 4,650
======== ======== ======== ========
Stockholders' equity per share:(3)
Historical....................................................... $ 9.51 $ 8.08 $ 7.03 $ 6.11
Estimated net proceeds........................................... 8.68 8.88 9.03 9.15
Less: Common stock acquired by ESOP(1)........................... (0.80) (0.80) (0.80) (0.80)
.. Common stock acquired by RSP(2)............................ (0.40) (0.40) (0.40) (0.40)
-------- -------- -------- --------
..Total............................................................ $ 16.99 $ 15.76 $ 14.85 $ 14.06
======== ======== ======== ========
Offering price as a percentage of pro forma stockholders'
equity per share(4).............................................. 58.9% 63.5% 67.3% 71.1%
========= ========= ========= =========
Ratio of offering price to pro forma earnings per share(5)......... - - - -
======= ======= ======= =======
</TABLE>
(footnotes on following pages)
8
<PAGE>
<TABLE>
<CAPTION>
At or For the Year Ended June 30, 1996
-----------------------------------------------------------------
212,500 250,000 287,500 330,600
Shares at Shares at Shares at Shares at
$10.00 $10.00 $10.00 $10.00
per share per share per share per share
--------- --------- --------- ---------
(Dollars in Thousands, except per share amounts)
<S> <C> <C> <C> <C>
Gross proceeds.................................................... $ 2,125 $ 2,500 $ 2,875 $ 3,306
Less estimated offering expenses.................................. (280) (280) (280) (280)
--------- --------- --------- ---------
Estimated net proceeds.......................................... 1,845 2,220 2,595 3,026
Less: ESOP funded by the Company................................ (170) (200) (230) (265)
RSP funded by the Company............................... (85) (100) (115) (132)
--------- --------- --------- ---------
Estimated investable net proceeds:.............................. $ 1,590 $ 1,920 $ 2,250 $ 2,630
======== ======== ======== ========
Net income:
Historical net income........................................... $ 35 $ 35 $ 35 $ 35
Pro forma earnings on investable net proceeds................... 64 77 90 106
Pro forma ESOP adjustment(1).................................... (11) (13) (15) (18)
Pro forma RSP adjustment(2)..................................... (11) (13) (15) (18)
--------- --------- --------- ---------
..Total........................................................... $ 76 $ 85 $ 95 $ 105
========= ========= ========= =========
Net income per share:
Historical net income per share................................. $ 0.18 $ 0.15 $ 0.13 $ 0.11
Pro forma earnings on net proceeds.............................. 0.32 0.33 0.34 0.34
Pro forma ESOP adjustment(1).................................... (0.06) (0.06) (0.06) (0.06)
Pro forma RSP adjustment(2)..................................... (0.06) (0.06) (0.06) (0.06)
--------- --------- --------- ---------
..Total(5)........................................................ $ 0.39 $ 0.37 $ 0.35 $ 0.34
========= ========= ========= =========
Stockholders' equity:(3)
Historical...................................................... $ 2,091 $ 2,091 $ 2,091 $ 2,091
Estimated net proceeds.......................................... 1,845 2,220 2,595 3,026
Less: Common stock acquired by ESOP(1).......................... (170) (200) (230) (265)
.. Common stock acquired by RSP(2)........................... (85) (100) (115) (132)
--------- --------- --------- ---------
..Total........................................................... $ 3,681 $ 4,011 $ 4,341 $ 4,721
======== ======== ======== ========
Stockholders' equity per share:(3)
Historical...................................................... $ 9.84 $ 8.36 $ 7.27 $ 6.32
Estimated net proceeds.......................................... 8.68 8.88 9.03 9.15
Less: Common stock acquired by ESOP(1).......................... (0.80) (0.80) (0.80) (0.80)
.. Common stock acquired by RSP(2)........................... (0.40) (0.40) (0.40) (0.40)
-------- -------- -------- --------
..Total........................................................... $ 17.32 $ 16.04 $ 15.10 $ 14.28
======== ======== ======== ========
Offering price as a percentage of pro forma stockholders'
equity per share(4)............................................. 57.7% 62.3% 66.2% 70.0%
======== ========= ========= =========
Ratio of offering price to pro forma earnings per share(5)........ 25.6x 27.0x 28.6x 29.4x
======= ======= ======= =======
</TABLE>
(footnotes on following page)
9
<PAGE>
- --------------------
(1) Assumes 8% of the shares sold in the Conversion are purchased by the
ESOP, and that the funds used to purchase such shares are borrowed from
WSB. The approximate amount expected to be borrowed by the ESOP is not
reflected as a liability but is reflected as a reduction of capital. We
intend to make annual contributions to the ESOP over a ten year period
in an amount at least equal to the principal and interest requirement
of the debt. The pro forma net income assumes: (i) that 1,700, 2,000,
2,300, and 2,645 shares at the minimum, mid-point, maximum and maximum,
as adjusted of the EVR, were committed to be released during the year
ended June 30, 1996 and the nine months ended March 31, 1997 at an
average fair value of $10.00 per share in accordance with Statement of
Position ("SOP") 93-6 of the American Institute of Certified Public
Accountants ("AICPA"); (ii) the effective tax rate was 33% for such
periods; and (iii) only the ESOP shares committed to be released were
considered outstanding for purposes of the per share net earnings. The
pro forma stockholders' equity per share calculation assumes all ESOP
shares were outstanding, regardless of whether such shares would have
been released. Because WSB will be providing the ESOP loan, only
principal payments on the ESOP loan are reflected as employee
compensation and benefits expense. As a result, to the extent the value
of the shares appreciates over time, compensation expense related to
the ESOP will increase. For purposes of the preceding tables, it was
assumed that a ratable portion of the ESOP shares purchased in the
Conversion were committed to be released during the period ended March
31, 1997 and June 30, 1996. See Note 5 below. If it is assumed that all
of the ESOP shares were included in the calculation of earnings per
share for the period ended at March 31, 1997 and June 30, 1996,
earnings per share would have been $(.21), $(.15), $(.10) and $(.07),
and $.35, $.34, $.33, and $.32, at March 31, 1997 and June 30, 1996,
respectively, based on the sale of shares at the minimum, midpoint,
maximum and the maximum, as adjusted, of the EVR. See "Management of
Workingmens Savings Bank, FSB - Other Benefits - Employee Stock
Ownership Plan."
(2) Assumes issuance to the RSP of 8,500, 10,000, 11,500, and 13,224 shares
at the minimum, mid-point, maximum, and maximum, as adjusted of the
EVR. The assumption in the pro forma calculation is that (i) shares
were purchased by WSB following the Conversion, (ii) the purchase price
for the shares purchased by the RSP was equal to the purchase price of
$10 per share and (iii) 20% of the amount contributed was an amortized
expense during such period. Such amount does not reflect possible
increases or decreases in the value of such stock relative to the
Purchase Price. As we accrue compensation expense to reflect the five
year vesting period of such shares pursuant to the RSP, the charge
against capital will be reduced accordingly. Implementation of the RSP
within one year of Conversion would require regulatory and stockholder
approval at a meeting of our stockholders to be held no earlier than
six months after the Conversion. For purposes of this table, it is
assumed that the RSP will be adopted by the board of directors,
reviewed by the OTS, and approved by the stockholders, and that the RSP
will purchase the shares in the open market within the year following
the Conversion. If the shares to be purchased by the RSP are assumed at
July 1, 1996 and July 1, 1995, to be newly issued shares purchased from
WSB by the RSP at the Purchase Price, at the minimum, midpoint, maximum
and maximum, as adjusted, of the EVR, pro forma stockholders' equity
per share would have been $16.33, $15.15, $14.28, and $13.52, and
$16.65, $15.43, $14.52, and $13.73 at March 31, 1997 and June 30, 1996,
respectively, and pro forma earnings per share would have been $(.16),
$(.10), $(.06), and (.03), and $.39, $.33, $.37, and $.36, for the nine
months ended March 31, 1997, and the year ended June 30, 1996,
respectively. As a result of the RSP, stockholders' ownership interests
will be diluted by approximately 3.9%. See "Management of Workingmens
Savings Bank, FSB - Proposed Future Stock Benefit Plans - Restricted
Stock Plan."
(3) Assumes that following the consummation of the Conversion, WSB will
adopt the Option Plan, which if implemented within one year of
Conversion would be subject to regulatory review and board of director
and stockholder approval, and that such plan would be considered and
voted upon at a meeting of WSB stockholders to be held no earlier than
six months after the Conversion. Under the Option Plan, employees and
directors could be granted options to purchase an aggregate amount of
shares equal to 10% of the shares issued in the Conversion at an
exercise price equal to the market price of the shares on the date of
grant. In the event the shares issued under the Option Plan were
awarded, the ownership interests of existing stockholders would be
diluted by approximately 9.1%. At the minimum, midpoint, maximum and
the maximum, as adjusted, of the EVR, if all shares under the Option
Plan were newly issued at the
10
<PAGE>
beginning of the respective periods and the exercise price for the
option shares were equal to the Purchase Price, the number of
outstanding shares would increase to 233,750, 275,000, 316,250, and
363,660, respectively, pro forma stockholders' equity per share would
have been $16.35, $15.23, $14.41, and $13.70 and $16.66, $15.49, $14.64,
and $13.89 at March 31, 1997 and June 30, 1996, respectively, and pro
forma earnings per share would have been $(.15), $(.10), $(.06), and
$.02), and $.36, $.35, $.34, and $.32, respectively.
(4) Consolidated stockholders' equity represents the excess of the carrying
value of the assets of the over its liabilities. The calculations are
based upon the number of shares issued in the Conversion, without
giving effect to SOP 93-6. The amounts shown do not reflect the federal
income tax consequences of the potential restoration to income of the
tax bad debt reserves for income tax purposes, which would be required
in the event of liquidation. The amounts shown also do not reflect the
amounts required to be distributed in the event of liquidation to
eligible depositors from the liquidation account which will be
established upon the consummation of the Conversion. Pro forma
stockholders' equity information is not intended to represent the fair
market value of the shares, the current value of our assets or
liabilities or the amounts, if any, that would be available for
distribution to stockholders in the event of liquidation. Such pro
forma data may be materially affected by a change in the number of
shares to be sold in the Conversion and by other factors.
(5) Pro forma net income per share calculations include the number of
shares assumed to be sold in the Conversion and, in accordance with SOP
93-6, exclude ESOP shares which would not have been released during the
period. Accordingly, 15,300, 18,000, 20,700, and 23,803 shares have
been subtracted from the shares assumed to be sold at the minimum,
mid-point, maximum, and maximum, as adjusted, of the EVR, respectively,
and 1,700, 2,000, 2,300, and 2,645 shares are assumed to be outstanding
at the minimum, mid-point, maximum, and maximum, as adjusted of the
EVR. See Note 1 above.
11
<PAGE>
HISTORICAL AND PRO FORMA CAPITAL COMPLIANCE
The following table presents our historical and pro forma capital
position relative to our capital requirements as of March 31, 1997. For a
discussion of the assumptions underlying the pro forma capital calculations
presented below, see "Use of Proceeds," "Capitalization" and "Pro Forma Data."
The definitions of the terms used in the table are those provided in the capital
regulations issued by the OTS. For a discussion of the capital standards
applicable to us, see "Regulation -- Savings Institution Regulation Regulatory
Capital Requirements."
<TABLE>
<CAPTION>
Pro Forma(1)
------------------------------------------------------------------------------------
$2,125,000 $2,500,000 $2,875,000 $3,306,000
Historical Minimum Midpoint Maximum Maximum, as adjusted
------------------- ------------------- ------------------- -------------------- ------------------
Percent Percent Percent Percent Percent
Amount of Assets(2) Amount of Assets(2) Amount of Assets(2) Amount of Assets(2) Amount of Assets(2)
------ --------- ------ ----------- ------ ------------ ------ ------------ ------ ------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP Capital.......... $2,020 6.10% $2,688 7.91% $2,830 8.29% $2,973 8.67% $3,136 9.09%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Tangible Capital...... $2,057 6.20% $2,725 8.01% $2,867 8.39% $3,010 8.76% $3,173 9.19%
Tangible Capital
Requirement......... 497 1.50 510 1.50 513 1.50 515 1.50 518 1.50
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Excess................ $1,560 4.70% $2,215 6.51% $2,354 6.89% $2,495 7.26% $2,655 7.69%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Core Capital.......... $2,057 6.20% $2,725 8.01% $2,867 8.39% $3,010 8.76% $ 3,173 9.19%
Core Capital
Requirement(3)...... 995 3.00 1,020 3.00 1,025 3.00 1,030 3.00 1,036 3.00
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Excess................ $1,062 3.20% $1,705 5.01% $1,824 5.39% $1,980 5.76% $2,137 6.19%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total Risk-Based
Capital(4).......... $2,229 16.23% $2,897 20.84% $3,039 21.80% $3.182 22.77% $3,345 23.87%
Risk-Based Capital
Requirement......... 1,099 8.00 1,112 8.00 1,115 8.00 1,118 8.00 1,121 8.00
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Excess................ $1,130 8.23% $1,785 12.84% $1,924 13.80% $2,064 14.77% $2,224 15.87%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
- --------------------
(1) WSB will provide additional paid-in capital prior to the formation of
the RSP in order to attain a 10% capitalization level at that time if
the RSP is adopted within one year of the Conversion and our tangible
capital is below 10% to comply with OTS rules requiring such capital
prior to implementation of the RSP. Assuming that the RSP was formed
immediately upon conversion, to attain that capitalization level, WSB
would invest approximately an additional $750,000, $612,000, $472,000,
and $313,000 at the minimum, midpoint, maximum, and maximum, as
adjusted of the EVR, respectively.
(2) GAAP, adjusted, or risk-weighted assets as appropriate.
(3) The unrealized loss on securities available for sale of $37,000 has
been added to GAAP Capital to arrive at our Tangible and Core Capital.
(4) Proposed regulations of the OTS could increase the core capital
requirement to a ratio between 4% and 5%, based upon an association's
regulatory examination rating. See "Regulation - Regulatory Capital
Requirements." Our Risk-Based Capital includes our Tangible Capital
plus $172,000 of our allowance for loan losses. Our Risk- weighted
assets as of March 31, 1997 totaled approximately $13.7 million. Net
proceeds available for investment by us are assumed to be invested in
interest earning assets that have a 20% risk-weighting.
12
<PAGE>
THE CONVERSION
Our board of directors and the OTS have approved the Plan subject to
the Plan's approval by our members, and subject to the satisfaction of certain
other conditions imposed by the OTS in its approval. OTS approval, however, does
not constitute a recommendation or endorsement of the Plan by the OTS.
General
On May 19, 1997, our board of directors adopted a Plan of Conversion,
pursuant to which we will convert from a federally chartered mutual savings bank
to a federally chartered stock savings bank and become a wholly owned subsidiary
of WSB. The Conversion will include adoption of the proposed Federal Stock
charter and Bylaws which will authorize the issuance of capital stock by us.
Under the Plan, our capital stock is being sold to WSB and the common stock of
WSB is being offered to our eligible depositors and then to the public. The
Conversion will be accounted for at historical cost in a manner similar to a
pooling of interests.
The OTS has approved WSB's application to become a savings and loan
holding company and to acquire all of our common stock to be issued in the
Conversion. Pursuant to such OTS approval, WSB plans to retain 50% of the net
proceeds from the sale of shares of its common stock and to use the remaining
50% to purchase all of the common stock we will issue in the Conversion.
However, if additional benefit plans, such as the RSP, are adopted within one
year and our tangible capital is not equal to or greater than 10% of total
assets at that time, WSB will provide additional capital to us so that tangible
capital equals 10% of total assets to comply with OTS rules requiring such
capital prior to the implementation of the RSP. See "Use of Proceeds."
The shares are first being offered in a Subscription Offering to
holders of subscription rights. To the extent shares of common stock remain
available after the Subscription Offering, shares of common stock may be offered
in a Public Offering. The Public Offering, if any, may commence anytime
subsequent to the commencement of the Subscription Offering. Shares not
subscribed for in the Subscription and Public Offerings may be offered for sale
by WSB in a Syndicated Public Offering. We have the right, in our sole
discretion, to accept or reject, in whole or in part, any orders to purchase
shares of the common stock received in the Public and Syndicated Public
Offering. See "-- Public Offering."
Shares of common stock in an amount equal to our pro forma market value
as a stock savings institution must be sold in order for the Conversion to
become effective. The Public Offering must be completed within 45 days after the
last day of the Subscription Offering period unless such period is extended by
us with the approval of the OTS. The Plan provides that the Conversion must be
completed within 24 months after the date of the approval of the Plan by our
members.
In the event that we are unable to complete the sale of common stock
and effect the Conversion within 45 days after the end of the Subscription
Offering, we may request an extension of the period by the OTS. No assurance can
be given that the extension would be granted if requested. Due to the volatile
nature of market conditions, no assurances can be given that our valuation would
not substantially change during any such extension. If the EVR of the shares
must be amended, no assurance can be given that such amended EVR would be
approved by the OTS. Therefore, it is possible that if the Conversion cannot be
completed within the requisite period, we may not be permitted to complete the
Conversion. A substantial delay caused by an extension of the period may also
significantly increase the expense of
13
<PAGE>
the Conversion. No sales of the shares may be completed in the offering unless
the Plan is approved by our members.
The completion of the offering is subject to market conditions and
other factors beyond our control. No assurance can be given as to the length of
time following approval of the Plan at the meeting of our members that will be
required to complete the shares being offered in the Conversion. If delays are
experienced, significant changes may occur in our estimated pro forma market
value upon Conversion together with corresponding changes in the offering price
and the net proceeds to be realized by us from the sale of the shares. In the
event the Conversion is terminated, we will charge all Conversion expenses
against current income and any funds collected by us in the offering will be
promptly returned, with interest, to each potential investor.
Effects of Conversion to Stock Form on Depositors and Borrowers of Workingmens
Savings Bank, FSB
Voting Rights. Currently in our mutual form, our depositor and certain
borrower members have voting rights and may vote for the election of directors.
Following the Conversion, all voting rights will be held solely by stockholders.
Savings Accounts and Loans. The balances, terms and FDIC insurance
coverage of savings accounts will not be affected by the Conversion.
Furthermore, the amounts and terms of loans and obligations of the borrowers
under their individual contractual arrangements with us will not be affected by
the Conversion.
Tax Effects. We have received an opinion from our counsel, Malizia,
Spidi, Sloane & Fisch, P.C. on the federal tax consequences of the Conversion.
The opinion provides, in part, that: (i) the Conversion will qualify as a
reorganization under Section 368(a)(1)(F) of the Code, and no gain or loss will
be recognized by us by reason of the proposed Conversion; (ii) no gain or loss
will be recognized by us upon the receipt of money from WSB for our stock, and
no gain or loss will be recognized by WSB upon the receipt of money for the
shares; (iii) our assets will have the same basis before and after the
Conversion; (iv) the holding period of our assets will include the period during
which the assets were held by us in our mutual form; (v) no gain or loss will be
recognized by the Eligible Account Holders, Supplemental Eligible Account
Holders, and Other Members upon the issuance to them of withdrawable savings
accounts in us in the stock form in the same dollar amount as their savings
accounts in us in the mutual form plus an interest in the liquidation account of
us in the stock form in exchange for their savings accounts in us in the mutual
form; (vi) provided that the amount to be paid for the shares pursuant to the
subscription rights is equal to the fair market value of such shares, no gain or
loss will be recognized by Eligible Account Holders, Supplemental Eligible
Account Holders, and Other Members under the Plan upon the distribution to them
of nontransferable subscription rights; (vii) the basis of each account holder's
savings accounts after the Conversion will be the same as the basis of his
savings accounts prior to the Conversion, decreased by the fair market value of
the nontransferable subscription rights received and increased by the amount, if
any, of gain recognized on the exchange; (viii) the basis of each account
holder's interest in the liquidation account will be zero; (ix) the holding
period of the common stock acquired through the exercise of subscription rights
shall begin on the date on which the subscription rights are exercised; (x) we
will succeed to and take into account the earnings and profits or deficit in
earnings and profits of us as of the date of Conversion; (xi) immediately after
Conversion, we will succeed to the bad debt reserve accounts of the Savings
Bank, and the bad debt reserves will have the same character in our hands after
Conversion as if no distribution or transfer had occurred; and (xii) the
creation of the liquidation account will have no effect on our taxable income.
14
<PAGE>
The opinion from Malizia, Spidi, Sloane & Fisch, P.C. is based in part
on the assumption that the exercise price of the subscription rights will be
approximately equal to the fair market value of those shares at the time of the
completion of the proposed Conversion. We have received an opinion of Ferguson
which, based on certain assumptions, concludes that the subscription rights to
be received by Eligible Account Holders and other eligible subscribers do not
have any economic value at the time of distribution or at the time the
subscription rights are exercised. Such opinion is based on the fact that such
rights are: (i) acquired by the recipients without payment therefor, (ii)
non-transferable, (iii) of short duration, and (iv) afford the recipients the
right only to purchase shares at a price equal to their estimated fair market
value, which will be the same price at which shares for which no subscription
right is received in the Subscription Offering will be offered in the Public
Offering. If the subscription rights granted to Eligible Account Holders or
other eligible subscribers are deemed to have an ascertainable value, receipt of
such rights would be taxable only to those Eligible Account Holders or other
eligible subscribers who exercise the subscription rights in an amount equal to
such value (either as a capital gain or ordinary income), and we could recognize
gain on such distribution.
We are also subject to Pennsylvania income taxes and have received an
opinion from Malizia, Spidi, Sloane & Fisch, P.C. that the Conversion will be
treated for Pennsylvania state tax purposes similar to the Conversion's
treatment for federal tax purposes.
Unlike a private letter ruling, the opinions of Malizia, Spidi, Sloane
& Fisch, P.C. and Ferguson have no binding effect or official status, and no
assurance can be given that the conclusions reached in any of those opinions
would be sustained by a court if contested by the IRS or the Pennsylvania tax
authorities. Eligible Account Holders, Supplemental Eligible Account Holders,
and Other Members are encouraged to consult with their own tax advisers as to
the tax consequences in the event the
subscription rights are deemed to have an ascertainable value.
Liquidation Account. In the unlikely event of our complete liquidation
in our present mutual form, each depositor is entitled to equal distribution of
any of our assets, pro rata to the value of his accounts, remaining after
payment of claims of all creditors (including the claims of all depositors to
the withdrawal value of their accounts). Each depositor's pro rata share of such
remaining assets would be in the same proportion as the value of his deposit
accounts was to the total value of all deposit accounts in us at the time of
liquidation.
Upon a complete liquidation after the Conversion, each depositor would
have a claim, as a creditor, of the same general priority as the claims of all
other general creditors of ours. Therefore, except as described below, a
depositor's claim would be solely in the amount of the balance in his deposit
account plus accrued interest. A depositor would not have an interest in the
residual value of our assets above that amount, if any.
The Plan provides for the establishment, upon the completion of the
Conversion, of a special "liquidation account" for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders. Each Eligible Account
Holder and Supplemental Eligible Account Holder, if he continues to maintain his
deposit account with us, would be entitled on a complete liquidation of us after
Conversion, to an interest in the liquidation account prior to any payment to
stockholders. Each Eligible Account Holder would have an initial interest in
such liquidation account for each deposit account held in us on the qualifying
date, March 31, 1996. Each Supplemental Eligible Account Holder would have a
similar interest as of the qualifying date, June 30, 1997. The interest as to
each deposit account would be in the same proportion of the total liquidation
account as the balance of the deposit account on the qualifying dates was to the
aggregate balance in all the deposit accounts of Eligible Account Holders and
15
<PAGE>
Supplemental Eligible Account Holders on such qualifying dates. However, if the
amount in the deposit account on any annual closing date of ours (June 30) is
less than the amount in such account on the respective qualifying dates, then
the interest in this special liquidation account would be reduced from time to
time by an amount proportionate to any such reduction, and the interest would
cease to exist if such deposit account were closed. The interest in the special
liquidation account will never be increased despite any increase in the related
deposit account after the respective qualifying dates.
No merger, consolidation, purchase of bulk assets with assumptions of
savings accounts and other liabilities, or similar transactions with another
insured institution in which transaction we in our converted form are not the
surviving institution shall be considered a complete liquidation. In such
transactions, the liquidation account shall be assumed by the surviving
institution.
Subscription Rights and the Subscription Offering
Non-transferable subscription rights to purchase shares of the common
stock have been granted to all persons and entities entitled to purchase shares
in the Subscription Offering under the Plan. If the Public Offering, as
described below, extends beyond 45 days following the completion of the
Subscription Offering, subscribers will be resolicited. Subscription priorities
have been established for the allocation of stock to the extent that shares are
available after satisfaction of all subscriptions of all persons having prior
rights and subject to the purchase limitations set forth in the Plan and as
described below under "-- Limitations on Purchases of Shares." The following
priorities have been established:
Category 1: Eligible Account Holders (First Priority). Each Eligible Account
Holder will receive non-transferable subscription rights on a priority basis to
purchase that number of shares of common stock which is equal to the greater of
7,500 shares ($75,000), or 15 times the product (rounded down to the next whole
number) obtained by multiplying the total number of shares to be issued by a
fraction of which the numerator is the amount of the qualifying deposit of the
Eligible Account Holder and the denominator is the total amount of qualifying
deposits of all Eligible Account Holders. If such allocation results in an
oversubscription, shares shall be allocated among subscribing Eligible Account
Holders so as to permit each such account holder, to the extent possible, to
purchase the lesser of 100 shares or the total amount of his subscription. Any
shares not so allocated shall be allocated among the subscribing Eligible
Account Holders on an equitable basis, related to the amounts of their
respective qualifying deposits as compared to the total qualifying deposits of
all subscribing Eligible Account Holders. Only a Person(s) with a Qualifying
Deposit as of the Eligibility Record Date (or a successor entity or estate)
shall receive subscription rights. Any Person(s) added to a Savings Account
after the Eligibility Record Date is not an Eligible Account Holder.
Subscription rights received by officers and directors in this category based on
their increased deposits in us in the one-year period preceding March 31, 1996,
are subordinated to the subscription rights of other Eligible Account Holders.
See "-- Limitations on Purchases and Transfer of Shares."
Category 2: Tax-Qualified Employee Benefit Plans (Second Priority). Our
tax-qualified employee benefit plans ("Employee Plans") have been granted
subscription rights to purchase up to 8% of the total shares issued in the
Conversion. The ESOP is an Employee Plan.
The right of Employee Plans to subscribe for shares is subordinate to
the right of the Eligible Account Holders to subscribe for shares. However, in
the event the offering result in the issuance of shares above the maximum of the
EVR (i.e., more than 287,500 shares), the Employee Plans have a priority right
to fill their subscription (the ESOP, the only Employee Plan, currently intends
to purchase up to 8% of the common stock issued in the Conversion). The Employee
Plans may, however, determine
16
<PAGE>
to purchase some or all of the shares covered by their subscriptions after the
Conversion in the open market or, if approved by the OTS, out of authorized but
unissued shares in the event of an oversubscription.
Category 3: Supplemental Eligible Account Holders (Third Priority). Each
Supplemental Eligible Account Holder who is not an Eligible Account Holder will
receive non-transferable subscription rights to purchase that number of shares
which is equal to the greater of 7,500 shares ($75,000), or 15 times the product
(rounded down to the next whole number) obtained by multiplying the total number
of shares to be issued by a fraction of which the numerator is the amount of the
qualifying deposit of the Supplemental Eligible Account Holder and the
denominator is the total amount of qualifying deposits of all Supplemental
Eligible Account Holders. If the allocation made in this paragraph results in an
oversubscription, shares shall be allocated among subscribing Supplemental
Eligible Account Holders so as to permit each such account holder, to the extent
possible, to purchase the lesser of 100 shares or the total amount of his
subscription. Any shares not so allocated shall be allocated among the
subscribing Supplemental Eligible Account Holders on an equitable basis, related
to the amounts of their respective qualifying deposits as compared to the total
qualifying deposits of all subscribing Supplemental Eligible Account Holders.
See "-- Limitations on Purchases and Transfer of Shares."
The right of Supplemental Eligible Account Holders to subscribe for
shares is subordinate to the rights of the Eligible Account Holders and Employee
Plans to subscribe for shares.
Category 4: Other Members (Fourth Priority). Each Other Member who is not an
Eligible Account Holder or Supplemental Eligible Account Holder, will receive
non-transferable subscription rights to purchase up to 7,500 shares ($75,000) to
the extent such shares are available following subscriptions by Eligible Account
Holders, Employee Plans, and Supplemental Eligible Account Holders. In the event
there are not enough shares to fill the orders of the Other Members, the
subscriptions of the Other Members will be allocated so that each subscribing
Other Member will be entitled to purchase the lesser of 100 shares or the number
of shares ordered. Any remaining shares will be allocated among Other Members
whose subscriptions remain unsatisfied on a 100 share (or whatever lesser amount
is available) per order basis until all orders have been filled on the remaining
shares have been allocated. See "-- Limitations on Purchases and Transfer of
Shares."
Members in Non-Qualified States. We will make reasonable efforts to
comply with the securities laws of all states in the United States in which
persons entitled to subscribe for the shares pursuant to the Plan reside.
However, no person will be offered or allowed to purchase any shares under the
Plan if he resides in a foreign country or in a state with respect to which any
of the following apply: (i) a small number of persons otherwise eligible to
subscribe for shares under the Plan reside in that state or foreign country;
(ii) the granting of subscription rights or offer or sale of shares of common
stock to those persons would require either us, or our employees to register,
under the securities laws of that state or foreign country, as a broker or
dealer or to register or otherwise qualify our securities for sale in that state
or foreign country; or (iii) such registration or qualification would be
impracticable for reasons of cost or otherwise. No payments will be made in lieu
of the granting of subscription rights to any person.
Restrictions on Transfer of Subscription Rights and Shares. Persons are
prohibited from transferring or entering into any agreement or understanding to
transfer the legal or beneficial ownership of their subscription rights.
Subscription rights may be exercised only by the person to whom they are granted
and only for his account. Each person subscribing for shares will be required to
certify that he is purchasing shares solely for his own account and has not
entered into an agreement or understanding regarding the sale or transfer of
those shares. The regulations also prohibit any person from offering or
17
<PAGE>
making an announcement of an offer or intent to make an offer to purchase
subscription rights or shares of common stock prior to the completion of the
Conversion.
We will pursue any and all legal and equitable remedies in the event we
become aware of the transfer of subscription rights and will not honor orders
believed by us to involve the transfer of subscription rights.
Expiration Date. The Subscription Offering will expire at 12:00 p.m.,
Eastern Time, on __________ ____, 1997, (Expiration Date). Subscription rights
will become void if not exercised prior to the Expiration Date.
Public Offering
To the extent that shares remain available and subject to market
conditions at or near the completion of the Subscription Offering, we may offer
shares to selected persons in a Public Offering on a best-efforts basis through
Trident in such a manner as to promote a wide distribution of the Common Stock.
Any orders received in connection with the Public Offering, if any, will receive
a lower priority than orders properly made in the Subscription Offering by
persons exercising Subscription Rights. Common Stock sold in the Public Offering
will be sold at the same price as all other shares in the Subscription Offering.
We have the right to reject any orders in the Public Offering.
No person, together with any associate or group of persons acting in
concert, will be permitted to purchase more than 12,500 shares or $125,000 of
Common Stock in the Public Offering. However, no person, together with
associates of and persons acting in concert with such persons may purchase more
than 5% of the amount of stock sold. To order Common Stock in connection with
the Public Offering, if held, an executed stock order and account withdrawal
authorization (if applicable) must be received by Trident prior to the
termination of the Public Offering. Promptly upon receipt of available funds,
together with a properly executed stock order and account withdrawal
authorization, if applicable, and certification, Trident will forward such funds
to the Bank to be deposited in a subscription escrow account.
The date by which orders must be received in the Public Offering
("Public Offering Expiration Date") will be set by us at the time of
commencement of the Public Offering; provided however, if the Offering are
extended beyond __________ ____, 1997, each purchaser will have the opportunity
to maintain, modify, or rescind his order. In such event, all funds received in
the Public Offering will be promptly returned with interest unless he
affirmatively indicates otherwise.
If an order in the Public Offering is accepted, promptly after the
completion of the Conversion, a certificate for the appropriate amount of shares
will be forwarded to Trident as nominee for the beneficial owner. In the event
that an order is not accepted or the Conversion is not consummated, the Bank
will promptly refund with interest the funds received to Trident which will then
return the funds to purchaser's accounts. If the aggregate pro forma market
value of the Bank, as converted, is less than $2,125,000 or more than
$3,306,000, each purchaser will have the right to modify or rescind his order.
The Plan also permits Trident to conduct a Syndicated Public Offering, which is
not expected to occur.
Ordering and Receiving Shares
Use of Order Forms. Rights to subscribe in the Subscription Offering or
purchase stock in the Public Offering (if any) may only be exercised by
completion of an original order form. Persons
18
<PAGE>
ordering shares in the Subscription Offering must deliver by mail or in person a
properly completed and executed original order form to us prior to the
Expiration Date. Order forms must be accompanied by full payment for all shares
ordered. See "-- Payment for Shares." Subscription rights under the Plan will
expire on the Expiration Date, whether or not we have been able to locate each
person entitled to subscription rights. Once submitted, subscription orders
cannot be revoked without our consent unless the Conversion is not completed
within 45 days of the Expiration Date.
In the event an order form (i) is not delivered and is returned to us
by the United States Postal Service or we are unable to locate the addressee,
(ii) is not received or is received after the Expiration Date, (iii) is
defectively completed or executed, or (iv) is not accompanied by full payment
for the shares subscribed for (including instances where a savings account or
certificate balance from which withdrawal is authorized is insufficient to fund
the amount of such required payment), the subscription rights for the person to
whom such rights have been granted will lapse as though that person failed to
return the completed order form within the time period specified. We may, but
will not be required to, waive any irregularity on any order form or require the
submission of corrected order forms or the remittance of full payment for
subscribed shares by such date as we specify. The waiver of an irregularity on
an order form in no way obligates us to waive any other irregularity on that, or
any irregularity on any other, order form. Waivers will be considered on a case
by case basis. Photocopies of order forms, payments from private third parties,
or electronic transfers of funds will not be accepted. Our interpretation of the
terms and conditions of the Plan and of the acceptability of the order forms
will be final. We have the right to investigate any irregularity on any order
form.
To ensure that each purchaser receives a prospectus at least 48 hours
before the Expiration Date in accordance with Rule 15c2-8 of the Exchange Act,
no prospectus will be mailed any later than five days prior to such date or hand
delivered any later than two days prior to such date. Execution of the order
form will confirm receipt or delivery in accordance with Rule 15c2-8. Order
forms will only be distributed with a prospectus.
Payment for Shares. Payment for shares of common stock may be made (i)
in cash, if delivered in person, (ii) by check or money order, or (iii) by
authorization of withdrawal from savings accounts (including certificates of
deposit) maintained with us or (iv) by an IRA not held by us. Appropriate means
by which such withdrawals may be authorized are provided in the order form. Once
such a withdrawal has been authorized, none of the designated withdrawal amount
may be used by the subscriber for any purpose other than to purchase the shares.
Where payment has been authorized to be made through withdrawal from a savings
account, the sum authorized for withdrawal will continue to earn interest at the
contract rate until the Conversion has been completed or terminated. Interest
penalties for early withdrawal applicable to certificate accounts will not apply
to withdrawals authorized for the purchase of shares; however, if a partial
withdrawal results in a certificate account with a balance less than the
applicable minimum balance requirement, the certificate evidencing the remaining
balance will earn interest at the passbook savings account rate subsequent to
the withdrawal. Payments made in cash or by check or money order, will be placed
in a segregated savings account and interest will be paid by us at our passbook
savings account rate from the date payment is received until the Conversion is
completed or terminated. An executed order form, once received by us, may not be
modified, amended, or rescinded without our consent, unless the Conversion is
not completed within 45 days after the conclusion of the Subscription Offering,
in which event subscribers may be given an opportunity to increase, decrease, or
rescind their order. In the event that the Conversion is not consummated, all
funds submitted pursuant to the offering will be refunded promptly with
interest.
19
<PAGE>
Owners of self-directed IRAs may use the assets of such IRAs to
purchase shares in the offering, provided that such IRAs are not maintained on
deposit with us. Persons with IRAs maintained with us must have their accounts
transferred to an unaffiliated institution or broker to purchase shares in the
offering. The Stock Information can assist you in transferring your
self-directed IRA. Because of the paperwork involved, persons owning IRAs with
us who wish to use their IRA account to purchase stock in the Offering, must
contact the Stock Information Center no later than __________ ____, 1997.
The ESOP may subscribe for shares by submitting its order form along
with evidence of a loan commitment from a financial institution or WSB for the
purchase of the shares during the Subscription Offering and by making payment
for shares on the date of completion of the Conversion.
Federal regulations prohibit us from lending funds or extending credit
to any person to purchase shares in the Conversion.
Delivery of Stock Certificates. Certificates representing shares of
common stock issued in the Conversion will be mailed to the person(s) at the
address noted on the order form, as soon as practicable following consummation
of the Conversion. Any certificates returned as undeliverable will be held until
properly claimed or otherwise disposed. Persons ordering shares might not be
able to sell their shares until they receive their stock certificates.
Plan of Distribution
Materials for the offering have been distributed to eligible
subscribers by mail. Additional copies are available at our main office. Our
officers may be available to answer questions about the Conversion. Responses to
questions about us will be limited to the information contained in this
document. Officers will not be authorized to render investment advice. All
subscribers for the shares being offered will be instructed to send payment
directly to us. The funds will be held in a segregated special escrow account
and will not be released until the closing of the Conversion or its termination.
Marketing Arrangements
Trident has been engaged as our financial advisor in connection with
the offering. Trident has agreed to exercise its best efforts to assist us in
the sale of the shares in the offering. Trident will receive $85,000 which
includes payment for out-of-pocket and legal expenses. Also, we have agreed to
indemnify Trident for reasonable costs and expenses in connection with certain
claims or liabilities which might be asserted against Trident. This
indemnification covers the investigation, preparation of defense and defense of
any action, proceeding or claim relating to misrepresentation or breach of
warranty of the written agreement among Trident and us or the omission or
alleged omission of a material fact required to be stated or necessary in the
prospectus or other documents.
The shares will be offered principally by the distribution of this
document and through activities conducted at a Stock Information Center located
at our branch office. The Stock Information Center is expected to operate during
our normal business hours throughout the offering. A registered representative
employed by Trident will be working at, and supervising the operation of, the
Stock Information Center. Trident will assist us in responding to questions
regarding the Conversion and the offering and processing order forms. Our
personnel will be present in the Stock Information Center to assist Trident with
clerical matters and to answer questions related solely to our business.
20
<PAGE>
Stock Pricing
Ferguson, an independent economic consulting and appraisal firm, which
is experienced in the evaluation and appraisal of business entities, including
savings institutions involved in the conversion process has been retained by us
to prepare an appraisal of our estimated pro forma market value. Ferguson will
receive a fee of $14,000 for preparing the appraisal and its assistance in
connection with the preparation of a business plan and will be reimbursed up to
$3,500 for reasonable out-of-pocket expenses. We have agreed to indemnify
Ferguson under certain circumstances against liabilities and expenses arising
out of or based on any misstatement or untrue statement of a material fact
contained in the information supplied by us to Ferguson.
The appraisal was prepared by Ferguson in reliance upon the information
contained herein, including the financial statements. The appraisal contains an
analysis of a number of factors including, but not limited to, our financial
condition and operating trends, the competitive environment within which we
operate, operating trends of certain savings institutions and savings and loan
holding companies, relevant economic conditions, both nationally and in the
state of Pennsylvania which affect the operations of savings institutions, and
stock market values of certain savings institutions. In addition, Ferguson has
advised us that it has considered the effect of the additional capital raised by
the sale of the shares on our estimated aggregate pro forma market value.
On the basis of the above, Ferguson has determined, in its opinion,
that as of June 6, 1997 our estimated aggregate pro forma market value was
$2,500,000. OTS regulations require, however, that the appraiser establish a
range of value for the stock to allow for fluctuations in the aggregate value of
the stock due to changing market conditions and other factors. Accordingly,
Ferguson has established a range of value from $2,125,000 to $2,875,000 for the
offering (the Estimated Valuation Range or EVR). The EVR will be updated prior
to consummation of the Conversion and the EVR may increase to $3,306,000.
The board of directors has reviewed the independent appraisal,
including the stated methodology of the independent appraiser and the
assumptions used in the preparation of the independent appraisal. The board of
directors is relying upon the expertise, experience and independence of the
appraiser and is not qualified to determine the appropriateness of the
assumptions.
In order for stock sales to take place Ferguson must confirm to the OTS
that, to the best of Ferguson's knowledge and judgment, nothing of a material
nature has occurred which would cause Ferguson to conclude that the Purchase
Price on an aggregate basis was incompatible with Ferguson's estimate of our pro
forma market value of us in converted form at the time of the sale. If, however,
facts do not justify such a statement, an amended EVR may be established.
The appraisal is not a recommendation of any kind as to the
advisability of purchasing these shares. In preparing the appraisal, Ferguson
has relied upon and assumed the accuracy and completeness of financial and
statistical information provided by us. Ferguson did not independently verify
the financial statements and other information provided by us, nor did Ferguson
value independently our assets and liabilities. The appraisal considers us only
as a going concern and should not be considered as our liquidation value.
Moreover, because the appraisal is based upon estimates and projections of a
number of matters which are subject to change, the market price of the common
stock could decline below $10.00.
21
<PAGE>
Change in Number of Shares to be Issued in the Conversion
Depending on market and financial conditions at the time of the
completion of the Subscription and Public Offerings, if applicable, we may
significantly increase or decrease the number of shares to be issued in the
Conversion. In the event of an increase in the valuation, we may increase the
total number of shares to be issued in the Conversion. An increase in the total
number of shares to be issued in the Conversion would decrease a subscriber's
percentage ownership interest and the pro forma net worth (book value) per share
and increase the pro forma net income and net worth (book value) on an aggregate
basis. In the event of a material reduction in the valuation, we may decrease
the number of shares to be issued to reflect the reduced valuation. A decrease
in the number of shares to be issued in the Conversion would increase a
subscriber's percentage ownership interest and the pro forma net worth (book
value) per share and decrease pro forma net income and net worth on an aggregate
basis.
Persons ordering shares will not be permitted to modify or cancel their
orders unless the change in the number of shares to be issued in the Conversion
results in an offering which is either less than $2,125,000 or more than
$3,306,000.
Limitations on Purchases and Transfer of Shares
The Plan provides for certain additional purchase limitations. The
minimum purchase is 25 shares and the maximum purchase for any individual person
or persons ordering through a single account, is 7,500 shares. No person,
together with associates, or group of persons acting in concert, may purchase
more than 12,500 shares except for the Employee Plans which may purchase up to
8% of the shares sold. However, no person, together with associates and persons
acting in concert with such persons may purchase more than 5% of the amount of
stock sold. The OTS regulations governing the Conversion provide that officers
and directors and their associates may not purchase, in the aggregate, more than
35% of the shares issued pursuant to the Conversion.
Depending on market conditions and the results of the offering, the
board of directors may increase or decrease any of the purchase limitations
without the approval of our members and without resoliciting subscribers. If the
maximum purchase limitation is increased, persons who ordered the maximum amount
will be given the first opportunity to increase their orders. In doing so the
preference categories in the offerings will be followed.
In the event of an increase in the total number of shares offered in
the Conversion due to an increase in the EVR of up to 15% (the "Adjusted
Maximum"), the additional shares will be allocated in the following order of
priority: (i) to fill the Employee Plans' subscription of up to 8% of the
Adjusted Maximum number of shares (the ESOP currently intends to subscribe for
8%); (ii) in the event that there is an oversubscription by Eligible Account
Holders, to fill unfulfilled subscriptions of Eligible Account Holders exclusive
of the Adjusted Maximum; (iii) in the event that there is an oversubscription by
Supplemental Eligible Account Holders, to fill unfulfilled subscriptions to
Supplemental Eligible Account Holders exclusive of the Adjusted Maximum; (iv) in
the event that there is an oversubscription by Other Members, to fill
unfulfilled subscriptions of Other Members exclusive of the Adjusted Maximum;
and (v) to fill unfulfilled subscriptions in the Public Offering to the extent
possible, exclusive of the Adjusted Maximum.
The term "associate" of a person means (i) any corporation or
organization (other than us or a majority-owned subsidiary of ours) of which
such person is an officer or partner or is, directly or indirectly, the
beneficial owner of 10% or more of any class of equity securities, (ii) any
trust or other
22
<PAGE>
estate in which such person has a substantial beneficial interest or as to which
such person serves as director or in a similar fiduciary capacity (excluding
tax-qualified employee stock benefit plans), and (iii) any relative or spouse of
such person or any relative of such spouse, who has the same home as such person
or who is a director or officer of us, or any of our subsidiaries. For example,
a corporation of which a person serves as an officer would be an associate of
that person, and therefore all shares purchased by that corporation would be
included with the number of shares which that person individually could purchase
under the above limitations.
The term "officer" may include our chairman of the board, president,
vice presidents in charge of principal business functions, Secretary and
Treasurer and any other person performing similar functions. All references
herein to an officer have the same meaning as used for an officer in the Plan.
To order shares in the Conversion, persons must certify that their
purchase does not conflict with the purchase limitations. In the event that the
purchase limitations are violated by any person (including any associate or
group of persons affiliated or otherwise acting in concert with such persons),
we will have the right to purchase from that person at $10.00 per share all
shares acquired by that person in excess of the purchase limitations. If the
excess shares have been sold by that person, we may recover the profit from the
sale of the shares by that person. We may assign our right either to purchase
the excess shares or to recover the profits from their sale.
Shares of common stock purchased pursuant to the Conversion will be
freely transferable, except for shares purchased by our directors and officers.
For certain restrictions on the shares purchased by directors and officers, see
" -- Restrictions on Sales and Purchases of Shares by Directors and Officers."
In addition, under guidelines of the NASD, members of the NASD and their
associates are subject to certain restrictions on the transfer of securities
purchased in accordance with subscription rights and to certain reporting
requirements upon purchase of such securities.
Restrictions on Repurchase of Shares
Generally, during the first year following the Conversion, WSB may not
repurchase its shares and during each of the second and third years following
the Conversion, WSB may repurchase five percent of the outstanding shares
provided they are purchased in open-market transactions. Repurchases must not
cause us to become undercapitalized and at least 10 days prior notice of the
repurchase must be provided to the OTS. The OTS may disapprove a repurchase
program upon a determination that (1) the repurchase program would adversely
affect our financial condition, (2) the information submitted is insufficient
upon which to base a conclusion as to whether the financial condition would be
adversely affected, or (3) a valid business purpose was not demonstrated.
However, the OTS may grant special permission to repurchase shares after six
months following the Conversion and to repurchase more than five percent during
each of the second and third years. In addition, SEC rules also govern the
method, time, price, and number of shares of common stock that may be
repurchased by WSB and affiliated purchasers. If, in the future, the rules and
regulations regarding the repurchase of stock are liberalized, WSB may utilize
the rules and regulations then in effect.
Restrictions on Sales and Purchases of Shares by Directors and Officers
Shares purchased by directors and officers of WSB may not be sold for
one year following the Conversion, except in the event of the death of the
director or officer. Any shares issued to directors and officers as a stock
dividend, stock split, or otherwise with respect to restricted stock shall be
subject to the same restrictions.
23
<PAGE>
For three years following the Conversion, directors and officers may
purchase shares only through a registered broker or dealer. Exceptions are
available only if the OTS has approved the purchase or the purchase is an arm's
length transaction and involves more than one percent of the outstanding shares.
Interpretation and Amendment of the Plan
We have the authority to interpret and amend the Plan. Our
interpretations are final. Amendments to the Plan after the receipt of member
approval will not need further member approval unless required by the OTS.
Conditions and Termination
Completion of the Conversion requires (i) the approval of the Plan by
the affirmative vote of not less than a majority of the total number of votes
eligible to be cast by our members; and (ii) completion of the sale of shares
within 24 months following approval of the Plan by our members. If these
conditions are not satisfied, the Plan will be terminated and we will continue
our business in the mutual form of organization. We may terminate the Plan at
any time prior to the meeting of members to vote on the Plan or at any time
thereafter with the approval of the OTS.
Other
All statements made in this document are hereby qualified by the
contents of the Plan of Conversion, the material terms of which are set forth
herein. The Plan of Conversion is attached to the proxy statement mailed to
certain depositors and borrowers. Copies of the Plan are available from us and
we should be consulted for further information. Adoption of the Plan by our
members authorizes us to interpret, amend or terminate the Plan.
24
<PAGE>
Workingmens Savings Bank, FSB and Subsidiary
Consolidated Statements of Income
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
MARCH 31, JUNE 30,
------------------------------------ ------------------------------
1997 1996
(UNAUDITED) (UNAUDITED) 1996 1995
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans $ 861,065 $ 832,142 $ 1,122,699 $ 1,081,162
Investments 746,877 568,779 781,105 642,252
Other interest earning assets 67,389 127,204 149,012 81,887
----------- ----------- ----------- -----------
TOTAL INTEREST AND
DIVIDEND INCOME 1,675,331 1,528,125 2,052,816 1,805,301
----------- ----------- ----------- -----------
INTEREST EXPENSE
Deposits 935,206 940,412 1,256,267 1,035,045
Advances from FHLB 55,046 - - 3,859
----------- ----------- ----------- -----------
TOTAL INTEREST EXPENSE 990,252 940,412 1,256,267 1,038,904
----------- ----------- ----------- -----------
NET INTEREST INCOME 685,079 587,713 796,549 766,397
PROVISION FOR LOAN LOSSES 127,844 13,370 35,142 19,297
----------- ----------- ----------- -----------
NET INTEREST INCOME
AFTER PROVISION FOR
LOAN LOSSES 557,235 574,343 761,407 747,100
----------- ----------- ----------- -----------
NONINTEREST INCOME
Service charges and other fees 63,464 53,038 72,441 64,340
Net gain (loss) on sales of securities
available-for-sale (1,608) - 969 31,455
Income from real estate rental 3,200 6,875 7,825 9,613
Net gain on sale of foreclosed real estate - 5,486 650 8,780
------------- ----------- ----------- -----------
TOTAL NONINTEREST
INCOME 65,056 65,399 81,885 114,188
----------- ----------- ----------- -----------
NONINTEREST EXPENSE
Compensation and benefits 277,708 270,825 348,421 338,257
Occupancy and equipment expense 101,845 78,615 106,517 78,608
Insurance premiums 204,411 51,138 69,365 63,581
Other 190,010 202,724 273,956 219,253
----------- ----------- ----------- -----------
TOTAL NONINTEREST
EXPENSE 773,974 603,302 798,259 699,699
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE
INCOME TAXES (151,683) 36,440 45,033 161,589
INCOME TAX EXPENSE (BENEFIT) (76,412) 5,714 10,382 11,376
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (75,271) $ 30,726 $ 34,651 $ 150,213
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition and results
of operations is intended to assist you in understanding our financial condition
and results of operations. The information in this section should also be read
with our Consolidated Financial Statements and Notes to the Consolidated
Financial Statements elsewhere in this document.
WSB has recently been formed, and accordingly, has no results of
operations. The following discussion relates only to our consolidated financial
condition and results of operations.
Our results of operations depend primarily on net interest income,
which is determined by (i) the difference between rates of interest we earn on
our interest-earning assets and the rates we pay on interest-bearing liabilities
(interest rate spread), and (ii) the relative amounts of interest -earning
assets and interest-bearing liabilities. Our results of operations are also
affected by non-interest income, including, primarily, income from customer
deposit account service charges, gains and losses from the sale of investments
and mortgage-backed securities and non-interest expense, including, primarily,
compensation and employee benefits, federal deposit insurance premiums, office
occupancy costs, and data processing cost. Our results of operations also are
affected significantly by general and economic and competitive conditions,
particularly changes in market interest rates, government policies and actions
of regulatory authorities, all of which are beyond our control.
Asset/Liability Management
Our assets and liabilities may be analyzed by examining the extent to
which our assets and liabilities are interest rate sensitive and by monitoring
the expected effects of interest rate changes on our net portfolio value.
An asset or liability is interest rate sensitive within a specific time
period if it will mature or reprice within that time period. If our assets
mature or reprice more quickly or to a greater extent than our liabilities, our
net portfolio value and net interest income would tend to increase during
periods of rising interest rates but decrease during periods of falling interest
rates. Conversely, if our assets mature or reprice more slowly or to a lesser
extent than our liabilities, our net portfolio value and net interest income
would tend to decrease during periods of rising interest rates but increase
during periods of falling interest rates. Our policy has been to address the
interest rate risk inherent in the historical savings institution business of
originating long-term loans funded by short-term deposits by maintaining
sufficient liquid assets for material and prolonged changes in interest rates.
We originate fixed rate real estate loans which approximated 85% of our
loan portfolio at March 31, 1997. To manage the interest rate risk of this type
of loan portfolio, we limit maturities of fixed rate loans to no more than 20
years and maintain a portfolio of liquid assets. Maintaining liquid assets tends
to reduce potential net income because liquid assets usually provide a lower
yield than less liquid assets. At March 31, 1997, the average weighted term to
maturity of our mortgage loan portfolio was slightly more than 13 years and the
average weighted term of our deposits was slightly less than 8 months. See
"Business -- Lending Activities."
26
<PAGE>
Net Portfolio Value
In recent years, we have measured our interest rate sensitivity by
computing the "gap" between the assets and liabilities which were expected to
mature or reprice within certain time periods, based on assumptions regarding
loan prepayment and deposit decay rates formerly provided by the OTS. However,
we now compute amounts by which the net present value of our cash flow from
assets, liabilities and off balance sheet items (our net portfolio value or
"NPV") would change in the event of a range of assumed changes in market
interest rates. These computations estimate the effect on an our NPV from
instantaneous and permanent 1% to 4% (100 to 400 basis points) increases and
decreases in market interest rates. Based upon OTS assumptions, the following
table presents our NPV at March 31, 1997.
Percentage Change in Net Portfolio Value
----------------------------------------
Changes Change in NPV
in Market NPV Ratio(1) Ratio(2)
------------ --------
Interest Rates
--------------
(basis points)
+ 400 1.55% -696bp
+ 300 3.37% -514bp
+ 200 5.14% -337bp
+ 100 6.86% -165bp
0 8.51%
- 100 9.93% 142bp
- 200 11.15% 264bp
- 300 12.86% 435bp
- 400 14.62% 611bp
- ------------------
(1) Calculated as the estimated NPV dividend by present value of total
assets.
(2) Calculated as the excess (deficiency) of the NPV ratio assuming the
indicated change in interest rates over the estimated NPV ratio
assuming no change in interest rates.
Because most of our loans have a fixed rate, these calculations
indicate that we would be deemed to have a more than normal level of interest
rate risk under applicable regulatory capital requirements.
See "Regulations."
While we cannot predict future interest rates or their effects on our
NPV or net interest income, we do not expect current interest rates, assuming
rates remain stable, to have a material adverse effect on our NPV or net
interest income. Computations of prospective effects of hypothetical interest
rate changes are based on numerous assumptions, including relative levels of
market interest rates, prepayments and deposit run-offs and should not be relied
upon as indicative of actual results. Certain shortcomings are inherent in such
computations. Although certain assets and liabilities may have similar maturity
or periods of repricing they may react at different times and in different
degrees to changes in the market interest rates. The interest rates on certain
types of assets and liabilities may fluctuate in advance of changes in market
interest rates, while rates on other types of assets and liabilities may lag
behind changes in market interest rates. In the event of a change in interest
rates, prepayments and early withdrawal levels could deviate significantly from
those assumed in making calculations set forth above. Additionally, an increased
credit risk may result as the ability of many borrowers to service their debt
may decrease in the event of an interest rate increase.
27
<PAGE>
The board of directors reviews our asset and liability policies. The
board of directors meets quarterly to review interest rate risk and trends, as
well as liquidity and capital ratios and requirements. Management administers
the policies and determinations of the board of directors with respect to our
asset and liability goals and strategies. We expect that our asset and liability
policies and strategies will continue as described so long as competitive and
regulatory conditions in the financial institution industry and market interest
rates continue as they have in recent years.
Financial Condition
Total consolidated assets increased $2.5 million, or 8.3% to $33.1
million at March 31, 1997 from $30.6 million at June 30, 1996. The increase in
total assets reflects a $1.5 million increase in investment and mortgage-backed
securities, a $497,000 increase in loans and real estate, net, and a $387,000
increase in cash and cash equivalents.
Deposits decreased $297,000 or 1.1% to $27.9 million at March 31, 1997
from $28.2 million at June 30, 1996, whereas deposits increased $2.4 million or
9.2% to $28.2 million at June 30, 1997 from $25.8 million at June 30, 1995. The
increase in fiscal 1996, as well as the decrease in the nine months ended March
31, 1997 was a result of new deposits being attracted due to promoting the
opening of a new branch office and the subsequent movement of such new deposits
once the branch was operating for some time. We believe that the aggregate
dollar amount of deposits will remain stable. In the future, the relatively new
branch office is expected to attract additional deposits while the main office
might continue to experience slight declines in deposits. Interest bearing
liabilities increased $2.7 million, or 9.6% to $30.9 million at March 31, 1997
from $28.2 million at June 30, 1996. The increase reflects borrowings of $3.0
million from the FHLB which funded the purchases of our investments.
Results of Operations for the Nine Months Ended March 31, 1997 and 1996
Net Income. Net income decreased $106,000 or 345.0% from $31,000 for
the nine months ended March 31, 1996 to a net loss of $75,000 for the nine
months ended March 31, 1997. The decrease was primarily the result of the
recognition of the one-time SAIF special insurance assessment in the amount of
$108,000 (after taxes) and the increase in the provision for loan losses of
$114,000 partially offset by an increase in net interest income of $97,000.
Excluding the SAIF special insurance assessment, we would have recognized net
income of $33,000, an increase of 6.5% from the nine months ended March 31,
1996.
Net Interest Income. Net interest income is the most significant
component of our income from operations. Net interest income is the difference
between interest we receive on our interest-earning assets (primarily loans,
investment and mortgage-backed securities) and interest we pay on our
interest-bearing liabilities (primarily deposits and borrowed funds). Net
interest income depends on the volume of and rates earned on interest-earning
assets and the volume of and rates paid on interest-bearing liabilities.
The following tables set forth a summary of average balances of assets
and liabilities as well as average yield and cost information. Average balances
are derived from monthly balances, however, we do not believe the use of
month-end balances has caused any material differences in the information
presented. There has been no tax equivalent adjustments made to yields.
28
<PAGE>
<TABLE>
<CAPTION>
For the Nine Months Ended March 31, (4) At March 31,
-------------------------------------------------------------------- ----------------------
1997 1996 1997
----------------------------------- ------------------------------- ----------------------
Average Average Average
Average Yield/ Average Yield/ Yield/
Balance Interest Cost Balance Interest Cost Balance Cost
------- -------- -------- ------- -------- ------ -------- -----
Interest-earning assets: (Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loans receivable(1).................. $14,015 $ 861 8.19% $13,068 $ 832 8.49% $14,326 8.59%
Investment securities ............... 14,973 747 6.65 11,650 569 6.51 15,736 6.99
Other interest-earning assets........ 1,237 67 7.27 3,493 127 4.85 1,355 5.60
------ ------ ------ ----- ------
Total interest-earning assets.......... $30,225 $1,675 7.39% $28,211 $1,528 7.22% $31,417 7.66%
----- -----
Non-interest-earning assets............ 1,628 1,136 1,710
------ ------ ------
Total assets........................... $31,853 $29,347 $33,127
====== ====== ======
Interest-bearing liabilities:
NOW accounts......................... $ 1,467 $ - -% $ 1,336 $ - -% $ 1,493 -%
Passbook and club accounts........... 10,064 240 3.18 10,032 249 3.31 10,130 3.19
Certificates of deposit.............. 16,477 695 5.63 15,575 691 5.92 16,237 5.68
Other liabilities.................. 1,500 55 4.89 - - - 3,000 5.80
------ ----- ------- ------- ------
Total interest-bearing
liabilities.......................... $29,508 $ 990 4.47% $26,943 $ 940 4.65% $30,860 4.60%
------ ------
Non-interest-bearing
liabilities........................ 290 316 247
------ ------ ------
Total liabilities.................. $29,798 $27,259 $31,107
------ ------ ------
Retained earnings...................... 2,055 2,088 2,020
------ ------ ------
Total liabilities and
retained earnings.................... $31,853 $29,347 $33,127
====== ====== ======
Net interest income.................. $ 685 $ 588
===== =====
Interest rate spread(2).............. 2.92% 2.57% 3.06%
Net yield on interest-
earning assets(3).................... 3.02% 2.78% -%
Ratio of average interest-
earning assets to average
interest-bearing liabilities........ 102.43% 104.71% 101.81%
</TABLE>
- ---------------------------------
(1) Average balances include non-accrual loans.
(2) Interest rate spread represents the difference between the average
yield on interest-earning assets and the average cost of
interest-bearing liabilities.
(3) Net yield on interest-earning assets represents net interest income as
a percentage of average interest-earning assets.
(4) Annualized (where appropriate) for purposes of comparability with
fiscal year date.
29
<PAGE>
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------------------------------------------------------------
1996 1995
----------------------------------- -----------------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets: (Dollars in Thousands)
Loans receivable(1)......................... $13,296 $1,123 8.44% $12,821 $1,081 8.43%
Investment securities ...................... 12,276 781 6.36 11,152 642 5.76
Other interest-earning assets............... 2,738 149 5.44 2,482 82 3.30
------ ------ ------ -----
Total interest-earning assets................. $28,310 $2,053 7.25% $26,455 $1,805 6.82%
----- -----
Non-interest-earning assets................... 1,121 620
------ ------
Total assets.................................. $29,431 $27,075
====== ======
Interest-bearing liabilities:
NOW accounts................................ $ 1,344 $ - -% $ 1,353 $ 7 0.54%
Passbook and club accounts.................. 10,034 328 3.27 11,203 397 3.55
Certificates of deposit..................... 15,590 928 5.95 12,122 635 5.23
Other liabilities........................... - - - - - -
------ ----- ------- -----
Total interest-bearing liabilities.......... $26,968 $1,256 4.66% $24,678 $1,039 4.21%
Non-interest-bearing liabilities............ 367 373
------ ------
Total liabilities........................... $27,335 $25,051
------ ------
Retained earnings........................... 2,096 2,024
------ ------
Total liabilities and retained earnings... $29,431 $27,075
====== ======
Net interest income......................... $ 797 $ 766
===== =====
Interest rate spread(2)..................... 2.59% 2.61%
Net yield on interest-earning assets(3)....... 2.82% 2.89%
Ratio of average interest-earning assets to
average interest-bearing liabilities........ 104.98% 107.20%
</TABLE>
- ---------------------------------
(1) Average balances include non-accrual loans.
(2) Interest rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing liabilities.
(3) Net yield on interest-earning assets represents net interest income as a
percentage of average interest-earning assets.
30
<PAGE>
The table below sets forth information regarding changes in our
interest income and interest expense for the periods indicated. For each
category of our interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume
(changes in volume multiplied by old rate); (ii) changes in rate (changes in
rate multiplied by old volume); (iii) changes in rate-volume (changes in rate
multiplied by the change in volume).
<TABLE>
<CAPTION>
Nine Months Ended Year Ended June 30,
------------------------------------------------- ------------------------------------------
1997 vs. 1996 1996 vs. 1995
------------------------------------------------- ------------------------------------------
Increase (Decrease) Increase (Decrease)
Due to Due to
------------------------------------------------- ------------------------------------------
Rate/ Rate/
Volume Rate Volume Net Volume Rate Volume Net
------------ --------- -------- ------------- ------- ------- ------------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Loans receivable................... $ 60 $(29) $ (2) $ 29 $ 40 $ 2 $ - $ 42
Investment securities.............. 162 12 4 178 65 67 7 139
Other interest-earning assets...... (82) 63 (41) (60) 8 53 6 67
---- ---- --- --- --- --- --- ---
Total interest-earning assets..... $140 $ 46 $ (39) $147 $ 113 $122 $ 13 $248
=== === === === === === === ===
Interest expense:
Non-interest-bearing
and NOW accounts................ $ - $ - $ - $ - $ - $ (7) $ - $ (7)
Passbook and club accounts........ 1 (10) - (9) (42) (30) 3 (69)
Certificates of deposit 40 (34) (2) (4) 181 87 25 293
Other liabilities.................. 55 - - 55 - - - -
--- ---- ---- ---- ---- ---- ---- ----
Total interest-bearing $ 96 $(44) $ (2) $ 50 $ 139 $ 50 $ 28 $217
=== === === === === === ==== ===
liabilities....................
Net change in interest income....... $ 44 $ 90 $ (37) $ 97 $ (26) $ 72 $ (15) $ 31
==== === ==== === ==== ==== ==== ====
</TABLE>
31
<PAGE>
Our net interest income increased $97,000 or 16.6% to $685,000 for the
nine months ended March 31, 1997 compared to $588,000 for the nine months ended
March 31, 1996. The increase was due primarily to the growth of average
interest-earning assets from $28.2 million for the nine months ended March 31,
1996 to $30.2 million for the nine month ended March 31, 1997.
The increase in our average interest-earning assets of $2.0 million
reflects an increase of $947,000 in average loans, an increase of $3.3 million
in average investment and mortgage-backed securities offset by a decrease of
$2.3 million in average other interest-earning assets.
Our interest rate spread and net interest margin increased for the nine
months ended March 31, 1997 compared to the nine months ended March 31, 1996.
This was due to the increase in the yield on interest-earning assets from 7.22%
for the nine months ended March 31, 1996 to 7.39% for the nine months ended
March 31, 1997, and by the decrease in the interest cost of average interest
bearing liabilities from 4.65% in the nine months ended March 31, 1996 to 4.47%
in the nine months ended March 31, 1997.
The yield on our average interest-earning assets increased in the nine
months ended March 31, 1997 due to an increase in the average balance of loans
and investment securities.
The decrease in the cost of our average interest-bearing liabilities
was due primarily to a decrease in the cost of certificates of deposit from
5.92% in the nine months ended March 31, 1996 to 5.63% in the nine months ended
March 31, 1997 and interest-bearing demand deposits from 3.31% in the nine
months ended March 31, 1996 to 3.18% in the nine months ended March 31, 1997,
offset partially by an increase in the average other interest-bearing
liabilities.
Provision for Loan Losses. Our provision for loan losses increased
$115,000 or 856% to $128,000 for the nine months ended March 31, 1997 from
$13,000 for the nine months ended March 31, 1996.
The increase in the provision for loan losses for the nine months ended
March 31, 1997 was attributable to changes in one of our borrower's ability to
repay. The borrower had outstanding, 16 non-performing loans that ranged from
$30,000 to $100,000, totalling $736,000, secured by 1- to 4-family residences.
The properties are located in Mount Washington, a highly desirable area for
development in the city of Pittsburgh. During the quarter, we became aware of
circumstances which might decrease the value of the collateral for these loans,
due to two properties being torn down by the borrower and maintenance for other
properties being neglected by the borrower. Full payment of the loan is due June
30, 1997 and if not paid, foreclosure proceedings will occur on July 7, 1997.
In the beginning of June 1997 certain circumstances came to our
attention that the borrower might have difficulty in repaying the loans on June
30, 1997. If payment is not received on this date, the loans will be classified
as other real estate owned. We do not anticipate any additional loss on the
properties.
Historically, we have emphasized our loss experience over other factors
in establishing the provision for loan losses. We review the allowance for loan
losses in relation to (i) our past loan loss experience, (ii) known and inherent
risks in our portfolio, (iii) adverse situations that may affect the borrower's
ability to repay, (iv) the estimated value of any underlying collateral, and (v)
current economic conditions. Because of the increased coverage of the allowances
for loan losses to total loans, management believes the allowance for loan
losses is at a level that is considered to be adequate to
32
<PAGE>
provide for estimated losses; however, there can be no assurance that further
additions will not be made to the allowance and that such losses will not exceed
the estimated amount.
Noninterest Expense. Our noninterest expense increased by $171,000 or
28.3% from $603,000 for the nine months ended March 31, 1996 to $774,000 for the
nine months ended March 31, 1997. The increase was primarily attributable to the
one-time special SAIF assessment of $161,000. Pursuant to the Economic Growth
and Paperwork Reduction Act of 1996 (the "Act"), the FDIC imposed a special
assessment on SAIF members to capitalize the SAIF at the designated reserve
level of 1.25% as of October 1, 1996. Based on our deposits as of March 31,
1995, the date for measuring the amount of the special assessment pursuant to
the Act, our special assessment was $161,000. Due to the recapitalization of the
SAIF, we expect lower premiums for deposit insurance in future periods. The SAIF
insurance assessment rate paid by us before the recapitalization of SAIF was
23(cent) per $100 of deposits and decreased to 6.5(cent) per $100 of deposits
after the recapitalization of SAIF.
Pursuant to the Act, we will pay, in addition to our normal deposit
insurance premium as a member of the SAIF, an annual amount equal to
approximately 6.5 basis points of outstanding SAIF deposits toward the
retirement of the Financing Corporation Bonds ("Fico Bonds") issued in the
1980's to assist in the recovery of the savings and loan industry. Members of
the Bank Insurance Fund ("BIF"), by contrast, will pay, in addition to their
normal deposit insurance premium, approximately 1.3 basis points. Beginning no
later than January 1, 2000, the rate paid to retire the Fico Bonds will be equal
for members of the BIF and the SAIF. The Act also provides for the merging of
the BIF and the SAIF by January 1, 1999 provided there are no financial
institutions still chartered as savings associations at that time. Should the
insurance funds be merged before January 1, 2000, the rate paid by all members
of this new fund to retire the Fico Bonds would be equal.
Income Tax Benefit. Our income tax benefit for the nine months ended
March 31, 1997 was $76,000 compared to $6,000 expense for the nine months ended
March 31, 1996. The $ 82,000 decrease was the result of pre-tax income
decreasing by $188,000, which was primarily the result of the SAIF special
insurance assessment.
Results of Operations for the Years Ending June 30, 1996 and 1995
Net Income. Net income decreased $115,000 or 76.9% from $150,000 for
fiscal 1995 to $35,000 for fiscal 1996. The decrease was primarily the result of
a reduction in gain on sale of securities available-for-sale of $30,000 and
increases in noninterest expenses associated with the opening of our new branch
office building in November, 1995.
Net Interest Income. Our net interest income increased $31,000 or 3.9%
to $797,000 in fiscal 1996 compared to $766,000 in fiscal 1995. The increase was
due primarily to the growth of average interest-earning assets from $26.5
million in fiscal 1995 to $28.3 million in fiscal 1996.
The increase in our average interest-earning assets of $1.8 million
reflects an increase of $475,000 in average loans, an increase of $1.1 million
in average investment and mortgage-backed securities and an increase of $256,000
in average other interest-earning assets.
Our interest rate spread and net interest margin decreased in fiscal
1996 compared to fiscal 1995. This was due to the increase in the yield on
interest-earning assets from 6.82% in fiscal 1995 to 7.25% in fiscal 1996 being
exceeded by the increase in the interest cost of average interest bearing
liabilities from 4.21% in fiscal 1995 to 4.66% in fiscal 1996.
33
<PAGE>
The yield on our average interest-earning assets increased in fiscal
1996 due to an increase in the yield on investment securities. This increase in
yield on our investment securities reflected the investment of the proceeds
received from maturities of tax-exempt securities into taxable securities.
The increase in the cost of our average interest-bearing liabilities
was due primarily to an increase in the cost of certificates of deposit from
5.23% in fiscal 1995 to 5.95% in fiscal 1996, and an increase in the average
balance of $3.5 million, offset partially by a decrease in the cost of
interest-bearing demand deposits from 3.55% in fiscal 1995 to 3.27% in fiscal
1996.
Provision for Loan Losses. Our provision for loan losses for fiscal
1996 was $35,000 and for fiscal 1995 was $19,000. The provision for loan losses
for both years was due to our assessment of market and economic conditions. Our
loan portfolio consists primarily of one- to four-family mortgage loans and we
experienced little change in the composition of our loan portfolio. In addition,
we experienced minimal charge-offs in the past two years.
NonInterest Income. Our non-interest income decreased approximately
$32,000 in fiscal 1996 as compared to fiscal 1995. This was attributable to
$39,000 higher gains on securities and foreclosed real estate in fiscal 1995
offset by a $7,000 increase in service charges and fees in fiscal 1996.
NonInterest Expense. Our non-interest expense increased by $99,000 or
14.1% from $699,000 for fiscal 1995 to $798,000 for fiscal 1996. The increase
was primarily attributable to expenses associated with the opening of our newly
constructed branch office. Such expenses included advertising and promotion, ATM
expenses, depreciation, occupancy and equipment expenses, printing and data
processing.
Income Tax Expense. Our income tax expense remained relatively constant
at $10,000 for fiscal 1996 and $11,000 for fiscal 1995.
Liquidity and Capital Resources
We are required to maintain minimum levels of liquid assets as defined
by OTS regulations. This requirement, which varies from time to time depending
upon economic conditions and deposit flows, is based upon a percentage of our
deposits and short-term borrowings. The required ratio currently is 5.0% and our
liquidity ratio average was 24.40% and 21.72% at March 31, 1997 and June 30
1996, respectively.
Our primary sources of funds are deposits, repayment of loans and
mortgage-backed securities, maturities of investments and interest-bearing
deposits, funds provided from operations and advances from the FHLB of
Pittsburgh. While scheduled repayments of loans and mortgage-backed securities
and maturities of investment securities are predicable sources of funds, deposit
flows, and loan prepayments are greatly influenced by the general level of
interest rates, economic conditions and competition. We use our liquidity
resources principally to fund existing and future loan commitments, to fund
maturing certificates of deposit and demand deposit withdrawals, to invest in
other interest-earning assets, to maintain liquidity, and to meet operating
expenses.
34
<PAGE>
Net cash provided by our operating activities (the cash effects of
transactions that enter into our determination of net income -- e.g., non-cash
items, amortization and depreciation, provision for loan losses) for the year
ended June 30, 1996 was $66,000 as compared to $94,000 for the year ended June
30, 1995 and $40,000 for the nine months ended March 31, 1997 as compared to
$7,000 for the nine months ended March 31, 1996.
Net cash used in our investing activities (i.e., cash receipts,
primarily from our investment securities and mortgage-backed securities
portfolios and our loan portfolio) for the year ended June 30, 1996 totalled
$5.6 million, an increase of $7.0 million from June 30, 1995. The increase was
primarily attributable to our use of $1.0 million in cash to fund the increase
in loan originations, the use of $3.9 million in cash to fund the net increase
in investment and mortgage-backed securities and the use of $809,000 to
construct and equip the new branch office. Net cash used in our investing
activities for the nine months ended March 31, 1997 totalled $2.2 million, an
increase of $1.6 million from the nine months ended March 31, 1996. The increase
was primarily attributable to the use of $1.5 million in cash to fund the net
increase in investment and mortgage-backed securities, and the use of $620,000
in cash to fund the increase in loan originations.
Net cash provided by our financing activities (i.e., cash receipts
primarily from net increases in deposits and net FHLB advances) for fiscal 1996
totalled $2.3 million. This is a result of a net increase in deposits of $2.4
million offset by a decrease in advances from borrowers for taxes and insurance
of $62,000. Net cash provided by our financing activities for the nine months
ended March 31, 1997 totalled $2.5 million. This is a result of a borrowing from
the FHLB of $3.0 million offset by a decrease in deposits of $297,000 and a
decrease in advances from borrowers for taxes and insurance of $157,000.
Recent Accounting Pronouncements
FASB Statement on Earnings Per Share. In March 1997, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 128. The Statement establishes standards for computing
and presenting earnings per share and applies to entities with publicly held
common stock or potential common stock. This Statement simplifies the standards
for computing earnings per share previously found in Accounting Principal Board
("APB") Opinion No. 15, Earnings per Share ("EPS"), and makes them comparable to
international EPS standards. It replaces the presentation of primary EPS with a
presentation of basic EPS. It also requires dual presentation of basic and
diluted Earnings per Share on the face of the income statement for all entities
with complex capital structures and requires a reconciliation of the numerator
and the denominator of the basic EPS computation to the numerator and
denominator of the diluted Earnings per Share computation. Basic EPS excludes
dilution and is computed by dividing income available to common stockholders by
the weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the
entity. Diluted EPS is computed similarly to fully diluted EPS pursuant to APB
Opinion No. 15. This statement supersedes Opinion 15 and AICPA Accounting
Interpretation 1-102 of Opinion 15. This statement is effective for financial
statements issued for periods ending after December 15, 1997, including interim
periods. SFAS No. 128 will be adopted by us in the initial period after December
15, 1997. We do not believe the impact of adopting SFAS No. 128 will be material
to our financial statements.
FASB Statement on Disclosure of Information about Capital Structure. In
February 1997, the FASB issued SFAS No. 129. The Statement incorporates the
disclosure requirements of APB Opinion No. 15, Earnings per Share, and makes
them applicable to all public and nonpublic entities that have
35
<PAGE>
issued securities addressed by the Statement. APB Opinion No. 15 requires
disclosure of descriptive information about securities that is not necessarily
related to the computation of earnings per share. This statement continues the
previous requirements to disclose certain information about an entity's capital
structure found in APB Opinions No. 10, Omnibus Opinion - 1966, and No. 15,
Earnings per Share, and FASB Statement No. 47, Disclosure of Long-Term
Obligations, for entities that were subject to the requirements of those
standards. This Statement eliminates the exemption of nonpublic entities from
certain disclosure requirements of Opinion 15 as provided by FASB Statement No.
21, Suspension of the Reporting of Earnings per Share and Segment Information by
Nonpublic Enterprises. It supersedes specific disclosure requirements of
Opinions 10 and 15 and Statement 47 and consolidates them in this Statement for
ease of retrieval and for greater visibility to nonpublic entities. The
Statement is effective for financial statements for periods ending after
December 15, 1997. SFAS No. 129 will be adopted by us in the initial period
after December 15, 1997. We do not believe the impact of adopting SFAS No.
129 will be material to our financial statements.
FASB Statement of on Accounting for Stock-Based Compensation. In
October 1995, the FASB issued SFAS No. 123. SFAS No. 123 defines a "fair value
based method" of accounting for an employee stock option whereby compensation
cost is measured at the grant date based on the value of the award and is
recognized over the service period. FASB has encouraged all entities to adopt
the fair value based method, however, it will allow entities to continue the use
of the "intrinsic value based method" prescribed by APB Opinion No. 25. Under
the intrinsic value based method, compensation cost is the excess of the market
price of the stock at the grant date over the amount an employee must pay to
acquire the stock. However, most stock option plans have no intrinsic value at
the grant date and, as such, no compensation cost is recognized under APB
Opinion No. 25. Entities electing to continue use of the accounting treatment of
APB Opinion No. 25 must make certain pro forma disclosures as if the fair value
based method had been applied. The accounting requirements of SFAS No. 123 are
effective for transactions entered into in fiscal years beginning after December
15, 1995. Pro forma disclosures must include the effects of all awards granted
in fiscal years beginnings after December 15, 1994. We will continue to use the
"intrinsic value based method" as prescribed by APB Opinion No. 25. Accordingly,
we do not believe the impact of adopting SFAS No. 123 will be material to our
financial statements.
In November 1993, the American Institute of Certified Public
Accountants ("AICPA") issued SOP 93-6 Employers' Accounting for Employee Stock
Ownership Plan. SOP 93-6 addresses accounting for shares of stock issued to
employees by an employee stock ownership plan. SOP 93-6 requires that the
employer record compensation expense in an amount equal to the fair value of
shares committed to be released from the ESOP to employees. SOP 93-6 is
effective for fiscal years beginning after December 15, 1993 and relates to
shares purchased by an ESOP after December 31, 1992. If the common stock
appreciates over time, SOP 93-6 will increase compensation expense relative to
the ESOP, as compared with prior guidance that required recognition of
compensation expense based on the cost of the shares acquired by the ESOP. The
amount of any such increase, however, cannot be determined at this time because
the expense will be based on the fair value of the shares committed to be
released to employees, which amount is not determinable. See "Pro Forma Data."
BUSINESS OF WSB HOLDING COMPANY
WSB is not an operating company and has not engaged in any significant
business to date. It was formed in June 1997 as a Pennsylvania-chartered
corporation to be the holding company for Workingmens Savings Bank, FSB. The
holding company structure and retention of proceeds will facilitate: (i)
diversification into non-banking activities, (ii) acquisitions of other
financial institutions, such
36
<PAGE>
as savings institutions, (iii) expansion within existing and into new market
areas and (iv) stock repurchases without adverse tax consequences. There are no
present plans regarding diversification, acquisitions, expansion, or
repurchases.
Since WSB will own only one savings association, it generally will not
be restricted in the types of business activities in which it may engage;
provided, that we retain a specified amount of our assets in housing-related
investments. WSB initially will not conduct any active business and does not
intend to employ any persons other than officers but will utilize our support
staff from time to time.
The office of the WSB is located at 807 Middle St., Pittsburgh,
Pennsylvania. The telephone number is (412) 231-7297.
BUSINESS OF WORKINGMENS SAVINGS BANK, FSB
The principal sources of funds for our activities are deposits,
payments on loans and borrowings from the FHLB of Pittsburgh. Our deposits
totalled $27.9 million at March 31, 1997. Funds are used principally for the
origination of loans secured by first mortgages on one- to four-family
residences which are located in our market area and investment securities. Such
loans totalled $10.6 million, or 73.91%, of our total loans receivable portfolio
at March 31, 1997. Our principal source of revenue is interest received on loans
and investments and our principal expense is interest paid on deposits.
Market Area
Our main office is located in the North Side of Pittsburgh and our
branch office is located in Baldwin, a suburb of Pittsburgh. The communities of
North Side, Baldwin, and surrounding areas of Allegheny County are considered to
be our primary market area. Most of our deposits and lending activity is
generated from individuals who live in these areas. We are a community-oriented
thrift and have served the local Allegheny County community since 1881. However,
our main office is located in an area where there is limited growth
opportunities for loan originations and deposit needs and, our branch office is
located in a more affluent area, where a significant amount of our loans are
originated and deposit accounts are generated.
The Greater Pittsburgh area has been in the process of restructuring
over the past decade. Once centered on heavy manufacturing, primarily steel, its
economic base is now more diverse, including technology, health and business
services. Several "Fortune 500" industrial firms are headquartered in the
Greater Pittsburgh area, including USX Corporation and Westinghouse Electric
Corporation. The largest employers in Pittsburgh, by the number of local
employees, include the United States Government, the Commonwealth of
Pennsylvania, Westinghouse, USAir, and the University of Pittsburgh. Seven
colleges and universities are located in the general Pittsburgh area.
Lending Activities
Most of our loans are mortgage loans which are secured by one- to
four-family residences. We also make multi-family, commercial real estate and
consumer loans. Loans originated by us have rates of interest which are fixed
for the term of the loan ("fixed rate").
37
<PAGE>
The following table sets forth information concerning the types of
loans held by us.
<TABLE>
<CAPTION>
At March 31, At June 30,
------------------------- ------------------------------------------------------------
1997 1996 1995
------------------------- --------------------------- ------------------------------
Amount Percent Amount Percent Amount Percent
(Dollars in Thousands)
Type of Loans:
Real Estate Loans:
<S> <C> <C> <C> <C> <C> <C>
One- to four- family ................... $10,596 73.91% $10,022 73.06% $ 9,708 75.76%
Multi-family............................ 1,608 11.22 1,811 13.20 1,220 9.52
Commercial.............................. 619 4.32 666 4.86 765 5.97
Other................................... 4 .03 6 .04 26 .20
Consumer Loans:
Home equity and second mortgage loans... 1,109 7.73 856 6.24 817 6.38
Share loans............................. 154 1.07 172 1.25 151 1.18
Other................................... 246 1.72 185 1.35 127 0.99
------- ------ ------- ------ ------- ------
Total loans......................... 14,336 100.00% 13,718 100.00% 12,814 100.00%
====== ====== ======
Less:
Deferred loan origination fees and costs 10 13 28
Allowance of loan losses ............... 201 76 89
------- -------- -------
Total loans, net..................... $14,125 $13,629 $12,798
====== ====== ======
</TABLE>
The following table sets forth the estimated maturity of our loan
portfolio at March 31, 1997. The table does not include the effects of possible
prepayments or scheduled repayments. All mortgage loans are shown as maturing
based on the date of the last payment required by the loan agreement.
<TABLE>
<CAPTION>
Home
One- to four- Other Equity and
Family Multi- Real Second Other
Residential Family Estate Mortgages Consumer Total
----------- ------ ------ --------- -------- -----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Amounts due:
Within 1 year........ $ 93 $ 15 $ - $ 255 $ 5 $ 368
Over 1 to 3 years.... 234 18 4 93 87 436
Over 3 to 5 years.... 995 221 - 252 154 1,622
Over 5 to 10 years... 2,006 329 - 509 - 2,844
Over 10 years........ 7,268 1,644 - - 154 9,066
------ ----- ------- ------- ------ ------
Total amount due..... $10,596 $2,227 $ 4 $1,109 $ 400 $14,336
====== ===== ======= ===== ====== ======
</TABLE>
38
<PAGE>
The following table sets forth the dollar amount of all loans for which
final payment is not due until after March 31, 1997. The table also shows the
amount of loans which have fixed rates of interest.
At March 31, 1997, we had no loans with adjustable rates of interest.
Fixed rates
-----------
(In Thousands)
Real Estate Loans:
One- to four-family residential............. $10,503
Multi-family................................ 2,212
Other real estate........................... 4
Home equity and second mortgages.............. 854
Other consumer................................ 395
------
Total....................................... $13,968
======
The following table contains information concerning changes in the
amount of loans held by us.
<TABLE>
<CAPTION>
For the Nine For the Years Ended
Months Ended June 30,
March 31,
1997 1996 1995
----------------- ------------------ ----------
(In Thousands)
<S> <C> <C> <C>
Total gross loans receivable at beginning of period........ $13,718 $12,915 $12,790
------ ------ ------
Loans originated:
One- to four-family residential.......................... 1,696 2,037 1,134
Multi-family............................................. - 184 200
Other real estate........................................ 40 30 68
Home equity and second mortgages......................... 586 477 738
Other consumer........................................... 163 166 129
------- -------- --------
Total loans originated..................................... 2,485 2,894 2,269
------ ------ ------
Loans purchased:
Participation loans, one- to four-family residential..... 36 7 100
------- ------- -------
Total loans purchased...................................... 36 7 100
------- ------- -------
Loan principal repayments.................................. (1,913) (2,098) (2,244)
------ ------ ------
Net loan activity.......................................... 608 803 125
------ ------ ------
Total gross loans receivable at end of period............ $14,326 $13,718 $12,915
====== ====== ======
</TABLE>
39
<PAGE>
One- to Four-Family Residential Loans. Our primary lending activity
consists of the origination of one- to four-family fixed rate residential
mortgage loans secured by property located in our primary market area. We
generally originate one- to four-family fixed rate residential mortgage loans in
amounts up to 90% of the lesser of the appraised value or purchase price, with
private mortgage insurance required on loans with a loan-to-value ratio in
excess of 80%. The maximum loan-to-value ratio on mortgage loans secured by
non-owner occupied properties generally is limited to 80%. We retain all of our
mortgage loans and originate these loans with maturities of up to 20 years. On a
limited basis, we originate and retain fixed rate balloon loans having terms of
up to 15 years, with principal and interest payments calculated using up to a
30-year amortization period. Loans originated at the main office consist almost
entirely of one- to four-family investment (non-owner occupied) mortgage loans
while the remainder of our loans are originated from our branch office, and
include most of our one- to four-family owner occupied residential mortgage
loans.
Mortgage loans originated and held by us generally include due-on-sale
clauses. This gives us the right to deem the loan immediately due and payable in
the event the borrower transfers ownership of the property securing the mortgage
loan without our consent.
Home Equity Loans and Second Mortgages. We originate home equity loans
and second mortgage loans which are secured by one to four-family residences. We
originate these loans on one- to four-family residences with fixed rate terms of
up to 10 years. The loans are generally subject to a 80% combined loan-to-value
limitation, including any other outstanding mortgages or liens.
Multi-Family and Commercial Loans. Our multi-family loans are secured
by apartment buildings. These loans generally have not exceeded $500,000 or have
terms greater than 20 years. Commercial real estate loans are secured by office
buildings, and other commercial properties.
Multi-family and commercial real estate lending entails significant
additional risks compared to residential property lending. These loans typically
involve large loan balances to single borrowers or groups of related borrowers.
The repayment of these loans typically is dependent on the successful operation
of the real estate project securing the loan. These risks can be significantly
affected by supply and demand conditions in the market for office and retail
space and may also be subject to adverse conditions in the economy. To minimize
these risks, we generally limit this type of lending to our market area and to
borrowers who are otherwise well known to us.
Loan Approval Authority and Underwriting. We established various
lending limits for our officers and maintain a loan committee. Mr. Neudorfer,
our President, has loan authority to approve all loans. Our Vice President and
Treasurer, Mr. Moreschi, has authority to approve all applications for secured
and unsecured consumer loans. The loan committee ratifies all fixed rate
residential mortgage loans of $200,000 or more and all other real estate loans
and consumer loans.
Upon receipt of a completed loan application from a prospective
borrower, a credit report is ordered. Income and certain other information is
verified. If necessary, additional financial information may be requested. An
appraisal or other estimate of value of the real estate intended to be used as
security for the proposed loan is obtained. Appraisals are processed by
independent fee appraisers.
Title insurance is generally required on all real estate mortgage
loans. We do not require title insurance on home equity loans and second
mortgages, but we obtain a property report from our local state tax office which
indicates whether there are any liens or other encumbrances against the
property.
40
<PAGE>
Borrowers also must obtain fire and casualty insurance. Flood insurance is also
required on loans secured by property that is located in a flood zone.
Loan Commitments. Written commitments are given to prospective
borrowers on all approved real estate loans. Generally, the commitment requires
acceptance within 60 days of the date of issuance. At March 31, 1997,
commitments to cover originations of mortgage loans totalled $154,000. We
believe that virtually all of our commitments will be funded.
Loans to One Borrower. The maximum amount of loans which we may make to
any one borrower may not exceed the greater of $500,000 or 15% of our unimpaired
capital and unimpaired surplus. We may lend an additional 10% of our unimpaired
capital and unimpaired surplus if the loan is fully secured by readily
marketable collateral. Since 1989, our maximum loan-to-one borrower limit is
$500,000. At March 31, 1997, the aggregate loans outstanding of our five largest
borrowers have outstanding balances of between $236,000 and $736,000. Two of
these loans are in excess of our lending limit but were in compliance with OTS
regulations applicable at the time the loans were originated. One of these loans
is a non-performing loan. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Provision for Loan Losses".
Nonperforming and Problem Assets
Loan Delinquencies. When a mortgage loan becomes 30 days past due, a
notice of nonpayment is sent to the borrower. If, after 60 days, payment is
still delinquent, a notice of right to cure default is sent to the borrower
giving 30 additional days to bring the loan current before foreclosure is
commenced. If the loan continues in a delinquent status for 90 days past due and
no repayment plan is in effect, foreclosure proceedings will be initiated. The
customer will be notified when foreclosure is commenced.
Loans are reviewed on a monthly basis and are placed on a non-accrual
status when the loan becomes more than 90 days delinquent or when, in our
opinion, the collection of additional interest is doubtful. Interest accrued and
unpaid at the time a loan is placed on nonaccrual status is charged against
interest income. Subsequent interest payments, if any, are either applied to the
outstanding principal balance or recorded as interest income, depending on the
assessment of the ultimate collectibility of the loan.
Nonperforming Assets. The following table sets forth information
regarding nonaccrual loans and real estate owned, as of the dates indicated. We
have no loans categorized as troubled debt restructurings within the meaning of
SFAS 15 and no accruing loans that were delinquent more than 90 days. Interest
income that would have been recorded on loans accounted for on a nonaccrual
basis under the original terms of such loans was $71,000 for the nine months
ended March 31, 1997. Subsequent to March 31, 1997, certain circumstances came
to our attention which indicated that $736,000 of our nonaccrual loans might be
classified as other real estate owned. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Results of Operations for
the Nine Months Ended March 31, 1997 and 1996 - Provision for Loan Losses".
41
<PAGE>
<TABLE>
<CAPTION>
At March 31, At June 30,
-------------- ----------------------------
1997 1996 1995
----------------- ------------ -------------
(Dollars in Thousands)
<S> <C> <C> <C>
Loans accounted for on a nonaccrual basis:
Mortgage loans:
One- to four-family residential real estate.................................... $769 $696 $701
All other mortgage loans....................................................... 4 1 8
Non-mortgage loans:
Home equity and second mortgages............................................... - 30 13
Other consumer................................................................. 3 - -
---- ----- -----
Total............................................................................ $776 $727 $722
=== === ===
Total non-accrual loans.......................................................... $776 $727 $722
=== === ===
Real estate owned................................................................ $ - $ - $101
==== ==== ===
Total non-performing assets...................................................... $776 $727 $823
=== === ===
Total non-accrual loans to net loans............................................. 5.46% 5.33% 6.43%
==== ==== ====
Total non-accrual loans to total assets.......................................... 2.34% 2.31% 2.38%
==== ==== ====
Total non-performing assets to total assets...................................... 2.34% 2.31% 2.38%
==== ==== ====
</TABLE>
Classified Assets. OTS regulations provide for a classification system
for problem assets of savings associations which covers all problem assets.
Under this classification system, problem assets of savings institutions such as
ours are classified as "substandard," "doubtful," or "loss." An asset is
considered substandard if it is inadequately protected by the current net worth
and paying capacity of the borrower or of the collateral pledged, if any.
Substandard assets include those characterized by the "distinct possibility"
that the savings institutions will sustain "some loss" if the deficiencies are
not corrected. Assets classified as doubtful have all of the weaknesses inherent
in those classified substandard, with the added characteristic that the
weaknesses present make "collection or liquidation in full," on the basis of
currently existing facts, conditions, and values, "highly questionable and
improbable." Assets classified as loss are those considered "uncollectible" and
of such little value that their continuance as assets without the establishment
of a specific loss reserve is not warranted. Assets may be designated "special
mention" because of potential weakness that do not currently warrant
classification in one of the aforementioned categories.
When a savings association classifies problem assets as either
substandard or doubtful, it may establish general allowances for loan losses in
an amount deemed prudent by management. General allowances represent loss
allowances which have been established to recognize the inherent risk associated
with lending activities, but which, unlike specific allowances, have not been
allocated to particular problem assets. When a savings association classifies
problem assets as loss, it is required either to establish a specific allowance
for losses equal to 100% of that portion of the asset so classified or to charge
off such amount. A savings association's determination as to the classification
of its assets and the amount of its valuation allowances is subject to review by
the OTS, which may order the establishment of additional general or specific
loss allowances. A portion of general loss allowances established to cover
possible losses related to assets classified as substandard or doubtful may be
included in determining a savings association's regulatory capital. Specific
valuation allowances for loan losses generally do not qualify as regulatory
capital.
42
<PAGE>
At March 31, 1997, we had loans classified as doubtful, substandard and
special mention in amounts equal to $22,000, $776,000, and $637,000,
respectively. The substandard loans are classified as nonperforming loans. See
"-- Nonperforming and Problem Assets." The special mention loan in the amount of
$637,000 is a 43-unit apartment building located in the city of Pittsburgh. In
1996, the building was severely damaged by fire and is now completely restored.
The collateral value of this property is in excess of the loan balance.
Allowances for Loan Losses. A provision for loan losses is charged to
operations based on management's evaluation of the potential losses that may be
incurred in our loan portfolio. The evaluation, including a review of all loans
on which full collectibility of interest and principal may not be reasonably
assured, considers: (i) our past loan loss experience, (ii) known and inherent
risks in our portfolio, (iii) adverse situations that may affect the borrower's
ability to repay, (iv) the estimated value of any underlying collateral, and (v)
current economic conditions. See "Risk Factors--Asset Quality."
We monitor our allowance for loan losses and make additions to the
allowance as economic conditions dictate. Although we maintain our allowance for
loan losses at a level that we consider adequate for the inherent risk of loss
in our loan portfolio, future losses could exceed estimated amounts and
additional provisions for loan losses could be required. In addition, our
determination as to the amount of its allowance for loan losses is subject to
review by the OTS, as part of its examination process. After a review of the
information available, the OTS might require the establishment of an additional
allowance.
The following table illustrates the allocation of the allowance for
loan losses for each category of loan. The allocation of the allowance to each
category is not necessarily indicative of future loss in any particular category
and does not restrict our use of the allowance to absorb losses in other loan
categories.
<TABLE>
<CAPTION>
At March 31, At June 30,
-------------------------- --------------------------------------------------------------------
1997 1996 1995
-------------------------- ------------------------------- ----------------------------------
Percent of Percent of Percent of
Loans in Loans in Loans in
Each Each Each
Category to Category to Category to
Amount Total Loans Amount Total Loans Amount Total Loans
------ ----------- ------ ----------- ------ -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
At end of period allocated to:
One- to four-family............ $ 177 73.91% $ 46 73.06% $ 70 75.76%
Multi-family................... 8 11.22 9 13.20 8 9.52
Other real estate.............. 14 4.35 18 4.90 8 6.17
Consumer....................... 2 10.52 3 8.84 3 8.55
------- ------ ----- ------ ---- ------
Total allowance.............. $ 201 100.00% $ 76 100.00% $ 89 100.00%
====== ======= ===== ====== ===== ======
</TABLE>
43
<PAGE>
The following table sets forth information with respect to our
allowance for loan losses at the dates and for the periods indicated:
<TABLE>
<CAPTION>
At March 31, At June 30,
------------ -----------
1997 1996 1995
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Total loans outstanding.................................................. $14,336 $13,718 $12,915
====== ====== ======
Average loans outstanding................................................ $14,027 $13,317 $12,853
====== ====== ======
Allowance balances at beginning of period................................ $ 76 $ 89 $ 114
Provision (credit):
1-4 family residential................................................. 128 23 -
Other real estate...................................................... 3 5
Consumer............................................................... 9 14
Net Charge-offs (recoveries):
1-4 family residential................................................. 46 25
Other real estate...................................................... 3 2 19
------- ------- -------
Allowance balance at end of period....................................... $ 201 $ 76 $ 89
======= ======= =======
Allowance for loan losses as a percent of total loans
outstanding............................................................ 1.40% 0.55% 0.69%
==== ==== ====
Net loans charged off as a percent of average
loans outstanding...................................................... 0.02% 0.36% 0.35%
==== ==== ====
</TABLE>
Investment Activities
Investment Securities. We are required under federal regulations to
maintain a minimum amount of liquid assets which may be invested in specified
short-term securities and certain other investments. See "Regulation -- Savings
Institution Regulation - Federal Home Loan Bank System" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources." The level of liquid assets varies depending
upon several factors, including: (i) the yields on investment alternatives, (ii)
our judgment as to the attractiveness of the yields then available in relation
to other opportunities, (iii) expectation of future yield levels, and (iv) our
projections as to the short-term demand for funds to be used in loan origination
and other activities. We classify our investment securities as "available for
sale" or "held to maturity" in accordance with SFAS No. 115. At March 31, 1997,
our investment portfolio policy allowed investments in instruments such as: (i)
U.S. Treasury obligations, (ii) U.S. federal agency or federally sponsored
agency obligations, (iii) local municipal obligations, (iv) mortgage-backed
securities, (v) banker's acceptances, (vi) certificates of deposit, (vii)
federal funds, including FHLB overnight and term deposits (up to six months),
and (viii) investment grade corporate bonds, commercial paper and mortgage
derivative products. See "-- Mortgage-backed Securities." The board of directors
may authorize additional investments.
Our investment securities "available for sale" and "held to maturity"
portfolios at March 31, 1997 did not contain securities of any issuer with an
aggregate book value in excess of 10% of our equity, excluding those issued by
the United States Government or its agencies.
Mortgage-backed Securities. To supplement lending activities, we have
invested in residential mortgage-backed securities. Mortgage-backed securities
can serve as collateral for borrowings and, through repayments, as a source of
liquidity. Mortgage-backed securities represent a participation interest
44
<PAGE>
in a pool of single-family or other type of mortgages. Principal and interest
payments are passed from the mortgage originators, through intermediaries
(generally quasi-governmental agencies) that pool and repackage the
participation interests in the form of securities, to investors such as us. The
quasi-governmental agencies guarantee the payment of principal and interest to
investors and include Federal Home Loan Mortgage Corporation ("FHLMC"),
Government National Mortgage Association ("GNMA"), and Federal National Mortgage
Association ("FNMA.")
At March 31, 1997, our mortgaged-backed securities portfolio was
classified as "available for sale" and totalled $2,152,000. Each security was
issued by GNMA, FHLMC or FNMA. Expected maturities will differ from contractual
maturities due to scheduled repayments and because borrowers may have the right
to call or prepay obligations with or without prepayment penalties.
Mortgage-backed securities typically are issued with stated principal
amounts. The securities are backed by pools of mortgages that have loans with
interest rates that are within a set range and have varying maturities. The
underlying pool of mortgages can be composed of either fixed rate or adjustable
rate mortgage loans. Mortgage-backed securities are generally referred to as
mortgage participation certificates or pass-through certificates. The interest
rate risk characteristics of the underlying pool of mortgages (i.e., fixed rate
or adjustable rate) and the prepayment risk, are passed on to the certificate
holder. The life of a mortgage-backed pass-through security is equal to the life
of the underlying mortgages. Mortgage-backed securities issued by FHLMC and GNMA
make up a majority of the pass-through certificates market.
Securities Portfolio. The following table sets forth the carrying
(i.e., amortized cost) value of our investment securities held to maturity, at
the dates indicated. Our securities portfolio classified as available for sale
is carried at market value. At March 31, 1997, the market value of our
investment securities, held to maturity, was $12.8 million. At March 31, 1997,
our securities portfolio available for sale contained net unrealized losses, net
of tax, of $37,459. See Notes B and C to our financial statements elsewhere in
this document.
45
<PAGE>
<TABLE>
<CAPTION>
At At June 30,
March 31, --------------------------------
---------
1997 1996 1995
------ ------ -----
(In Thousands)
<S> <C> <C> <C>
Securities Held to Maturity:
U.S. Government and
Agency Securities.................. $12,858 $10,745 $6,187
Corporate Debt Instruments........... - - 398
FHLMC................................ - - 127
GNMA................................. - - 1,915
CMOs................................. 131 147 314
------- ------- -------
Total Securities Held to
Maturity............................ 12,989 10,892 8,941
------ ------ ------
Securities Available for Sale:
FHLMC................................. 96 235 150
GNMA.................................. 1,425 1,589 -
FNMA.................................. 465 480 -
FHLMC Preferred Stock................. 251 255 263
Municipal Bonds....................... - 225 891
Corporate Notes....................... 482 480 98
CMOs.................................. 39 54 -
------- ------ --------
Total Securities Available for
Sale.................................. 2,758 3,318 1,402
------ ----- ------
Total Investment and
Mortgage-Backed Securities....... $15,747 $14,210 $10,343
====== ====== ======
</TABLE>
46
<PAGE>
The following table sets forth information regarding the scheduled
maturities, carrying values, approximate fair values, and weighted average
yields for our investment securities portfolio at March 31, 1997 by contractual
maturity. The following table does not take into consideration the effects of
scheduled repayments or the effects of possible prepayments.
<TABLE>
<CAPTION>
As of March 31, 1997
--------------------------------------------------------------
One Year or Less One to Five Years
------------------ -------------------
Carrying Average Carrying Average
Value Yield Value Yield
------- ------- ------- -------
<S> <C> <C> <C> <C>
U.S. Government and Agency
Obligations.................... $ - -% $5,199 6.51%
Corporate Notes and Bonds...... - - 482 5.55
FHLMC Preferred Stock.......... - - - -
Mortgage-Backed Securities..... - - - -
------ ----- ------- -----
Total........................ $ - -% $5,681 6.43%
====== ===== ===== ====
</TABLE>
<TABLE>
<CAPTION>
As of March 31, 1997
-------------------------------------------------------------------------------------------------
Five to Ten Years More than Ten Years Total Investment Securities
------------------- --------------------- -------------------------------------
Carrying Average Carrying Average Carrying Average Market
Value Yield Value Yield Value Yield Value
------- ------- ------- ------- ------- ------- ------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Government and Agency
Obligations.................... $5,937 7.26% $1,722 7.78% $12,858 7.03% $12,701
Corporate Notes and Bonds...... - - - - 482 5.55 482
FHLMC Preferred Stock.......... - - 251 7.90 251 7.90 251
Mortgage-Backed Securities..... - - 2,156 7.04 2,156 7.04 2,152
------- ----- ----- ---- ------ ---- ------
Total........................ $5,937 7.26% $4,129 7.40% $15,747 6.99% $15,586
===== ==== ===== ==== ====== ==== ======
</TABLE>
47
<PAGE>
Sources of Funds
Deposits are our major external source of funds for lending and other
investment purposes. Funds are also derived from the receipt of payments on
loans and prepayment of loans and, maturities of investment securities and
mortgage-backed securities, and, to a much lesser extent, borrowings and
operations. Scheduled loan principal repayments are a relatively stable source
of funds, while deposit inflows and outflows and loan prepayments are
significantly influenced by general interest rates and market conditions.
Deposits. Consumer and commercial deposits are attracted principally
from within our primary market area through the offering of a selection of
deposit instruments including regular savings accounts, money market accounts,
and term certificate accounts. IRA accounts are also offered. Deposit account
terms vary according to the minimum balance required, the time period the funds
must remain on deposit, and the interest rate.
The interest rates paid by us on deposits are set weekly at the
direction of our senior management. Interest rates are determined based on our
liquidity requirements, interest rates paid by our competitors, and our growth
goals and applicable regulatory restrictions and requirements.
Passbook savings, money market and NOW accounts constituted $11.6
million, or 41.72%, of our deposit portfolio at March 31, 1997. Certificates of
deposit constituted $16.2 million or 58.28% of the deposit portfolio of which
$1.6 million or 5.76% of the deposit portfolio were certificates of deposit with
balances of $100,000 or more. Such deposits are offered at negotiated rates. As
of March 31, 1997, we had no brokered deposits.
48
<PAGE>
At March 31, 1997, our deposits were represented by the various types
of savings programs described below.
<TABLE>
<CAPTION>
Minimum Balance as of Percentage of
Category Term Interest Rate(1) Balance Amount March 31, 1997 Total Deposits
- -------- ---- ------------- -------------- -------------- --------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Now Accounts None -% $ - $1,493 5.36%
Passbook and Club Accounts None 3.19% 50 10,130 36.36%
Certificates of Deposit:
Fixed Term, Fixed rate 1-3 Months -% - 0 -%
Fixed Term, Fixed rate 4-6 Months 5.00% 2,500 2,146 7.70%
Fixed Term, Fixed rate 7-12 Months 5.25% 500 3,119 10.84%
Fixed Term, Fixed rate 13-24 Months 5.40% 500 982 3.53%
Fixed Term, Fixed rate 25-36 Months 5.75% 500 5,558 19.95%
Fixed Term, Fixed rate 36-48 Months -% - - -
Fixed Term, Fixed rate 49-120 Months 6.00% 500 2,616 9.39%
Variable Term No longer offered -% 216 1.13%
Jumbo Certificates (2) 1,600 5.74%
----- ------
$27,860 100.00%
====== ======
</TABLE>
- ---------------
(1) Interest rate offerings as of March 31, 1997.
(2) Negotiated rates and terms.
The following table sets forth our time deposits classified by interest
rate at the dates indicated.
<TABLE>
<CAPTION>
At
March 31, As of June 30,
------------------------------
1997 1996 1995
---- ---- ----
(In Thousands)
<C> <C> <C> <C>
Interest Rate
4.00% or less..................................... $ 3 $ - $ 47
4.01-4.99%........................................ 2,108 2,151 2,466
5.00-5.99%........................................ 8,432 11,132 6,673
6.00-6.99%........................................ 4,527 2,665 4,052
7.00-7.99%........................................ 1,167 770 974
8.00-9.99%........................................ - - 251
------ ------ ------
Total........................................... $16,237 $16,718 $14,463
====== ====== ======
</TABLE>
49
<PAGE>
The following table sets forth the amount and maturities of our time
deposits at March 31, 1997.
<TABLE>
<CAPTION>
Amount Due
------------------------------------------------------------------------------------------------------------
After
March 31, March 31, March 31, March 31, March 31,
Interest Rate 1998 1999 2000 2001 2002 Total
- ------------- ---- ---- ---- ---- ---- -----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
4.00% or less.......... $ 3 $ - $ - $ - $ - $ 3
4.01-4.99%............. 2,108 - - - - 2,108
5.00-5.99%............. 5,099 2,190 483 365 295 8,432
6.00-6.99%............. 2,817 606 123 768 213 4,527
7.00-7.99%............. 743 - 329 95 - 1,167
------- ------- --- ------ ----- ------
Total $ 10,770 $ 2,796 $ 935 $ 1,228 $ 508 $16,237
====== ===== === ===== === ======
</TABLE>
The following table sets forth our savings activity for the
periods indicated:
Nine Months
Ended Year Ended June 30,
March 31, --------------------------------
---------
1997 1996 1995
--------------- ------------- ----------------
(In Thousands)
Net increase (decrease)
before interest credited..... $(1,232) $1,122 $1,166
Interest credited.............. 935 1,256 1,035
------- ----- -----
Net increase (decrease) in
savings deposits............. $ (297) $2,378 $2,201
======= ===== =====
The following table indicates the amount of our certificates of deposit
of $100,000 or more by time remaining until maturity as of March 31, 1997.
Certificates
of Deposits
(In Thousands)
Maturity Period
Within three months................... $ 300
Three through six months.............. 400
Six through twelve months............. 400
Over twelve months.................... 500
---
$1,600
======
50
<PAGE>
Borrowings. Advances (borrowing) may be obtained from the FHLB of
Pittsburgh to supplement our supply of lendable funds. Advances from the FHLB of
Pittsburgh are typically secured by a pledge of our stock in the FHLB of
Pittsburgh, a portion of our first mortgage loans and other assets. Each FHLB
credit program has its own interest rate, which may be fixed or adjustable, and
range of maturities. We may borrow up to $15.2 million from the FHLB of
Pittsburgh. If the need arises, we may also access the Federal Reserve Bank
discount window to supplement our supply of lendable funds and to meet deposit
withdrawal requirements. At March 31, 1997, borrowings from the FHLB of
Pittsburgh totaled $3 million and ($2 million were short-term borrowings) and we
had no other borrowings outstanding.
We had no borrowings at June 30, 1995 and 1996.
The following table sets forth the teams of our short-term FHLB
advances of March 31, 1997.
(Dollars in Thousands)
Average balance outstanding.......................... $ 120
Maximum amount outstanding at any
month-end during the period........................ $2,000
Weighted average interest rates during the period.... 5.82%
Competition
Competition for deposits comes from other insured financial
institutions such as commercial banks, thrift institutions, credit unions,
finance companies, and multi-state regional banks in our market areas.
Competition for funds also includes a number of insurance products sold by local
agents and investment products such as mutual funds and other securities sold by
local and regional brokers. Loan competition varies depending upon market
conditions and comes from commercial banks, thrift institutions, credit unions
and mortgage bankers, most of whom have far greater resources than we have.
Subsidiary Activity
We are permitted to invest up to 2% of our assets in the capital stock
of or loans to subsidiary corporations. Additional investment of 1% of assets is
permitted when such additional investment is utilized primarily for community
development purposes. At March 31, 1997, we had a $1,050 investment in our
subsidiary, Workingmens Service Corporation. Workingmens Service Corporation
receives commissions for referrals by the subsidiary to a third party investor
advisor.
51
<PAGE>
Properties
We operate from our main office and one branch office. Our total
investment in office equipment had a net book value of $151,000 at March 31,
1997.
<TABLE>
<CAPTION>
Year Leased Net Book Value
Location Leased or Owned or Acquired Of Real Property
- -------- --------------- ----------- ----------------
<S> <C> <C> <C>
MAIN OFFICE:
807 Middle St. Owned 1974 $130,000
Pittsburgh, Pennsylvania
15212
BRANCH OFFICE:
5035 Curry Road Owned 1995 $782,000
Pittsburgh, Pennsylvania
15236
</TABLE>
Personnel
At March 31, 1997 we had 9 full-time and four part-time employees. None
of our employees are represented by a collective bargaining group. We believe
that our relationship with our employees is good.
Legal Proceedings
We are, from time to time, a party to legal proceedings arising in the
ordinary course of our business, including legal proceedings to enforce our
rights against borrowers. We are not currently a party to any legal proceedings
which are expected to have a material adverse effect on our financial
statements.
52
<PAGE>
REGULATION
Set forth below is a brief description of certain laws which relate to
us. The description is not complete and is qualified in its entirety by
references to applicable laws and regulation.
Holding Company Regulation
General. WSB will be required to register and file reports with the OTS
and will be subject to regulation and examination by the OTS. In addition, the
OTS will have enforcement authority over WSB and any non-savings institution
subsidiaries. This will permit the OTS to restrict or prohibit activities that
it determines to be a serious risk to us. This regulation is intended primarily
for the protection of our depositors and not for the benefit of you, as
stockholders of WSB.
QTL Test. Since WSB will only own one savings institution, it will be
able to diversify its operations into activities not related to banking, but
only so long as we satisfy the QTL test. If WSB controls more than one savings
institution, it would lose the ability to diversify its operations into
non-banking related activities, unless such other savings institutions each also
qualify as a QTL or were acquired in a supervised acquisition. See "-- Savings
Institution Regulation - Qualified Thrift Lender Test."
Restrictions on Acquisitions. WSB must obtain approval from the OTS
before acquiring control of any other SAIF-insured savings institution. No
person may acquire control of a federally insured savings institution without
providing at least 60 days written notice to the OTS and giving the OTS an
opportunity to disapprove the proposed acquisition.
Savings Institution Regulation
General. As a federally chartered, SAIF-insured savings institution, we
are subject to extensive regulation by the OTS and the FDIC. Our lending
activities and other investments must comply with various federal and state
statutory and regulatory requirements. We are also subject to certain reserve
requirements promulgated by the Board of Governors of the Federal Reserve System
("Federal Reserve System").
The OTS, in conjunction with the FDIC, regularly examines us and
prepares reports for the consideration of our board of directors on any
deficiencies that the OTS finds in our operations. Our relationship with our
depositors and borrowers is also regulated to a great extent by federal and
state law, especially in such matters as the ownership of savings accounts and
the form and content of our mortgage documents.
We must file reports with the OTS and the FDIC concerning our
activities and financial condition, in addition to obtaining regulatory
approvals prior to entering into certain transactions such as mergers with or
acquisitions of other financial institutions. This regulation and supervision
establishes a comprehensive framework of activities in which an institution can
engage and is intended primarily for the protection of the SAIF and depositors.
The regulatory structure also gives the regulatory authorities extensive
discretion in connection with their supervisory and enforcement activities and
examination policies, including policies with respect to the classification of
assets and the establishment of adequate loan loss reserves for regulatory
purposes. Any change in regulations, whether by the OTS, the FDIC or any other
government agency, could have a material adverse impact on our operations.
53
<PAGE>
Insurance of Deposit Accounts. The FDIC is authorized to establish
separate annual assessment rates for deposit insurance for members of the BIF
and the SAIF. The FDIC may increase assessment rates for either fund if
necessary to restore the fund's ratio of reserves to insured deposits to its
target level within a reasonable time and may decrease such assessment rates if
such target level has been met. The FDIC has established a risk-based assessment
system for both SAIF and BIF members. Under this system, assessments are set
within a range, based on the risk the institution poses to its deposit insurance
fund. This risk level is determined based on the institution's capital level and
the FDIC's level of supervisory concern about the institution.
Because a significant portion of the assessments paid into the SAIF by
savings institutions were used to pay the cost of prior savings institution
failures, the reserves of the SAIF were below the level required by law. The BIF
had, however, met its required reserve level during the third calendar quarter
of 1995. As a result, deposit insurance premiums for deposits insured by the BIF
were substantially less than premiums for deposits such as ours which are
insured by the SAIF. Legislation to capitalize the SAIF and to eliminate the
significant premium disparity between the BIF and the SAIF became effective
September 30, 1996. The recapitalization plan provided for a special assessment
equal to $.657 per $100 of SAIF deposits held at March 31, 1995, in order to
increase SAIF reserves to the level required by law. Certain BIF institutions
holding SAIF-insured deposits were required to pay a lower special assessment.
Based on our deposits at March 31, 1995, we paid a pre-tax special assessment of
$161,000.
The recapitalization plan also provides that the cost of prior failures
which were funded through the issuance of Fico Bonds (bonds issued to fund the
cost of savings institution failures in prior years) will be shared by members
of both the SAIF and the BIF. This will increase BIF assessments for healthy
banks to approximately $.013 per $100 of deposits in 1997. SAIF assessments for
healthy savings institutions in 1997 will be approximately $.064 per $100 in
deposits and may be reduced, but not below the level set for healthy BIF
institutions.
The FDIC has lowered the rates on assessments paid to the SAIF and
widened the spread of those rates. The FDIC's action established a base
assessment schedule for the SAIF with rates ranging from 4 to 31 basis points,
and an adjusted assessment schedule that reduces these rates by 4 basis points.
As a result, the effective SAIF rates range from 0 to 27 basis points as of
October 1, 1996. In addition, the FDIC's final rule prescribed a special interim
schedule of rates ranging from 18 to 27 basis points for SAIF-member savings
institutions for the last quarter of calendar 1996, to reflect the assessments
paid to the Financing Corp. (Fico Bonds). Finally, the FDIC's action established
a procedure for making limited adjustments to the base assessment rates by
rulemaking without notice and comment, for both the SAIF and the BIF.
The recapitalization plan also provides for the merger of the SAIF and
BIF effective January 1, 1999, assuming there are no savings institutions under
federal law. Under separate proposed legislation, Congress is considering the
elimination of the federal thrift charter and elimination of the separate
federal regulation of thrifts. As a result, we might have to convert to a
different financial institution charter and be regulated under federal law as a
bank, including being subject to the more restrictive activity limitations
imposed on national banks. We cannot predict the impact of our conversion to, or
regulation as, a bank until the legislation requiring such change is enacted.
Regulatory Capital Requirements. OTS capital regulations require
savings institutions to meet three capital standards: (1) tangible capital equal
to 1.5% of total adjusted assets, (2) core capital equal to at least 3% of total
adjusted assets, and (3) risk-based capital equal to 8% of total risk-weighted
assets. Our capital ratios are set forth under "Historical and Pro Forma Capital
Compliance."
54
<PAGE>
Tangible capital is defined as core capital less all intangible assets
(including supervisory goodwill), less certain mortgage servicing rights and
less certain investments. Core capital is defined as common stockholders' equity
(including retained earnings), noncumulative perpetual preferred stock and
minority interests in the equity accounts of consolidated subsidiaries, certain
nonwithdrawable accounts and pledged deposits of mutual savings associations and
qualifying supervisory goodwill, less nonqualifying intangible assets, certain
mortgage servicing rights and certain investments.
The risk-based capital standard for savings institutions requires the
maintenance of total risk-based capital (which is defined as core capital plus
supplementary capital) of 8% of risk-weighted assets. The components of
supplementary capital include, among other items, cumulative perpetual preferred
stock, perpetual subordinated debt, mandatory convertible subordinated debt,
intermediate-term preferred stock, and the portion of the allowance for loan
losses not designated for specific loan losses. The portion of the allowance for
loan and lease losses includable in supplementary capital is limited to a
maximum of 1.25% of risk-weighted assets. Overall, supplementary capital is
limited to 100% of core capital. A savings association must calculate its
risk-weighted assets by multiplying each asset and off-balance sheet item by
various risk factors as determined by the OTS, which range from 0% for cash to
100% for delinquent loans, property acquired through foreclosure, commercial
loans, and other assets.
The risk-based capital standards of the OTS generally require savings
institutions with more than a "normal" level of interest rate risk to maintain
additional total capital. An institution's interest rate risk will be measured
in terms of the sensitivity of its "net portfolio value" to changes in interest
rates. Net portfolio value is defined, generally, as the present value of
expected cash inflows from existing assets and off-balance sheet contracts less
the present value of expected cash outflows from existing liabilities. A savings
institution will be considered to have a "normal" level of interest rate risk
exposure if the decline in its net portfolio value after an immediate 200 basis
point increase or decrease in market interest rates (whichever results in the
greater decline) is less than two percent of the current estimated economic
value of its assets. An institution with a greater than normal interest rate
risk will be required to deduct from total capital, for purposes of calculating
its risk-based capital requirement, an amount (the "interest rate risk
component") equal to one-half the difference between the institution's measured
interest rate risk and the normal level of interest rate risk, multiplied by the
economic value of its total assets.
The OTS calculates the sensitivity of an institution's net portfolio
value based on data submitted by the institution in a schedule to its quarterly
Thrift Financial Report and using the interest rate risk measurement model
adopted by the OTS. The amount of the interest rate risk component, if any, to
be deducted from an institution's total capital will be based on the
institution's Thrift Financial Report filed two quarters earlier. Savings
institutions with less than $300 million in assets and a risk-based capital
ratio above 12% are generally exempt from filing the interest rate risk schedule
with their Thrift Financial Reports. However, the OTS may require any exempt
institution that it determines may have a high level of interest rate risk
exposure to file such schedule on a quarterly basis and may be subject to an
additional capital requirement based upon its level of interest rate risk as
compared to its peers. However, due to our net size and risk-based capital
level, we are exempt from the interest rate risk component.
Dividend and Other Capital Distribution Limitations. OTS regulations
require us to give the OTS 30 days advance notice of any proposed declaration of
dividends to WSB, and the OTS has the authority under its supervisory powers to
prohibit the payment of dividends by us to WSB. In addition, we may not declare
or pay a cash dividend on our capital stock if the effect would be to reduce our
55
<PAGE>
regulatory capital below the amount required for the liquidation account to be
established at the time of the Conversion. See "The Conversion -- Effects of
Conversion to Stock Form on Depositors and Borrowers of Workingmens Savings
Bank, FSB -- Liquidation Account."
OTS regulations impose limitations upon all capital distributions by
savings institutions, such as cash dividends, payments to repurchase or
otherwise acquire its shares, payments to stockholders of another institution in
a cash-out merger, and other distributions charged against capital. The rule
establishes three tiers of institutions based primarily on an institution's
capital level. An institution that exceeds all fully phased-in capital
requirements before and after a proposed capital distribution ("Tier 1
institution") and has not been advised by the OTS that it is in need of more
than the normal supervision can, after prior notice but without the approval of
the OTS, make capital distributions during a calendar year equal to the greater
of (i) 100% of its net income to date during the calendar year plus the amount
that would reduce by one-half its "surplus capital ratio" (the excess capital
over its fully phased-in capital requirements) at the beginning of the calendar
year, or (ii) 75% of its net income over the most recent four quarter period.
Any additional capital distributions require prior regulatory notice. As of
December 31, 1996, we qualified as a Tier 1 institution.
In the event our capital falls below our fully phased-in requirement or
the OTS notifies us that we are in need of more than normal supervision, we
would become a Tier 2 or Tier 3 institution and as a result, our ability to make
capital distributions could be restricted. Tier 2 institutions, which are
institutions that before and after the proposed distribution meet their current
minimum capital requirements, may only make capital distributions of up to 75%
of net income over the most recent four quarter period. Tier 3 institutions,
which are institutions that do not meet current minimum capital requirements and
propose to make any capital distribution, and Tier 2 institutions that propose
to make a capital distribution in excess of the noted safe harbor level, must
obtain OTS approval prior to making such distribution. In addition, the OTS
could prohibit a proposed capital distribution by any institution, which would
otherwise be permitted by the regulation, if the OTS determines that such
distribution would constitute an unsafe or unsound practice. The OTS has
proposed rules relaxing certain approval and notice requirements for
well-capitalized institutions.
A savings institution is prohibited from making a capital distribution
if, after making the distribution, the savings institution would be
undercapitalized (i.e., not meet any one of its minimum regulatory capital
requirements). Further, a savings institution cannot distribute regulatory
capital that is needed for its liquidation account.
Qualified Thrift Lender Test. Savings institutions must meet a
qualified thrift lender ("QTL") test. If we maintain an appropriate level of
qualified thrift investments ("QTIs") (primarily residential mortgages and
related investments, including certain mortgage-related securities) and
otherwise qualify as a QTL, we will continue to enjoy full borrowing privileges
from the FHLB of Pittsburgh. The required percentage of QTIs is 65% of portfolio
assets (defined as all assets minus intangible assets, property used by the
institution in conducting its business and liquid assets equal to 10% of total
assets). Certain assets are subject to a percentage limitation of 20% of
portfolio assets. In addition, savings institutions may include shares of stock
of the FHLBs, FNMA, and FHLMC as QTIs. Compliance with the QTL test is
determined on a monthly basis in nine out of every 12 months. As of March 31,
1997, we were in compliance with our QTL requirement with approximately 88.55%
of our assets invested in QTIs.
Transactions With Affiliates. Generally, restrictions on transactions
with affiliates require that transactions between a savings institution or its
subsidiaries and its affiliates be on terms as favorable to
56
<PAGE>
the savings institution as comparable transactions with non-affiliates. In
addition, certain of these transactions are restricted to an aggregate
percentage of the savings institution's capital. Collateral in specified amounts
must usually be provided by affiliates in order to receive loans from the
savings institution. Our affiliates include WSB and any company which would be
under common control with us. In addition, a savings institution may not extend
credit to any affiliate engaged in activities not permissible for a bank holding
company or acquire the securities of any affiliate that is not a subsidiary. The
OTS has the discretion to treat subsidiaries of savings institution as
affiliates on a case-by-case basis.
Liquidity Requirements. All savings institutions are required to
maintain an average daily balance of liquid assets equal to a certain percentage
of the sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings institutions. At March 31, 1997, our required liquid asset
ratio was 5.0% and our actual ratio was 25.40%. Monetary penalties may be
imposed upon institutions for violations of liquidity requirements.
Federal Home Loan Savings Bank System. We are a member of the FHLB of
Pittsburgh, which is one of 12 regional FHLBs. Each FHLB serves as a reserve or
central bank for its members within its assigned region. It is funded primarily
from funds deposited by savings institutions and proceeds derived from the sale
of consolidated obligations of the FHLB System. It makes loans to members (i.e.,
advances) in accordance with policies and procedures established by the board of
directors of the FHLB.
As a member, we are required to purchase and maintain stock in the FHLB
of Pittsburgh in an amount equal to at least 1% of our aggregate unpaid
residential mortgage loans, home purchase contracts or similar obligations at
the beginning of each year. At March 31, 1997, we had $153,000 in FHLB stock, at
cost, which was in compliance with this requirement. The FHLB imposes various
limitations on advances such as limiting the amount of certain types of real
estate related collateral to 30% of a member's capital and limiting total
advances to a member.
The FHLBs are required to provide funds for the resolution of troubled
savings institutions and to contribute to affordable housing programs through
direct loans or interest subsidies on advances targeted for community investment
and low- and moderate-income housing projects. These contributions have
adversely affected the level of FHLB dividends paid and could continue to do so
in the future.
Federal Reserve System. The Federal Reserve System requires all
depository institutions to maintain non-interest bearing reserves at specified
levels against their transaction accounts (primarily checking, NOW and Super NOW
checking accounts) and non-personal time deposits. The balances maintained to
meet the reserve requirements imposed by the Federal Reserve System may be used
to satisfy the liquidity requirements that are imposed by the OTS. At March 31,
1997, our reserve met the minimum level required by the Federal Reserve System.
Savings institutions have authority to borrow from the Federal Reserve
System "discount window," but Federal Reserve System policy generally requires
savings institutions to exhaust all other sources before borrowing from the
Federal Reserve System. We had no borrowings from the Federal Reserve System at
March 31, 1997.
57
<PAGE>
TAXATION
Federal Taxation
We are subject to the provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), in the same general manner as other corporations.
However, prior to August 1996, savings institutions such as us, which met
certain definitional tests and other conditions prescribed by the Code could
benefit from certain favorable provisions regarding their deductions from
taxable income for annual additions to their bad debt reserve. The amount of the
bad debt deduction that a qualifying savings institution could claim with
respect to additions to its reserve for bad debts was subject to certain
limitations. We reviewed the most favorable way to calculate the deduction
attributable to an addition to our bad debt reserve on an annual basis.
In August 1996, the Code was revised to equalize the taxation of
thrifts and banks. Thrifts, such as us, no longer have a choice between the
percentage of taxable income method and the experience method in determining
additions to bad debt reserves. Thrifts with $500 million of assets or less may
still use the experience method, which is generally available to small banks
currently. Larger thrifts must use the specific charge off method regarding bad
debts. Any reserve amounts added after 1987 will be taxed over a six year period
beginning in 1996; however, bad debt reserves set aside through 1987 are
generally not taxed. A savings institution may delay recapturing into income its
post-1987 bad debt reserves for an additional two years if it meets a
residential-lending test. This law is not expected to have a material impact on
us. At March 31, 1997, we had no post 1987 bad-debt reserves.
Under the percentage of taxable income method, the bad debt deduction
attributable to "qualifying real property loans" could not exceed the greater of
(i) the amount deductible under the experience method, or (ii) the amount which,
when added to the bad debt deduction for non-qualifying loans, equaled the
amount by which 12% of the sum of the total deposits and the advance payments by
borrowers for taxes and insurance at the end of the taxable year exceeded the
sum of the surplus, undivided profits and reserves at the beginning of the
taxable year. The amount of the bad debt deduction attributable to qualifying
real property loans computed using the percentage of taxable income method was
permitted only to the extent that the institution's reserve for losses on
qualifying real property loans at the close of the taxable year did not exceed
6% of such loans outstanding at such time.
Under the experience method, the bad debt deduction may be based on (i)
a six-year moving average of actual losses on qualifying and non-qualifying
loans, or (ii) a fill-up to the institution's base year reserve amount, which is
the tax bad debt reserve determined as of December 31, 1987.
The percentage of specially computed taxable income that was used to
compute a savings institution's bad debt reserve deduction under the percentage
of taxable income method (the "percentage bad debt deduction") was 8%. The
percentage of taxable income bad debt deduction thus computed was reduced by the
amount permitted as a deduction for non-qualifying loans under the experience
method. The availability of the percentage of taxable income method permitted
qualifying savings institutions to be taxed at a lower effective federal income
tax rate than that applicable to corporations generally (approximately 31.3%
assuming the maximum percentage bad debt deduction).
If a savings institution's qualifying assets (generally, loans secured
by residential real estate or deposits, educational loans, cash and certain
government obligations) constitute less than 60% of its total assets, the
institution may not deduct any addition to a bad debt reserve and generally must
include existing reserves in income over a four year period, which is
immediately accruable for financial
58
<PAGE>
reporting purposes. As of March 31, 1997, at least 60% of our assets were
qualifying assets as defined in the Code. No assurance can be given that we will
meet the 60% test for subsequent taxable years.
Earnings appropriated to our bad debt reserve and claimed as a tax
deduction including our supplemental reserves for losses will not be available
for the payment of cash dividends or for distribution to you, our stockholders
(including distributions made on dissolution or liquidation), unless we include
the amount in income, along with the amount deemed necessary to pay the
resulting federal income tax. As of March 31, 1997, we had $419,000 of
accumulated earnings, representing our base year tax reserve, for which federal
income taxes have not been provided. If such amount is used for any purpose
other than bad debt losses, including a dividend distribution or a distribution
in liquidation, it will be subject to federal income tax at the then current
rate.
Generally, for taxable years beginning after 1986, the Code also
requires most corporations, including savings institutions, to utilize the
accrual method of accounting for tax purposes. Further, for taxable years ending
after 1986, the Code disallows 100% of a savings institution's interest expense
deemed allocated to certain tax-exempt obligations acquired after August 7,
1986. Interest expense allocable to (i) tax-exempt obligations acquired after
August 7, 1986 which are not subject to this rule, and (ii) tax-exempt
obligations issued after 1982 but before August 8, 1986, are subject to the rule
which applied prior to the Code disallowing the deductibility of 20% of the
interest expense.
The Code imposes a tax ("AMT") on alternative minimum taxable income
("AMTI") at a rate of 20%. AMTI is increased by certain preference items,
including the excess of the tax bad debt reserve deduction using the percentage
of taxable income method over the deduction that would have been allowable under
the experience method. Only 90% of AMTI can be offset by net operating loss
carryovers of which we currently have none. AMTI is also adjusted by determining
the tax treatment of certain items in a manner that negates the deferral of
income resulting from the regular tax treatment of those items. Thus, our AMTI
is increased by an amount equal to 75% of the amount by which our adjusted
current earnings exceeds our AMTI (determined without regard to this adjustment
and prior to reduction for net operating losses). In addition, for taxable years
beginning after December 31, 1986 and before January 1, 1996, an environmental
tax of 0.12% of the excess of AMTI (with certain modifications) over $2 million
is imposed on corporations, including us, whether or not an AMT is paid. Under
pending legislation, the AMT rate would be reduced to zero for taxable years
beginning after December 31, 1994, but this rate reduction would be suspended
for taxable years beginning in 1995 and 1996 and the suspended amounts would be
refunded as tax credits in subsequent years.
WSB may exclude from its income 100% of dividends received from us as a
member of the same affiliated group of corporations. A 70% dividends received
deduction generally applies with respect to dividends received from corporations
that are not members of such affiliated group, except that an 80% dividends
received deduction applies if WSB owns more than 20% of the stock of a
corporation paying a dividend. The above exclusion amounts, with the exception
of the affiliated group figure, were reduced in years in which we availed
ourself of the percentage of taxable income bad debt deduction method.
Our federal income tax returns have not been audited by the IRS since
our fiscal year ended 1992. There was no material effect to our financial
statements, as a result of the audit.
State Taxation
We are subject to the Mutual Thrift Institutions Tax of the
Commonwealth of Pennsylvania based on our financial net income determined in
accordance with generally accepted accounting principles with
59
<PAGE>
certain adjustments. Our tax rate under the Mutual Thrift Institutions Tax is
11.5%. Interest on state and federal obligations is excluded from net income. An
allocable portion of net interest expense incurred to carry the obligations is
disallowed as a deduction. Three year carryforwards of losses are allowed.
Upon consummation of the Conversion, we will also be subject to the
Corporate Net Income Tax and the Capital Stock Tax of the Commonwealth of
Pennsylvania.
MANAGEMENT OF WSB HOLDING COMPANY
Our board of directors consists of the same individuals who serve as
directors of our subsidiary, Workingmens Savings Bank, FSB. Our articles of
incorporation and bylaws require that directors be divided into four classes, as
nearly equal in number as possible. Each class of directors serves for a
four-year period, with approximately one-fourth of the directors elected each
year. Our officers will be elected annually by the board and serve at the
board's discretion. See "Management of Workingmens Savings Bank, FSB."
MANAGEMENT OF WORKINGMENS SAVINGS BANK, FSB
Directors and Executive Officers
Our board of directors is composed of six members each of whom serves
for a term of three years, with approximately one-third of the directors elected
each year. Our proposed stock articles of incorporation and bylaws require that
directors be divided into four classes, as nearly equal in number as possible.
Our officers are elected annually by our board and serve at the board's
discretion.
The following table sets forth information with respect to our
directors and executive officers, all of whom will continue to serve in the same
capacities after the Conversion.
<TABLE>
<CAPTION>
Age at Current
March 31, Director Term
1997 Position Since Expires
---- -------- ------- -------
Directors
- ---------
<S> <C> <C> <C> <C>
Joseph J. Manfred 74 Chairman of the Board and 1973 1998
Director
Robert Neudorfer 60 President and Director 1988 2000
Stanford H. Rosenberg 63 Vice President 1985 2000
and Director
Johanna C. Guehl 43 Secretary and Director 1990 1999
John P. Mueller 59 Director 1994 1998
John T. Ringland 69 Director 1978 1999
Ronald W. Moreschi 54 Vice President and - -
Treasurer
</TABLE>
60
<PAGE>
The business experience for the past five years of each of the
directors and executive officers is as follows:
Joseph J. Manfred has been a member of the board of directors and
Chairman of the Board since 1973. Mr. Manfred is a choir member of St. John
Fisher Church and a eucharistic minister for Forbes Regional Hospital. Mr.
Manfred is also a retired insurance agent who owned Manfred Insurance Agency.
Robert Neudorfer has been employed by us since 1975 and has been the
President and a member of the board of directors since 1988. Mr. Neudorfer is a
member of the board of directors and the treasurer of Community Development
Foundation and is also a member of the board of directors of the Western
Pennsylvania League of Savings Institutions. Mr. Neudorfer is a choir member of
the Baldwin Community United Methodist Church.
Stanford H. Rosenberg has been Director and Vice President since 1985.
Since 1974, he has been a professor at La Roche College in Pittsburgh.
Johanna C. Guehl has been a Director and Secretary since 1991. Since
1991, Ms. Guehl has been a partner in the law firm of Brabender & Guehl. Ms.
Guehl is a member of the board of directors for Women's Leadership Assembly and
she is the treasurer for Center For Victims of Violent Crimes and Women's
Business Network.
John P. Mueller has been a member of the board of directors since 1994.
Mr. Mueller is President and majority stockholder of Mueller's Hardware in
Pittsburgh. He is also the President of East Allegheny Business District and a
member of the board of directors of St. Ambrose Manor and Northside Chamber of
Commerce.
John T. Ringland has been a member of the board of directors since
1978. Mr. Ringland is a retired controller for Minsky Brothers.
Ronald W. Moreschi has been vice president and treasurer since 1987.
Meetings and Committees of the Board of Directors
The board of directors conducts its business through meetings of the
board and through activities of its committees. During the year ended June 30,
1996, the board of directors held 12 regular meetings and 8 special meetings. No
director attended fewer than 75% of the total meetings of the board of directors
and committees on which such director served during the year ended June 30,
1996.
Director Compensation
Each non-salaried director is paid monthly with two paid absences per
year. Total aggregate fees paid to the current non-salaried directors for the
year ended June 30, 1996 were $31,500. Beginning July 1, 1997, each non-salaried
directors will be paid a monthly fee of $700 and the Chairman of the Board will
be paid a monthly fee of $750.
61
<PAGE>
Executive Compensation
Summary Compensation Table. The following table sets forth the cash and
non-cash compensation awarded to or earned by our chief executive officer at
June 30, 1996. No employee earned in excess of $100,000 for the year ended June
30, 1996.
<TABLE>
<CAPTION>
Annual Compensation
---------------------------------------------------
Other Annual
Compensation
Name and Principal Position Salary Bonus (1)
- --------------------------- ------ ----- ----
<S> <C> <C> <C>
Robert Neudorfer, President $61,000 $2,750
</TABLE>
- --------------------
(1) Aggregate value does not exceed the lesser of $50,000 or 10% of Mr.
Neudorfer's total salary and bonus.
Employment Agreement. We have entered into an employment agreement with
our President, Robert Neudorfer. Mr. Neudorfer's base salary under the
employment agreement is $60,000. The agreement has a term of three years and is
terminable by us for "just cause". If we terminate Mr. Neudorfer without just
cause, he will be entitled to a continuation of his base salary from the date of
termination through the remaining term of the agreement.
Employee Stock Ownership Plan. We have established an employee stock
ownership plan, the ESOP, for the exclusive benefit of participating employee of
ours, to be implemented upon the completion of the Conversion. Participating
employees are employees who have completed one year of service with us or our
subsidiary and have attained the age of 21. An application for a letter of
determination as to the tax-qualified status of the ESOP will be submitted to
the IRS. Although no assurances can be given, we expect that the ESOP will
receive a favorable letter of determination from the IRS.
The ESOP is to be funded by contributions made by us in cash or common
stock. Benefits may be paid either in shares of the common stock or in cash. In
accordance with the Plan, the ESOP may borrow funds with which to acquire up to
8% of the common stock to be issued in the Conversion. The ESOP intends to
borrow funds from WSB. The loan is expected to be for a term of ten years at an
annual interest rate equal to the prime rate as published in The Wall Street
Journal. Presently it is anticipated that the ESOP will purchase up to 8% of the
common stock to be issued in the offering (i.e., $200,000, based on the midpoint
of the EVR). The loan will be secured by the shares purchased and earnings of
ESOP assets. Shares purchased with such loan proceeds will be held in a suspense
account for allocation among participants as the loan is repaid. We anticipate
contributing approximately $20,000 annually (based on a $200,000 purchase) to
the ESOP to meet principal obligations under the ESOP loan, as proposed. It is
anticipated that all such contributions will be tax-deductible. This loan is
expected to be fully repaid in approximately 10 years.
Shares sold above the maximum of the EVR (i.e., more than 287,500
shares) may be sold to the ESOP before satisfying remaining unfilled orders of
Eligible Account Holders to fill the ESOP's subscription or the ESOP may
purchase some or all of the shares covered by its subscription after the
Conversion in the open market.
62
<PAGE>
Contributions to the ESOP and shares released from the suspense account
will be allocated among participants on the basis of total compensation. All
participants must be employed at least 1,000 hours in a plan year, or have
terminated employment following death, disability or retirement, in order to
receive an allocation. Participant benefits become vested in plan payments as
follows: after 3 years - 20%, 4 years - 40%, 5 years - 60%, 6 years - 80% and 7
years -100%. Employment prior to the adoption of the ESOP shall be credited for
the purposes of vesting. Vesting will be accelerated upon retirement, death,
disability, change in control of WSB, or termination of the ESOP. Forfeitures
will be reallocated to participants on the same basis as other contributions in
the plan year. Benefits may be payable in the form of a lump sum upon
retirement, death, disability or separation from service. Our contributions to
the ESOP are discretionary and may cause a reduction in other forms of
compensation.
Therefore, benefits payable under the ESOP cannot be estimated.
The board of directors has appointed non-employee directors to the ESOP
Committee to administer the ESOP and to serve as the initial ESOP Trustees. The
board of directors or the ESOP Committee may instruct the ESOP Trustees
regarding investments of funds contributed to the ESOP. The ESOP Trustees must
vote all allocated shares held in the ESOP in accordance with the instructions
of the participating employees. Unallocated shares and allocated shares for
which no timely direction is received will be voted by the ESOP Trustees as
directed by the board of directors or the ESOP Committee, subject to the
Trustees' fiduciary duties.
Pension Plan. We sponsor a tax-qualified defined benefit pension plan
(the "Pension Plan"). All our full-time employees are eligible to participate
after six months of service and attainment of age 20 1/2. A qualifying employee
becomes fully vested in the Pension Plan upon completion of six years of
qualifying service. The Pension Plan is intended to comply with the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
Our Pension Plan provides for monthly payments to each participating
employee at normal retirement age (age 65). Upon termination at or after age 65
and completion of 25 or more years of service, the annual retirement benefit
would be determined based upon 42.8% of a participant's Final Average
Compensation. Retirement benefits at age 65 with less than 25 years of service
are reduced proportionately.
Benefits are paid for the life of the participant following retirement.
The Pension Plan also provides for payments in the event of death. At March 31,
1997, Mr. Neudorfer had 22 years of credited service under the Pension Plan and
the monthly benefit payable to Mr. Neudorfer at normal retirement age would have
been $1,567.
Benefits are payable in the form of various annuity alternatives,
including a joint and survivor option. For the Pension Plan year ended March 31,
1997, the highest permissible annual benefit under the Internal Revenue Code is
$120,000. Benefits under the Pension Plan are not subject to offset for Social
Security benefits.
Proposed Future Stock Benefit Plans
Stock Option Plan. The boards of directors intend to adopt a stock
option plan (the Option Plan) following the Conversion, subject to approval and
WSB's stockholders, at a stockholders meeting to be held no sooner than six
months after the Conversion. The Option Plan would be in compliance with the OTS
regulations in effect. See "-- Restrictions on Stock Benefit Plans." If the
Option Plan is implemented within one year after the Conversion, in accordance
with OTS regulations, a number of
63
<PAGE>
shares equal to 10% of the aggregate shares of common stock to be issued in the
Offering (i.e., 25,000 shares based upon the sale of 250,000 shares at the
midpoint of the EVR) would be reserved for issuance by WSB upon exercise of
stock options to be granted to our officers, directors and employees from time
to time under the Option Plan. The purpose of the Option Plan would be to
provide additional performance and retention incentives to certain officers,
directors and employees by facilitating their purchase of a stock interest in
WSB. Under the OTS regulations, the Option Plan, would provide for a term of 10
years, after which no awards could be made, unless earlier terminated by the
board of directors pursuant to the Option Plan and the options would vest over a
five year period (i.e., 20% per year), beginning one year after the date of
grant of the option. Options would be granted based upon several factors,
including seniority, job duties and responsibilities, job performance, our
financial performance and a comparison of awards given by other savings
institutions converting from mutual to stock form.
WSB would receive no monetary consideration for the granting of stock
options under the Option Plan. It would receive the option price for each share
issued to optionees upon the exercise of such options. Shares issued as a result
of the exercise of options will be either authorized but unissued shares or
shares purchased in the open market by WSB. However, no purchases in the open
market will be made that would violate applicable regulations restricting
purchases by WSB. The exercise of options and payment for the shares received
would contribute to the equity of WSB.
If the Option Plan is implemented more than one year after the
Conversion, the Option Plan will comply with OTS regulations and policies that
are applicable at such time.
Restricted Stock Plan. The board of directors intends to adopt the RSP
following the Conversion, the objective of which is to enable us to retain
personnel and directors of experience and ability in key positions of
responsibility. WSB expects to hold a stockholders' meeting no sooner than six
months after the Conversion in order for stockholders to vote to approve the
RSP. If the RSP is implemented within one year after the Conversion, in
accordance with applicable OTS regulations, the shares granted under the RSP
will be in the form of restricted stock vesting over a five year period (i.e.,
20% per year) beginning one year after the date of grant of the award.
Compensation expense in the amount of the fair market value of the common stock
granted will be recognized pro rata over the years during which the shares are
payable. Until they have vested, such shares may not be sold, pledged or
otherwise disposed of and are required to be held in escrow. Any shares not so
allocated would be voted by the RSP Trustees. The RSP will be implemented in
accordance with applicable OTS regulations. See "-- Restrictions on Stock
Benefit Plans." Awards would be granted based upon a number of factors,
including seniority, job duties and responsibilities, job performance, our
performance and a comparison of awards given by other institutions converting
from mutual to stock form. The RSP would be managed by a committee of
non-employee directors (the "RSP Trustees"). The RSP Trustees would have the
responsibility to invest all funds contributed by us to the trust created for
the RSP (the "RSP Trust").
We expect to contribute sufficient funds to the RSP so that the RSP
Trust can purchase, in the aggregate, up to 4% of the amount of common stock
that is sold in the Conversion. The shares purchased by the RSP would be
authorized but unissued shares or would be purchased in the open market. In the
event the market price of the common stock is greater than $10.00 per share, our
contribution of funds will be increased. Likewise, in the event the market price
is lower than $10.00 per share, our contribution will be decreased. In
recognition of their prior and expected services to us and WSB, as the case may
be, the officers, other employees and directors responsible for implementation
of the policies adopted by the board of directors and our profitable operation
will, without cost to them, be
64
<PAGE>
awarded stock under the RSP. Based upon the sale of 250,000 shares of common
stock in the offering at the midpoint of the EVR, the RSP Trust is expected to
purchase up to 10,000 shares of common stock.
If the RSP is implemented more than one year after the Conversion, the
RSP will comply with such OTS regulations and policies that are applicable at
such time.
Restrictions on Stock Benefit Plans. OTS regulations provide that in
the event stock option or management and/or employee stock benefit plans are
implemented within one year from the date of Conversion, such plans must comply
with the following restrictions: (1) the plans must be fully disclosed in the
prospectus, (2) for stock option plans, the total number of shares for which
options may be granted may not exceed 10% of the shares issued in the
Conversion, (3) for restricted stock plans, the shares may not exceed 3% of the
shares issued in the Conversion (4% for institutions with 10% or greater
tangible capital), (4) the aggregate amount of stock purchased by the ESOP in
the Conversion may not exceed 10% (8% for well-capitalized institutions
utilizing a 4% restricted stock plan), (5) no individual employee may receive
more than 25% of the available awards under the option plan or the restricted
stock plans, (6) directors who are not employees may not receive more than 5%
individually or 30% in the aggregate of the awards under any plan, (7) all plans
must be approved by a majority of the total votes eligible to be cast at any
duly called meeting of WSB's stockholders held no earlier than six months
following the Conversion, (8) for stock option plans, the exercise price must be
at least equal to the market price of the stock at the time of grant, (9) for
restricted stock plans, no stock issued in a conversion may be used to fund the
plan, (10) neither stock option awards nor restricted stock awards may vest
earlier than 20% as of one year after the date of stockholder approval and 20%
per year thereafter, and vesting may be accelerated only in the case of
disability or death (or if not inconsistent with applicable OTS regulations in
effect at such time, in the event of a change in control), (11) the proxy
material must clearly state that the OTS in no way endorses or approves of the
plans, and (12) prior to implementing the plans, all plans must be submitted to
the Regional Director of the OTS within five days after stockholder approval
with a certification that the plans approved by the stockholders are the same
plans that were filed with and disclosed in the proxy materials relating to the
meeting at which stockholder approval was received.
RESTRICTIONS ON ACQUISITIONS OF WSB HOLDING COMPANY
While the board of directors is not aware of any effort that might be
made to obtain control of WSB after Conversion, the board of directors believes
that it is appropriate to include certain provisions as part of WSB's articles
of incorporation to protect the interests of WSB and its stockholders from
hostile takeovers ("anti-takeover"provisions) which the board of directors might
conclude are not in the best interests of us or our stockholders. These
provisions may have the effect of discouraging a future takeover attempt which
is not approved by the board of directors but which individual stockholders may
deem to be in their best interests or in which stockholders may receive a
substantial premium for their shares over the current market prices. As a
result, stockholders who might desire to participate in such a transaction may
not have an opportunity to do so. Such provisions will also render the removal
of the current board of directors or management of WSB more difficult.
The following discussion is a general summary of the material
provisions of the articles of incorporation, bylaws, and certain other
regulatory provisions of WSB, which may be deemed to have such an anti-takeover
effect. The description of these provisions is necessarily general and reference
should be made in each case to the articles of incorporation and bylaws of WSB
which are incorporated herein by reference. See "Where You Can Find Additional
Information" as to how to obtain a copy of these documents.
65
<PAGE>
Provisions of WSB Articles of Incorporation and Bylaws
Limitations on Voting Rights. The articles of incorporation of WSB
provide that for a period of five years from completion of the Conversion, in no
event shall any record owner of any outstanding equity security which is
beneficially owned, directly or indirectly, by a person who beneficially owns in
excess of 10% of any class of equity security outstanding (the "Limit") be
entitled or permitted to any vote in respect of the shares held in excess of the
Limit. The number of votes which may be cast by any record owner who
beneficially owned shares in excess of the Limit shall be a number equal to the
total number of votes which a single record owner of all common stock owned by
such person would be entitled to cast, multiplied by a fraction, the numerator
of which is the number of shares of such class or series which are both
beneficially owned by such person and owned of record by such record owner and
the denominator of which is the total number of shares of common stock
beneficially owned by such person owning shares in excess of the Limit. In
addition, for a period of five years from the completion of our Conversion, no
person may directly or indirectly offer to acquire or acquire the beneficial
ownership of more than 10% of any class of an equity security of WSB.
The impact of these provisions on the submission of a proxy on behalf
of a beneficial holder of more than 10% of the common stock is (1) to disregard
for voting purposes and require divestiture of the amount of stock held in
excess of 10% (if within five years of the Conversion more than 10% of the
common stock is beneficially owned by a person) and (2) limit the vote on common
stock held by the beneficial owner to 10% or possibly reduce the amount that may
be voted below the 10% level (if more than 10% of the common stock is
beneficially owned by a person more than five years after the Conversion).
Unless the grantor of a revocable proxy is an affiliate or an associate of such
a 10% holder or there is an arrangement, agreement or understanding with such a
10% holder, these provisions would not restrict the ability of such a 10% holder
of revocable proxies to exercise revocable proxies for which the 10% holder is
neither a beneficial nor record owner. A person is a beneficial owner of a
security if he has the power to vote or direct the voting of all or part of the
voting rights of the security, or has the power to dispose of or direct the
disposition of the security. The articles of incorporation of WSB further
provide that this provision limiting voting rights may only be amended upon the
vote of 80% of the outstanding shares of voting stock.
Election of Directors. Certain provisions of WSB's articles of
incorporation and bylaws will impede changes in majority control of the board of
directors. WSB's articles of incorporation provide that the board of directors
of WSB will be divided into four staggered classes, with directors in each class
elected for four-year terms. Thus, it would take three annual elections to
replace a majority of WSB's board. WSB's articles of incorporation provide that
the size of the board of directors may be increased or decreased only if
two-thirds of the directors then in office concur in such action. The articles
of incorporation also provide that any vacancy occurring in the board of
directors, including a vacancy created by an increase in the number of
directors, shall be filled for the remainder of the unexpired term by a majority
vote of the directors then in office. Finally, the articles of incorporation and
the bylaws impose certain notice and information requirements in connection with
the nomination by stockholders of candidates for election to the board of
directors or the proposal by stockholders of business to be acted upon at an
annual meeting of stockholders.
The articles of incorporation provide that a director may only be
removed for cause by the affirmative vote of at least 80% of the shares of WSB
entitled to vote generally in an election of directors cast at a meeting of
stockholders called for that purpose.
66
<PAGE>
Restrictions on Call of Special Meetings. The articles of incorporation
of WSB provide that a special meeting of stockholders may be called only
pursuant to a resolution adopted by a majority of the board of directors, or a
Committee of the board.
Absence of Cumulative Voting. WSB's articles of incorporation provides
that stockholders may not cumulate their votes in the election of directors.
Authorized Shares. The articles of incorporation authorizes the
issuance of 4,000,000 shares of common stock and 1,000,000 shares of preferred
stock. The shares of common stock and preferred stock were authorized in an
amount greater than that to be issued in the Conversion to provide WSB board of
directors with as much flexibility as possible to effect, among other
transactions, financings, acquisitions, stock dividends, stock splits and the
exercise of stock options. However, these additional authorized shares may also
be used by the board of directors consistent with its fiduciary duty to deter
future attempts to gain control of WSB. The board of directors also has sole
authority to determine the terms of any one or more series of Preferred Stock,
including voting rights, conversion rates, and liquidation preferences. As a
result of the ability to fix voting rights for a series of Preferred Stock, the
board has the power, to the extent consistent with its fiduciary duty, to issue
a series of Preferred Stock to persons friendly to management in order to
attempt to block a post-tender offer merger or other transaction by which a
third party seeks control, and thereby assist management to retain its position.
WSB's board currently has no plans for the issuance of additional shares, other
than the issuance of additional shares upon exercise of stock options.
Procedures for Certain Business Combinations. The articles of
incorporation require the affirmative vote of at least 80% of the outstanding
shares of WSB entitled to vote in the election of directors in order for WSB to
engage in or enter into certain "Business Combinations," as defined therein,
with any Principal Shareholder (as defined below) or any affiliates of the
Principal Shareholder, unless the proposed transaction has been approved in
advance by WSB's board of directors, excluding those who were not directors
prior to the time the Principal Shareholder became the Principal Shareholder.
The term "Principal Shareholder" is defined to include any person and the
affiliates and associates of the person (other than WSB or its subsidiary) who
beneficially owns, directly or indirectly, 10% or more of the outstanding shares
of voting stock of WSB. Any amendment to this provision requires the affirmative
vote of at least 80% of the shares of WSB entitled to vote generally in an
election of directors.
Amendment to Articles of Incorporation and Bylaws. Amendments to WSB's
articles of incorporation must be approved by WSB's board of directors and also
by a majority of the outstanding shares of WSB's voting stock, provided,
however, that approval by at least 80% of the outstanding voting stock is
generally required for certain provisions (i.e., provisions relating to
restrictions on the acquisition and voting of greater than 10% of the common
stock; number, classification, election and removal of directors; amendment of
Bylaws; call of special stockholder meetings; director liability; certain
business combinations; power of indemnification; and amendments to provisions
relating to the foregoing in the articles of incorporation).
The bylaws may be amended by a majority vote of the board of directors
or the affirmative vote of the holders of at least 80% of the outstanding shares
of WSB entitled to vote in the election of directors cast at a meeting called
for that purpose.
Benefit Plans. In addition to the provisions of WSB's articles of
incorporation and bylaws described above, certain benefit plans of ours adopted
in connection with the Conversion contain provisions which also may discourage
hostile takeover attempts which the boards of directors might
67
<PAGE>
conclude are not in the best interests for us or our stockholders. For a
description of the benefit plans and the provisions of such plans relating to
changes in control, see "Management of Workingmens Savings Bank, FSB - Proposed
Future Stock Benefit Plans."
Regulatory Restrictions. A federal regulation prohibits any person
prior to the completion of a conversion from transferring, or entering into any
agreement or understanding to transfer, the legal or beneficial ownership of the
subscription rights issued under a plan of conversion or the stock to be issued
upon their exercise. This regulation also prohibits any person prior to the
completion of a conversion from offering, or making an announcement of an offer
or intent to make an offer, to purchase such subscription rights or stock. For
three years following conversion, OTS regulations prohibit any person, without
the prior approval of the OTS, from acquiring or making an offer to acquire more
than 10% of the stock of any converted savings institution if such person is, or
after consummation of such acquisition would be, the beneficial owner of more
than 10% of such stock. In the event that any person, directly or indirectly,
violates this regulation, the securities beneficially owned by such person in
excess of 10% shall not be counted as shares entitled to vote and shall not be
voted by any person or counted as voting shares in connection with any matter
submitted to a vote of stockholders.
Federal regulations require that, prior to obtaining control of an
insured institution, a person, other than a company, must give 60 days notice to
the OTS and have received no OTS objection to such acquisition of control, and a
company must apply for and receive OTS approval of the acquisition. Control,
involves a 25% voting stock test, control in any manner of the election of a
majority of the institution's directors, or a determination by the OTS that the
acquiror has the power to direct, or directly or indirectly to exercise a
controlling influence over, the management or policies of the institution.
Acquisition of more than 10% of an institution's voting stock, if the acquiror
also is subject to any one of either "control factors," constitutes a rebuttable
determination of control under the regulations. The determination of control may
be rebutted by submission to the OTS, prior to the acquisition of stock or the
occurrence of any other circumstances giving rise to such determination, of a
statement setting forth facts and circumstances which would support a finding
that no control relationship will exist and containing certain undertakings. The
regulations provide that persons or companies which acquire beneficial ownership
exceeding 10% or more of any class of a savings association's stock after the
effective date of the regulations must file with the OTS a certification that
the holder is not in control of such institution, is not subject to a rebuttable
determination of control and will take no action which would result in a
determination or rebuttable determination of control without prior notice to or
approval of the OTS, as applicable.
DESCRIPTION OF CAPITAL STOCK
WSB is authorized to issue 4,000,000 shares of the common stock, $0.10
par value per share, and 1,000,000 shares of serial preferred stock, $.10 par
value per share. WSB currently expects to issue up to 330,600 shares of common
stock in the Conversion. WSB does not intend to issue any shares of serial
preferred stock in the Conversion, nor are there any present plans to issue such
preferred stock following the Conversion. The aggregate par value of the issued
shares will constitute the capital account of WSB. The balance of the purchase
price will be recorded for accounting purposes as additional paid-in capital.
See "Capitalization." The capital stock of WSB will represent nonwithdrawable
capital and will not be insured by us, the FDIC, or any other government agency.
68
<PAGE>
Common Stock
Voting Rights. Each share of the common stock will have the same
relative rights and will be identical in all respects with every other share of
the common stock. The holders of the common stock will possess exclusive voting
rights in WSB, except to the extent that shares of serial preferred stock issued
in the future may have voting rights, if any. Each holder of the common stock
will be entitled to only one vote for each share held of record on all matters
submitted to a vote of holders of the common stock and will not be permitted to
cumulate their votes in the election of WSB's directors.
Liquidation. In the unlikely event of the complete liquidation or
dissolution of WSB, the holders of the common stock will be entitled to receive
all assets of WSB available for distribution in cash or in kind, after payment
or provision for payment of (i) all debts and liabilities of WSB; (ii) any
accrued dividend claims; and (iii) liquidation preferences of any serial
preferred stock which may be issued in the future.
Restrictions on Acquisition of the Common Stock. See "Certain
Restrictions on Acquisition of WSB" for a discussion of the limitations on
acquisition of shares of the common stock.
Other Characteristics. Holders of the common stock will not have
preemptive rights with respect to any additional shares of the common stock
which may be issued. Therefore, the board of directors may sell shares of
capital stock of WSB without first offering such shares to existing stockholders
of WSB. The common stock is not subject to call for redemption, and the
outstanding shares of common stock when issued and upon receipt by WSB of the
full purchase price therefor will be fully paid and non-assessable.
Issuance of Additional Shares. Except in the Subscription and Public
Offerings and possibly pursuant to the RSP or Option Plan, the WSB has no
present plans, proposals, arrangements or understandings to issue additional
authorized shares of the common stock. In the future, the authorized but
unissued and unreserved shares of the common stock will be available for general
corporate purposes, including, but not limited to, possible issuance: (i) as
stock dividends; (ii) in connection with mergers or acquisitions; (iii) under a
cash dividend reinvestment or stock purchase plan; (iv) in a public or private
offering; or (v) under employee benefit plans. See "Risk Factors -- Possible
Dilutive Effect of RSP and Stock Options and Effect of Purchases by the RSP and
ESOP" and "Pro Forma Data." Normally no stockholder approval would be required
for the issuance of these shares, except as described herein or as otherwise
required to approve a transaction in which additional authorized shares of the
common stock are to be issued.
For additional information, see "Dividends," "Regulation" and
"Taxation" with respect to restrictions on the payment of cash dividends; "--
Restrictions on Transferability by Directors and Officers" relating to certain
restrictions on the transferability of shares purchased by directors and
officers; and "Certain Restrictions on Acquisition of WSB" for information
regarding restrictions on acquiring common stock of WSB.
Serial Preferred Stock
None of the 1,000,000 authorized shares of serial preferred stock of
WSB will be issued in the Conversion. After the Conversion is completed, the
board of directors of WSB will be authorized to issue serial preferred stock and
to fix and state voting powers, designations, preferences or other special
rights of such shares and the qualifications, limitations and restrictions
thereof, subject to regulatory
69
<PAGE>
approval but without stockholder approval. If and when issued, the serial
preferred stock is likely to rank prior to the common stock as to dividend
rights, liquidation preferences, or both, and may have full or limited voting
rights. The board of directors, without stockholder approval, can issue serial
preferred stock with voting and conversion rights which could adversely affect
the voting power of the holders of the common stock. The board of directors has
no present intention to issue any of the serial preferred stock.
LEGAL AND TAX MATTERS
The legality of the common stock has been passed upon for us by
Malizia, Spidi, Sloane & Fisch, P.C., Washington, D.C. Certain legal matters for
Trident Securities, Inc. may be passed upon by Brooks, Pierce, McLendon,
Humphrey & Leonard, L.L.P., Greensboro, North Carolina. The federal and state
income tax consequences of the Conversion have been passed upon for us by
Malizia, Spidi, Sloane & Fisch, P.C., Washington, D.C.
EXPERTS
The consolidated financial statements of Workingmens Savings Bank,
FSB as of and for the years ended June 30, 1995 and 1996 appearing in this
document have been audited by Hinds, Lind, Miller & Co., independent certified
public accountants, as set forth in their report which appears elsewhere in this
document, and is included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
Ferguson has consented to the publication herein of a summary of its
letters to Workingmens Savings Bank, FSB setting forth its opinion as to the
estimated pro forma market value of us in the converted form and its opinion
setting forth the value of subscription rights and to the use of its name and
statements with respect to it appearing in this document.
REGISTRATION REQUIREMENTS
The common stock of WSB will be registered pursuant to Section 12(g) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") prior to
completion of the Conversion. WSB will be subject to the information, proxy
solicitation, insider trading restrictions, tender offer rules, periodic
reporting and other requirements of the SEC under the Exchange Act. WSB may not
deregister the common stock under the Exchange Act for a period of at least
three years following the Conversion.
70
<PAGE>
WHERE YOU CAN FIND ADDITIONAL INFORMATION
WSB and Workingmens Savings Bank, FSB are not currently subject to the
informational requirements of the Exchange Act.
WSB has filed with the SEC a registration statement on Form SB-2 under
the Securities Act of 1933, as amended, with respect to the common stock offered
in this document. As permitted by the rules and regulations of the SEC, this
document does not contain all the information set forth in the registration
statement. Such information can be examined without charge at the public
reference facilities of the SEC located at 450 Fifth Street, N.W., Washington,
D.C. 20549, and copies of such material can be obtained from the SEC at
prescribed rates. The SEC also maintains an internet address ("Web site") that
contains reports, proxy and information statements and other information
regarding registrants, including the Company, that file electronically with the
SEC. The address for this Web site is "http://www.sec.gov." The statements
contained in this document as to the contents of any contract or other document
filed as an exhibit to the Form SB-2 are, of necessity, brief descriptions and
are not necessarily complete; each such statement is qualified by reference to
such contract or document.
Workingmens Savings Bank, FSB has filed an Application for Conversion
with the OTS with respect to the Conversion. Pursuant to the rules and
regulations of the OTS, this document omits certain information contained in
that Application. The Application may be examined at the principal office of the
OTS, 1700 G Street, N.W., Washington, D.C. 20552 and at the Central Regional
Office of the OTS, 111 East Wacker Drive, Suite 800, Chicago, Illinois
60601-4360 without charge.
A copy of the Articles of Incorporation and the Bylaws of WSB are
available without charge from Workingmens Savings Bank, FSB.
71
<PAGE>
WORKINGMENS SAVINGS BANK, FSB
and Subsidiary
Index to Consolidated Financial Statements
Page
----
Independent Auditors' Report ............................................. F-1
Consolidated Balance Sheets............................................... F-2
Consolidated Statements of Income ........................................ 25
Consolidated Statements of Retained Earnings ............................. F-3
Consolidated Statements of Cash Flows .................................... F-4
Notes to Consolidated Financial Statements................................ F-6
All schedules are omitted because the required information is either not
applicable or is included in the consolidated financial statements or related
notes.
Separate financial statements for WSB have not been included since it will not
engage in material transactions until after the Conversion. WSB, which has been
inactive to date, has no significant assets, liabilities, revenues, expenses or
contingent liabilities.
72
<PAGE>
HINDS, LIND MILLER & CO.
A PROFESSIONAL CORPORATION
CERTIFIED PUBLIC ACCOUNTANTS
9401 McKnight Road PHONE (412) 364-6070
Pittsburgh, Pennsylvania 15237-6000 FAX (412) 364-6176
- --------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Workingmens Savings Bank, F.S.B. and Subsidiary
We have audited the accompanying consolidated balance sheets of Workingmens
Savings Bank, F.S.B. and Subsidiary ("Bank") at June 30, 1996 and 1995, and the
related consolidated statements of income, changes in retained earnings, and
cash flows for the years then ended. These consolidated financial statements are
the responsibility of the Bank's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Workingmens Savings
Bank, F.S.B. and Subsidiary at June 30, 1996 and 1995, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
As discussed in Note O to the consolidated financial statements, the Bank
changed its method of accounting for investment securities in fiscal year 1995
as permitted by the provisions of Statement of Financial Accounting Standards
No. 115.
/s/Hinds, Lind Miller & Co.
Pittsburgh, Pennsylvania
August 21, 1996
F-1
<PAGE>
WORKINGMENS SAVINGS BANK, F.S.B. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MAR. 31,
(UNAUDITED) JUNE 30,
----------- -------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents
Interest bearing $ 1,201,875 $ 984,667 $ 4,218,325
Non-interest bearing 390,902 221,364 208,551
Securities held-to-maturity (estimated fair value
of $12,828,035, $10,782,060 and $8,823,833) 12,988,802 10,892,081 8,941,199
Securities available-for-sale, at fair value 2,757,816 3,317,811 1,401,555
Loans and real estate, net 14,125,458 13,628,724 12,798,315
Federal Home Loan Bank stock, at cost 153,300 133,200 139,600
Accrued interest receivable 301,088 235,434 168,352
Premises and equipment, net 1,062,750 1,072,594 305,404
Other assets 69,520 83,382 66,819
Income taxes receivable - 3,537 34,020
Deferred income taxes 75,693 6,680 -
----------- ----------- -----------
$33,127,204 $30,579,474 $28,282,140
========== ========== ==========
LIABILITIES AND RETAINED EARNINGS
Deposits $27,859,505 $28,156,791 $25,778,885
Federal Home Loan Bank advances 3,000,000 - -
Advances from borrowers for taxes and insurance 121,650 278,488 340,926
Accrued expenses and other liabilities 126,520 53,229 51,208
Deferred income taxes - - 9,795
----------- ----------- -----------
31,107,675 28,488,508 26,180,814
----------- ----------- -----------
Commitments and contingencies
Retained earnings 2,056,988 2,132,259 2,097,608
Net unrealized gain (loss) on securities
available-for-sale, net of applicable income taxes (37,459) (41,293) 3,718
----------- ----------- -----------
of $(19,297), $(28,695), and $2,583
2,019,529 2,090,966 2,101,326
----------- ----------- -----------
$33,127,204 $30,579,474 $28,282,140
========== ========== ==========
</TABLE>
See accompanying notes.
F-2
<PAGE>
WORKINGMENS SAVINGS BANK, F.S.B. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN RETAINED EARNINGS
<TABLE>
<CAPTION>
NET UNREALIZED
GAIN (LOSS) ON
SECURITIES
RETAINED AVAILABLE-FOR-
EARNINGS SALE TOTAL
-------- ---- -----
<S> <C> <C> <C>
BALANCE AT JULY 1, 1994 $ 1,947,395 $ - $ 1,947,395
Adjustment to beginning balance for
change in accounting principle,
net of applicable income taxes
of $9,343 - 13,446 13,446
Change in unrealized gain (loss) on
securities available-for-sale,
net of applicable income tax
benefit of $(6,760) - (9,728) (9,728)
Net income (loss) 150,213 - 150,213
----------- ----------- -----------
BALANCE AT JUNE 30, 1995 2,097,608 3,718 2,101,326
Change in unrealized gain (loss) on
securities available-for-sale,
net of applicable income tax
benefit of $(31,278) - (45,011) (45,011)
Net income (loss) 34,651 - 34,651
----------- ----------- -----------
BALANCE AT JUNE 30, 1996 2,132,259 (41,293) 2,090,966
Change in unrealized gain (loss) on
securities available-for-sale, net
of applicable income taxes of
$9,398 - 3,834 3,834
Net income (loss) (75,271) - (75,271)
----------- ----------- -----------
BALANCE AT MARCH 31, 1997 $ 2,056,988 $ (37,459) $ 2,019,529
=========== =========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE>
WORKINGMENS SAVINGS BANK, F.S.B. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
MARCH 31, JUNE 30,
--------------------------------- -------------------------------
1997 1996
(UNAUDITED) (UNAUDITED) 1996 1995
------------ ------------ ------------- -----------
<S> <C> <C> <C> <C>
OPERATIONS
Net income (loss) $ (75,271) $ 30,726 $ 34,651 $ 150,213
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Amortization of:
Deferred loan origination fees (3,608) (12,418) (13,367) (8,237)
Premiums and discounts on loans
and investment securities 3,445 5,000 5,808 (23,202)
Provision for loan losses 127,844 13,370 35,142 19,297
(Gain) loss on sales of
real estate owned - (5,486) (650) (8,780)
Net (gain) loss on sales of
securities available-for-sale 1,608 - (969) (31,455)
Depreciation of premises and equipment 39,717 28,620 41,859 27,432
(Increase) decrease in:
Accrued interest receivable (65,654) (75,809) (67,082) 29,484
Other assets 13,862 (20,110) (16,563) (22,580)
Income taxes receivable 3,537 34,020 30,483 (34,020)
Deferred income taxes (78,411) (6,076) 14,803 7,364
Increase (decrease) in:
Accrued expenses and other liabilities 73,291 21,453 2,021 3,675
Income taxes payable - (6,157) - (15,152)
------------ ------------ ----------- -----------
NET CASH PROVIDED BY OPERATIONS 40,360 7,133 66,136 94,039
------------ ------------ ----------- -----------
INVESTMENT ACTIVITIES
Purchases of securities held-to-maturity (4,525,000) (5,461,406) (9,665,088) (1,606,953)
Proceeds from maturities of and
principal repayments on
securities held-to-maturity 2,424,834 3,028,574 5,151,167 770,945
Purchases of securities available-for-sale - (503,594) (503,594) (100,000)
Proceeds from maturities of and
principal repayments on
securities available-for-sale 273,227 259,772 393,280 335,601
Proceeds from sales of securities
available-for-sale 298,392 - 675,969 2,280,188
Net loan originations and
principal repayments on loans (620,970) (541,334) (1,010,211) (184,485)
Proceeds from sales of real estate owned - 160,827 160,827 58,480
Capitalized improvements on real estate owned - (2,150) (2,150) (34,570)
Net (purchase) sale of
Federal Home Loan Bank stock (20,100) 6,400 6,400 9,400
Purchases of premises and equipment (29,873) (794,350) (809,049) (81,951)
------------ ------------ ----------- -----------
NET CASH PROVIDED (USED)
BY INVESTMENT ACTIVITIES (2,199,490) (3,847,261) (5,602,449) 1,446,655
------------ ------------ ----------- -----------
</TABLE>
F-4
<PAGE>
WORKINGMENS SAVINGS BANK, F.S.B. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
MARCH 31, JUNE 30,
--------------------------------- ------------------------------
1997 1996
(UNAUDITED) (UNAUDITED) 1996 1995
------------ ------------ ------------- -----------
<S> <C> <C> <C> <C>
FINANCING ACTIVITIES
Net increase (decrease) in deposits (297,286) 2,328,273 2,377,906 2,201,340
Net proceeds from FHLB advances 3,000,000 - - -
Net increase (decrease) in advances from borrowers
for taxes and insurance (156,838) (177,448) (62,438) 61,072
------------ ------------ ----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 2,545,876 2,150,825 2,315,468 2,262,412
------------ ------------ ----------- -----------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 386,746 (1,689,303) (3,220,845) $ 3,803,106
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 1,206,031 4,426,876 4,426,876 623,770
------------- ------------ ----------- -----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 1,592,777 $ 2,737,573 $ 1,206,031 $ 4,426,876
============= ============ =========== ===========
SUPPLEMENTAL DISCLOSURES Cash paid during the period for:
Interest on deposits, advances,
and other borrowings $ 979,012 $ 927,296 $ 1,235,757 $ 1,034,984
Income taxes $ - $ - $ - $ 55,084
Noncash investing and financing activities:
Transfer from loans to real estate owned $ - $ 106,949 $ 106,949 $ 67,095
Transfers from securities held to maturity
to securities available-for-sale,
at amortized cost $ - $ 2,564,286 $ 2,564,286 $ -
Total increase (decrease) in unrealized gain
(loss) on securities available-for-sale $ 13,232 $ (57,033) $ (76,289) $ 6,301
Less: income tax expense (benefit) (9,398) 23,384 31,278 (2,583)
------------- ------------ ----------- -----------
Net increase (decrease) in unrealized gain
(loss) on securities available-for-sale $ 3,834 $ (33,649) $ (45,011) $ 3,718
============= ============ =========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE>
WORKINGMENS SAVINGS BANK, F.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Workingmens Savings Bank and Subsidiary
(the "Bank") and the methods of applying those policies conform with generally
accepted accounting principles. The accounting and reporting policies and the
methods of applying those policies which significantly affect the determination
of financial position, results of operations, and cash flows are summarized
below.
The consolidated balance sheet as of March 31, 1997 and the related consolidated
statement of income, changes in retained earnings and cash flows for the nine
months ended March 31, 1997 and the related statement of income and cash flows
for the nine months ended March 31, 1996 are unaudited and have been prepared in
accordance with the requirements for a presentation of interim financial
statements and are in accordance with generally accepted accounting principles.
In the opinion of management, all adjustments, consisting of normal recurring
adjustments, that are necessary for a fair presentation of the interim periods
have been reflected.
Nature of Operations
Workingmens Savings Bank, F.S.B. is a federally chartered, Savings Association
Insurance Fund (SAIF) insured mutual savings bank conducting its business from
its two locations in the Northside section of the City of Pittsburgh and South
Hills suburb of Pittsburgh. The Bank's principal sources of revenue emanate from
its portfolio of residential real estate mortgage loans and investment
securities.
The Bank is subject to regulation and supervision by the Federal Deposit
Insurance Corporation (FDIC) and the Office of Thrift Supervision (OTS).
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for loan losses. In connection with
the determination of the allowance for loan losses, management obtains
independent appraisals for significant properties.
A majority of the Bank's loan portfolio consists of single-family residential
loans in the Pittsburgh area. The regional economy is currently stable and
consists of various types of industry. Real estate prices in this market are
also stable, however, the ultimate collectibility of a substantial portion of
the Bank's loan portfolio are susceptible to changes in local market conditions.
While management uses available information to recognize losses on loans and
foreclosed real estate, further reductions in the carrying amounts of loans and
foreclosed assets may be necessary based on changes in local economic
conditions. In addition, regulatory agencies, as an integral part of their
examination process, periodically, review the estimated losses on loans and
foreclosed real estate. Such agencies may require the Bank to recognize
additional losses based on their judgments about information available to them
at the time of their examination. Because of these factors, it is reasonably
possible that the estimated losses on loans and foreclosed real estate may
change materially in the near term. However, the amount of the change that is
reasonably possible cannot be estimated.
F-6
<PAGE>
WORKINGMENS SAVINGS BANK, F.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Principles of Consolidation
The consolidated financial statements include the accounts of the Bank and its
wholly-owned subsidiary, Workingmens Service Corporation. Intercompany balances
and transactions have been eliminated. Workingmens Service Corporation is
currently inactive and its impact on the consolidated financial statements is
insignificant.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Bank considers cash on hand and
deposits in other financial institutions with an original maturity of ninety
(90) days or less to be cash and cash equivalents.
Investment and Mortgage-Backed Securities
Effective July 1, 1994, the Bank adopted Statement of Financial Accounting
Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities". Pursuant to Statement 115 management determines the
appropriate classification of securities at the time of purchase and reevaluates
such designation as of each balance sheet date. Debt securities are classified
as held-to-maturity when the Bank has the positive intent and ability to hold
the securities to maturity. Held-to-maturity securities are stated at amortized
cost.
Debt securities not classified as held-to-maturity are classified as
available-for-sale. Available-for-sale securities are stated at fair value, with
the unrealized gains and losses, net of tax, reported as a separate component of
retained earnings.
The amortized cost of debt securities classified as held-to-maturity or
available-for-sale is adjusted for amortization of premiums and accretion of
discounts to maturity, or in the case of mortgage-backed securities, over the
estimated life of the security. Such amortization is included in interest income
from investments. Interest and dividends are included in interest income from
investments. Realized gains and losses, and declines in value judged to be
other-than-temporary are included in gain (loss) on sale of investments. The
cost of securities sold is based on the specific identification method.
In October, 1994 the Financial Accounting Standards Board ("FASB") issued SFAS
No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of
Financial Instruments." SFAS No. 119 established disclosures about derivatives
and other financial instruments. Derivatives are various instruments used to
construct a transaction that is derived from and reflects the underlying value
of assets, other instruments or various indices. The primary purpose of
derivatives, which include such items as forward contracts, interest rate swaps,
options and futures, is to transfer price risk associated with the fluctuations
in asset values rather than to borrow or lend funds. At present, the Bank does
not invest in such derivative instruments for trading, investing, hedging or
other purposes.
F-7
<PAGE>
WORKINGMENS SAVINGS BANK, F.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Loans Receivable
Loans receivable are stated at unpaid principal balances, less the allowance for
loan losses and net deferred loan-origination fees.
Loan origination fees, as well as certain direct origination costs, are deferred
and amortized as a yield adjustment over the lives of the related loans using
the interest method.
Uncollected interest on loans is periodically reviewed. An allowance is
established based on management's periodic evaluation for interest deemed
uncollectible. The allowance is established by a charge to interest income equal
to all interest previously accrued, and income is subsequently recognized only
to the extent cash payments are received until, in management's judgment, the
borrower is able to make periodic interest and principal repayments, as
scheduled, in which case the loan is returned to accrual status.
The allowance for loan losses is increased by charges to income and decreased by
charge-offs (net of recoveries). Management's periodic evaluation of the
adequacy of the allowance is based on the Bank's past loan loss experience,
known and inherent risks in the portfolio, adverse situations that may affect
the borrower's ability to repay, the estimated value of any underlying
collateral, and current economic conditions. Allowances for impaired loans are
generally determined based on collateral values or the present value of
estimated cash flows. While management believes it uses the best information
available to make evaluations, future adjustments to the allowances may be
necessary if circumstances differ substantially from the assumptions used in
making the evaluations.
Real Estate Owned
Real estate acquired by foreclosure or voluntary deed in lieu of foreclosure is
initially carried at the lower of fair value minus estimated disposal costs or
the balance of the loan on the property at the date of acquisition. Any
write-downs based on the asset's fair value at date of acquisition are charged
to the allowance for loan losses. Subsequent costs directly related to the
development or improvement of real estate are capitalized. Other costs of
maintaining real estate ($0 and $7,542 (unaudited) for the nine months ended
March 31, 1997 and 1996, and $8,014 and $13,771 in fiscal years 1996 and 1995,
respectively) are charged to income as incurred and are reported in "Other
Noninterest Expense."
Federal Home Loan Bank Stock
Investment in stock of a Federal Home Loan Bank is required by law of every
federally insured savings and loan or savings bank. The investment is carried at
cost. No ready market exists for the stock, and it has no quoted market value.
Premises and Equipment
Land is carried at cost. Buildings, leasehold improvements, and furniture,
fixtures, and equipment are carried at cost, less accumulated depreciation and
amortization. Buildings, leasehold improvements, and furniture, fixtures, and
equipment are depreciated using the straight-line method over the estimated
useful lives of the assets (ranging from 5 to 35 years).
F-8
<PAGE>
WORKINGMENS SAVINGS BANK, F.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income Taxes
The Bank and its subsidiary follow the practice of filing federal consolidated
income tax returns. Income taxes are allocated to the Bank as though separate
returns are being filed.
Income taxes are provided for the tax effects of the transactions reported in
the financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the basis of available-for-sale
securities, allowance for loan losses, estimated losses on foreclosed real
estate, and accumulated depreciation for financial and income tax reporting. The
deferred tax assets and liabilities represent the future tax return consequences
of those differences, which will either be taxable or deductible when the assets
and liabilities are recovered or settled. Deferred tax assets and liabilities
are reflected at income tax rates applicable to the period in which the deferred
tax assets or liabilities are expected to be realized or settled. As changes in
tax laws or rates are enacted, deferred tax assets and liabilities are adjusted
through the provision for income taxes.
Pension Plan
The Bank has a pension plan covering substantially all employees. It is the
policy of the Bank to fund the maximum amount that can be deducted for federal
income tax purposes but in amounts not less than the minimum amounts required by
law.
Fair Values of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments", requires disclosure of fair value information
about financial instruments, whether or not recognized in the statement of
financial condition. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. In that regard, the
derived fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in immediate
settlement of the instruments. Statement No. 107 excludes certain financial
instruments and all nonfinancial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts present do not represent the
underlying value of the Bank.
The following methods and assumptions were used by the Bank in estimating its
fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts reported in the statements of
financial condition for cash and cash equivalents approximate those assets' fair
values.
Investment and mortgage-backed securities: Fair values for investments and
mortgage-backed securities are based on quoted market prices, where available.
If quoted market prices are not available, fair values are based on quoted
market prices of comparable instruments.
F-9
<PAGE>
WORKINGMENS SAVINGS BANK, F.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Loans: The fair values for loans are estimated using discounted cash flow
analysis, based on interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality. Loan fair value estimates include
judgments regarding future expected loss experience and risk characteristics.
Fair values for impaired loans are estimated using discounted cash flow analysis
or underlying collateral values, where applicable. The carrying amount of
accrued interest receivable approximates its fair value.
Federal Home Loan Bank (FHLB) Stock: No ready market exists for this stock and
it has no quoted market value. However, redemption of this stock has
historically been at par value. Accordingly, the carrying amount is deemed to be
a reasonable estimate of fair value.
Deposits: The fair values disclosed for demand deposits are, by definition,
equal to the amount payable on demand at the reporting date (that is, their
carrying amounts). Fair values for fixed rate certificates of deposit are
estimated using a discounted cash flow calculation that applies interest rates
currently offered on certificates to a schedule of aggregated expected monthly
maturities on time deposits. The carrying amount of accrued interest payable
approximates fair value.
Federal Home Loan Bank (FHLB) advances: Fair values of FHLB advances are
estimated using discounted cash flow analyses based on the Bank's current
incremental borrowing rates for similar types of borrowing arrangements.
Advances from borrowers for taxes and insurance: The carrying amount of advances
from borrowers for taxes and insurance approximate fair value.
Off-Balance sheet items: Fair value of these items approximate their contractual
amounts.
F-10
<PAGE>
WORKINGMENS SAVINGS BANK, F.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE B - SECURITIES HELD-TO-MATURITY
The amortized cost and estimated fair values of securities held-to-maturity are
as follows:
<TABLE>
<CAPTION>
MARCH 31, 1997 (UNAUDITED)
-------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Government and
government agency
obligations $ 12,857,931 $ 177 $ (158,904) $ 12,699,204
Collateralized mortgage
obligations 130,871 - (2,040) 128,831
------------ --------- ---------- ------------
$ 12,988,802 $ 177 $ (160,944) $ 12,828,035
============ ========= ========== ============
JUNE 30, 1996
-------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---- ----- ------ ------
U.S. Government and
government agency
obligations $ 10,744,807 $ 9,138 $ (116,383) $ 10,637,562
Collateralized mortgage
obligations 147,274 - (2,776) 144,498
------------ --------- ---------- ------------
$ 10,892,081 $ 9,138 $ (119,159) $ 10,782,060
============ ========= ========== ============
JUNE 30, 1995
-------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
U.S. Government and
government agency
obligations $ 6,186,558 $ 13,667 $ (69,500) $ 6,130,725
Mortgage-backed securities:
Federal Home Loan Mortgage
Corporation 127,263 1,432 - 128,695
Government National
Mortgage Association 1,914,676 27,296 (3,457) 1,938,515
Collateralized mortgage
obligations 314,175 - (69,777) 244,398
Corporate bonds 398,527 - (17,027) 381,500
----------- ---------- ---------- -----------
$ 8,941,199 $ 42,395 $ (159,761) $ 8,823,833
=========== ========== ========== ===========
</TABLE>
F-11
<PAGE>
WORKINGMENS SAVINGS BANK, F.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The amortized cost and approximate fair values of securities held-to-maturity at
March 31, 1997, by contractual maturity are shown below. Collateralized mortgage
obligations are not due at a single maturity date; periodic payments are
received on these securities based on the payment patterns of the underlying
collateral.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Due from one year to five years $ 5,199,331 $ 5,139,371
Due from five years to ten years 5,936,510 5,848,575
Due after 10 years 1,852,961 1,840,089
------------ ------------
$ 12,988,802 $ 12,828,035
============ ============
</TABLE>
In November of 1995, the Financial Accounting Standards Board allowed financial
institutions to perform a one-time reassessment of the appropriateness of the
classifications of all securities held at that time. Any transfers from the
held-to- maturity classification as a result of this one-time reassessment would
not question the Bank's intent and ability to hold other debt securities to
maturity in the future. Accordingly, the Bank transferred securities
held-to-maturity with an amortized cost of $2,564,286 to securities
available-for-sale.
NOTE C - SECURITIES AVAILABLE-FOR-SALE
The amortized cost and estimated fair values of securities available-for-sale
are as follows:
<TABLE>
<CAPTION>
MARCH 31, 1997 (UNAUDITED)
----------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---- ----- ------ ----------
<S> <C> <C> <C> <C>
Mortgage-backed securities:
Federal Home Loan Mortgage
Corporation $ 95,010 $ 633 $ - $ 95,643
Government National
Mortgage Association 1,414,959 15,240 (5,027) 1,425,172
Federal National
Mortgage Association 488,790 - (23,635) 465,155
FHLMC Preferred Stock 256,750 500 (6,000) 251,250
Corporate notes 499,246 - (17,530) 481,716
Collateralized mortgage
obligations 59,817 - (20,937) 38,880
----------- ---------- ---------- -----------
$ 2,814,572 $ 16,373 $ (73,129) $ 2,757,816
=========== ========== ========== ===========
</TABLE>
F-12
<PAGE>
WORKINGMENS SAVINGS BANK, F.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---- ----- ------ ----------
<S> <C> <C> <C> <C>
Mortgage-backed securities:
Federal Home Loan Mortgage
Corporation $ 235,181 $ - $ (186) $ 234,995
Government National
Mortgage Association 1,581,105 15,004 (6,849) 1,589,260
Federal National
Mortgage Association 502,050 - (22,559) 479,491
FHLMC Preferred Stock 256,750 2,000 (3,750) 255,000
Municipal bonds 227,898 - (2,683) 225,215
Corporate notes 499,181 - (18,852) 480,329
Collateralized mortgage
obligations 85,634 - (32,113) 53,521
----------- ---------- ---------- -----------
$ 3,387,799 $ 17,004 $ (86,992) $ 3,317,811
=========== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1995
--------------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---- ----- ------ ----------
<S> <C> <C> <C> <C>
Mortgage-backed securities:
Federal Home Loan Mortgage
Corporation $ 149,257 $ 572 $ - $ 149,829
FHLMC Preferred Stock 255,283 7,217 - 262,500
Municipal bonds 890,714 7,013 (6,403) 891,324
Corporate bond 100,000 - (2,098) 97,902
----------- ---------- ---------- -----------
$ 1,395,254 $ 14,802 $ (8,501) $ 1,401,555
=========== ========== ========== ===========
</TABLE>
F-13
<PAGE>
WORKINGMENS SAVINGS BANK, F.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At March 31, 1997, securities available-for-sale with an amortized cost of
$499,246 (unaudited) and estimated fair values of $481,716 (unaudited) mature
from one year to five years. Mortgage-backed securities are not due at a single
maturity date; periodic payments are received on these securities based on the
payment patterns of the underlying collateral. FHLMC preferred stock shares do
not have a maturity date, however, these shares may be called at a future date.
NOTE D - LOANS AND REAL ESTATE
Loans and real estate are summarized as follows:
<TABLE>
<CAPTION>
MAR. 31, 1997 JUNE 30,
----------------------------------
(UNAUDITED) 1996 1995
------------------------------------------------------
<S> <C> <C> <C>
First mortgage loans:
Secured by 1- to 4-family residences $ 10,596,104 $ 9,432,022 $ 9,083,389
Secured by over 4 family units 1,068,443 1,810,664 1,220,196
Commercial 614,965 665,797 765,353
Participation loans 543,081 590,399 624,509
Home equity and second mortgage loans 1,109,512 855,454 816,694
Lease pools 4,172 6,337 26,031
Share loans 153,538 172,527 150,502
Consumer loans 246,567 185,154 127,271
Real estate owned - - 100,683
------------ ------------ -------
14,336,382 13,718,354 12,914,628
Allowance for loan losses (200,596) (75,694) (89,010)
Deferred loan origination fees (10,328) (13,936) (27,303)
------------ ------------ ------------
$14,125,458 $13,628,724 $12,798,315
=========== =========== ==========
</TABLE>
The Bank conducts its business through two offices located in Pittsburgh,
Pennsylvania. As of March 31, 1997, the majority of the Bank's loan portfolio
was secured by properties located in this region. The Bank evaluates each
customer's credit worthiness on a case-by-case basis. Collateral held includes
mortgages on residential and income-producing properties. The Bank does not
believe it has significant concentration of credit risk to any one group of
borrowers given its underwriting and collateral requirements.
In accordance with SFAS No. 114, "Accounting by Creditors for Impairment of a
Loan", no loans in non- homogenous groups were determined to be impaired for the
nine months ended or as of March 31, 1997. Commercial real estate, multi-family
residential and participation loans are included in the non-homogenous group.
First mortgage loans which are contractually past due ninety days or more total
approximately $700,000 at March 31, 1997. The amount the Bank will ultimately
realize from these loans could differ materially from their carrying value
because of unanticipated future developments affecting the underlying collateral
or the borrower's ability to repay the loans. If collection efforts are
unsuccessful, these loans will be subject to foreclosure proceedings in the
ordinary course of business. Management believes that the Bank has adequate
collateral on these loans and additional losses are not expected to occur in the
event of foreclosure.
F-14
<PAGE>
WORKINGMENS SAVINGS BANK, F.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Activity in the allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>
MAR. 31, 1997 JUNE 30,
(UNAUDITED) 1996 1995
------------- -----------------------------
<S> <C> <C> <C>
Beginning balance $ 75,694 $ 89,010 $ 114,382
Provision for loan losses 127,844 35,142 19,297
Charge-offs and recoveries, net (2,942) (48,458) (44,669)
----------- ------------ ------------
Ending balance $ 200,596 $ 75,694 $ 89,010
=========== ============ ============
</TABLE>
In the ordinary course of business, the Bank has and expects to continue to have
transactions, including borrowings, with its officers, directors, and their
affiliates (totalling $68,741 at March 31, 1997). In the opinion of management,
such transactions were on substantially the same terms, including interest rates
and collateral, as those prevailing at the time of comparable transactions with
other persons and did not involve more than a normal risk of collectibility or
present any other unfavorable features to the Bank.
NOTE E - ACCRUED INTEREST RECEIVABLE
Accrued interest receivable consists of the following:
<TABLE>
<CAPTION>
MAR. 31, 1997 JUNE 30,
---------------------------------
(UNAUDITED) 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Loans $ 77,778 $ 88,352 $ 84,796
Investments 294,666 187,073 107,300
------------- ------------ ------------
372,444 275,425 192,096
Allowance for uncollectible
interest (71,356) (39,991) (23,744)
------------- ------------ ------------
$ 301,088 $ 235,434 $ 168,352
============= ============ ============
</TABLE>
NOTE F - PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
MAR. 31, 1997 JUNE 30,
---------------------------------
(UNAUDITED) 1996 1995
------------- ----------- ------------
<S> <C> <C> <C>
Cost:
Land $ 121,027 $ 121,027 $ 121,027
Buildings and improvements 991,989 977,976 229,044
Furniture, fixtures, and
equipment 386,319 370,459 228,391
Construction in process - - 81,951
-------------- -------------- -----------
1,499,335 1,469,462 660,413
Accumulated depreciation (436,585) (396,868) (355,009)
----------- ----------- -----------
$ 1,062,750 $ 1,072,594 $ 305,404
=========== =========== ===========
</TABLE>
In November of 1995, the Bank opened the South Hills branch office at a total
cost including equipment of approximately $890,000.
F-15
<PAGE>
WORKINGMENS SAVINGS BANK, F.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE G - DEPOSITS
Deposits are summarized as follows:
<TABLE>
<CAPTION>
MARCH 31, 1997
(UNAUDITED JUNE 30, 1996 JUNE 30, 1995
----------------------------- ------------------------------- ----------------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
RATE AMOUNT RATE AMOUNT RATE AMOUNT
---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
NOW accounts -% $ 1,492,814 -% $ 1,440,445 -% $ 1,247,822
Passbook savings 3.19 10,129,939 3.18 9,998,620 3.00 10,068,220
------ ---------- ------ ---------- ------ ----------
2.78% 11,622,753 2.77% 11,439,065 2.67% 11,316,042
------ ---------- ------ ---------- ------ ----------
Certificates of deposit:
Under 4.00% 3.00 3,675 - - 3.40 46,823
4.01% to 5.00% 4.94 2,107,810 4.62 2,150,893 4.56 2,466,229
5.01% to 6.00% 5.39 8,431,868 5.55 11,132,426 5.66 6,672,663
6.01% to 7.00% 6.21 4,526,760 6.63 2,664,629 6.56 4,052,186
7.01% to 8.00% 7.09 1,166,639 7.20 769,778 7.30 974,394
8.01% to 9.00% - - - - 8.21 250,548
----- ---------- ----- ---------- ------ -----------
5.68 16,236,752 5.68 16,717,726 5.87 14,462,843
------ ---------- ------ ---------- ------ ----------
4.47% $27,859,505 4.50% $28,156,791 4.47% $25,778,885
====== ========== ====== ========== ====== ==========
</TABLE>
At March 31, 1997, the aggregate maturities of certificates of deposit in fiscal
years 1998 through 2002 is $10,770,794, $2,795,950, $934,615, $1,228,042 and
$507,351, respectively (unaudited). The aggregate amount of certificates in
denominations of $100,000 or more totaled $1,600,018 (unaudited).
Deposits in excess of $100,000 are not insured by the Savings Association
Insurance Fund (SAIF).
Interest expense on deposits consisted of the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
MARCH 31, JUNE 30
-------------------------------------- --------------------------------------
1997 1996
(UNAUDITED) (UNAUDITED) 1996 1995
------------------ ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
NOW and passbook savings $239,818 $249,369 $ 328,500 $ 400,657
Certificate accounts 695,388 691,043 927,767 638,001
------- ------- --------- ---------
935,206 940,412 1,256,267 1,038,658
Penalties for early withdrawal - - - (3,613)
---------- ---------- ------------ -----------
Total interest on deposits $935,206 $940,412 $1,256,267 $1,035,045
======= ======= ========= =========
</TABLE>
NOTE H - ADVANCES FROM FEDERAL HOME LOAN BANK
At March 31, 1997, the Bank had outstanding advances from the Federal Home Loan
Bank (FHLB) totalling $3,000,000 (unaudited) bearing interest at a weighted rate
of 5.80% (unaudited). Certain mortgage loans are pledged to the FHLB as
collateral in the event the Bank requests future advances. The Bank had no
outstanding advances from the FHLB at June 30, 1996 and 1995.
F-16
<PAGE>
WORKINGMENS SAVINGS BANK, F.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE I - PENSION PLAN
The Bank has a qualified, noncontributory defined benefit retirement plan
covering substantially all of its employees. The benefits are based on each
employee's years of service up to a maximum of 25 years, and the average of the
highest five consecutive annual salaries excluding the four years prior to
retirement. The benefits are reduced by a specified percentage for each year of
participation less than 25 years. An employee becomes fully vested upon
completion of six years of qualifying service.
The following table sets forth the plan's funded status as of November 30, 1994,
the latest date information is available:
Vested accumulated benefit obligation $ 197,213
Nonvested accumulated benefit obligation 1,023
---------
Accumulated benefit obligation 198,236
Effect of projected salary increases 45,879
---------
Projected benefit obligation 244,115
Plan assets at market value 248,617
Plan assets in excess of project
benefit obligation 4,502
Unrecognized net gain (1,151)
Unrecognized net obligation 1,676
---------
Prepaid pension cost $ 5,027
=========
The following table represents certain significant assumptions used in
determining the actuarial present value of the projected benefit obligations and
the net periodic pension costs at November 30, 1994:
Weighted average discount rate used to
calculate benefit obligations 7.00%
Assumed rate of future compensation
increases 4.00%
Expected long-term rate of return of
plan assets 7.50%
Components of net pension cost are as follows for the fiscal year ended November
30, 1994:
Service cost $ 18,620
Interest cost 15,622
Actual return on plan assets (7,237)
Net amortization on deferrals (12,027)
---------
Net periodic pension cost $ 14,978
=========
F-17
<PAGE>
WORKINGMENS SAVINGS BANK, F.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE J - INCOME TAXES
Income tax expense (benefit) is summarized as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
MARCH 31, JUNE 30,
----------------------------------- ------------------------------
1997 1996
(UNAUDITED) (UNAUDITED) 1996 1995
------------ ------------- ---------- ------------
<S> <C> <C> <C> <C>
Federal:
Current (benefit) $ (1,935) $ (1,012) $ (1,838) $ (3,350)
Deferred (74,477) 6,726 12,220 9,947
------------ ------------- ---------- ----------
$ (76,412) $ 5,714 $ 10,382 $ 6,597
============ ============= ========== ==========
State:
Current $ - $ - $ - $ 4,779
============ ============= ========== ==========
Totals:
Current (benefit) $ (1,935) $ (1,012) $ (1,838) $ 1,429
Deferred (74,477) 6,726 12,220 9,947
------------ ------------- ---------- ----------
$ (76,412) $ 5,714 $ 10,382 $ 11,376
============ ============= ========== ==========
Effective tax (benefit)
rate (50.4)% 15.7% 23.1% 7.0%
========== ========= ======== =======
</TABLE>
The differences between actual income tax expense (benefit) and the amount
computed by applying the federal statutory income tax rate of 34% to income
before income taxes are reconciled as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
MARCH 31, JUNE 30,
-------------------------------------- ------------------------------
1997 1996
(UNAUDITED) (UNAUDITED) 1996 1995
----------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Computed income tax
expense (benefit) $ (51,572) $ 12,390 $ 15,311 $ 54,940
Increase (decrease)
resulting in:
State income tax,
net of federal
benefit - - - 3,183
Tax-exempt income (6,296) (11,711) (15,614) (36,495)
Other, net (18,544) 5,035 10,685 (10,252)
----------- ----------- --------------------------
Actual income tax
expense (benefit) $ (76,412) $ 5,714 $ 10,382 $ 11,376
=========== =========== ==========================
</TABLE>
F-18
<PAGE>
WORKINGMENS SAVINGS BANK, F.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of net deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
MAR. 31, 1997 JUNE 30,
-----------------------------------
(UNAUDITED) 1996 1995
-------------------------------------------------------
<S> <C> <C> <C>
Deferred tax assets:
Loan origination fees, net $ 2,738 $ 2,254 $ 5,729
Allowance for loan losses 53,171 12,245 21,754
Net operating loss
carryforward 24,850 - -
Unrealized loss on
securities available-
for-sale 19,297 28,695 -
------------- --------- -------
100,056 43,194 27,483
------------- --------- ---------
Deferred tax liabilities:
Premises and equipment (9,476) (3,218) (3,057)
Accrued interest
receivable (14,887) (31,182) (26,152)
Unrealized gain on
securities available-
for-sale - - (2,583)
Section 481(a) adjustment -
loan fees - (2,114) (5,486)
------------- --------- ---------
(24,363) (36,514) (37,278)
------------- --------- ---------
Net deferred asset
(liability) $ 75,693 $ 6,680 $ (9,795)
============= ========= =========
</TABLE>
The Bank's annual addition to its reserve for bad debts allowed under the
Internal Revenue Code may differ significantly from the bad debt expense used
for financial statement purposes. Such bad debt deductions for income tax
purposes are included in taxable income of later years only if the bad debt
reserves are used for purposes other than to absorb bad debt losses. Since the
Bank does not intend to use the reserve for purposes other than to absorb
losses, no deferred income taxes have been provided on the amount of bad debt
reserves for tax purposes that arose in tax years beginning before December 31,
1987, in accordance with SFAS No. 109. Therefore, retained earnings at March 31,
1997 and June 30, 1996 and 1995, includes approximately $143,000, representing
such bad debt deductions for which no deferred income taxes have been provided.
The use of the reserve method of accounting for thrift bad debt reserves has
been repealed for the tax year beginning after June 30, 1996. The law provides
that all thrifts must recapture into taxable income their post-1987 excess
reserves over a six-year period. Since the Bank has no such excess reserves, no
provision for income tax was needed to be recorded for the nine months ended
March 31, 1997.
The Bank has available Pennsylvania net operating loss carryforwards of
approximately $380,000. This carryforward can be utilized in fiscal years 1998
through 2000. The deferred tax benefit associated with this loss carryforward is
approximately $44,000. This benefit has been fully reserved.
F-19
<PAGE>
WORKINGMENS SAVINGS BANK, F.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE K - OTHER NONINTEREST INCOME AND EXPENSE
Other noninterest income and expense amounts are summarized as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
MARCH 31, JUNE 30,
-------------------------------------- ------------------
1997 1996
(UNAUDITED) (UNAUDITED) 1996 1995
------------- ------------- --------- -------
<S> <C> <C> <C> <C>
Service charges and other fees:
Bank service charges and fees $ 52,462 $ 40,933 $ 55,344 $ 47,129
Loan late charges 10,694 11,713 16,512 16,229
Insurance commissions 308 392 585 982
------------ ------------- --------- ---------
$ 63,464 $ 53,038 $ 72,441 $ 64,340
============ ============= ========= =========
Other noninterest expense:
Service bureau expense $ 43,684 $ 44,255 $ 58,972 $ 43,808
FHLB bank account expense 32,463 30,344 41,235 38,361
Advertising and promotion 8,976 21,712 28,284 10,075
Loan expenses 12,270 10,842 17,266 14,410
Real estate owned expense - 7,542 8,014 13,771
Dues and subscriptions 5,162 5,877 8,331 4,885
ATM expense 12,907 2,910 7,478 -
Professional and supervisory fees 23,058 23,994 31,790 39,916
Printing, stationery, and supplies 12,809 15,235 19,096 15,063
Telephone and postage 12,587 12,726 15,956 14,386
Seminars and training 987 1,994 1,994 3,611
Other insurance 12,394 12,617 17,839 13,926
Miscellaneous 12,713 12,676 17,701 7,041
------------ ------------ --------- --------
$ 190,010 $ 202,724 $ 273,956 $219,253
============ ============ ========= ========
</TABLE>
NOTE L - COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Bank has various outstanding commitments
and contingent liabilities that are not reflected in the accompanying financial
statements. The financial commitments of the Bank are as follows:
The Bank has outstanding commitments to originate loans as follows:
<TABLE>
<CAPTION>
MAR. 31, 1997 JUNE 30,
--------------------------------------
(UNAUDITED) 1996 1995
------------- --------- --------------
<S> <C> <C> <C>
First mortgage loans $ 154,000 $ 158,000 $ 230,000
Secured consumer (unused
lines of credit) loans $ 380,000 $ 323,000 $ 288,000
</TABLE>
F-20
<PAGE>
WORKINGMENS SAVINGS BANK, F.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE M - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Bank is a party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit. These instruments
involve, to varying degrees, elements of credit and interest rate risk in excess
of the amounts recognized in the statements of financial condition.
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instruments for commitments to extend credit is
represented by the contractual notional amount of those instruments (See Note
L). The Bank uses the same credit policies in making commitments and conditional
obligations as it does for on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount and type of collateral
obtained, upon extension of credit, varies and is based on management's credit
evaluation of the counterparty.
NOTE N - DEPOSIT INSURANCE ASSESSMENT
The Bank incurred an expense for the nine months ended March 31, 1997 for the
one-time special assessment levied by the omnibus appropriation bill to
recapitalize the SAIF insurance fund. The special assessment for deposit
insurance premiums was approximately $161,000, with an after tax impact of
approximately $108,000. Effective January 1, 1997, the Bank began paying reduced
premium assessments in accordance with the new SAIF assessment rates.
NOTE O - ACCOUNTING CHANGE - INVESTMENT SECURITIES
In May 1993 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." The Association adopted the provisions of the new
standard for investments held as of or acquired after July 1, 1994. In
accordance with the Statement, prior period financial statements have not been
restated to reflect the change in accounting principle.
There was no cumulative effect as of July 1, 1994 of adopting Statement No. 115.
The opening balance of retained earnings was increased by $13,446 (net of $9,343
in income taxes) to reflect the net unrealized holding gain on securities
classified as available-for-sale previously carried at amortized cost or lower
of cost or fair value.
F-21
<PAGE>
WORKINGMENS SAVINGS BANK, F.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE P - FAIR VALUES OF FINANCIAL INSTRUMENTS
The estimated fair values of the Bank's financial instruments are as follows:
<TABLE>
<CAPTION>
MARCH 31, 1997 (UNAUDITED) JUNE 30, 1996
--------------------------- ---------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------ ----- ------ -----
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash
equivalents $ 1,592,777 $ 1,592,777 $ 1,206,031 $ 1,206,031
Investment and mortgage-
backed securities 15,746,618 15,585,851 14,343,092 14,233,071
Loans 14,125,458 14,172,062 13,628,724 14,333,010
FHLB stock 153,300 153,300 133,200 133,200
Accrued interest
receivable 301,088 301,088 235,434 235,434
Financial liabilities:
Deposits 27,859,505 27,897,723 28,156,791 28,192,010
FHLB advances 3,000,000 3,000,000 - -
Advances from borrowers for
taxes and insurance 121,650 121,650 278,488 278,488
</TABLE>
NOTE Q - REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered by
its primary regulator, The Office of Thrift Supervision (OTS). Failure to meet
minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken, could have
a direct material effect on the Bank's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Bank must meet specific capital guidelines that involve quantitative measure
of the Bank's assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
following table) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of March 31, 1997, that the Bank
meets all capital adequacy requirements to which it is subject.
As of March 31, 1997, the most recent notification from the OTS categorized the
Bank as "well capitalized". To be categorized as "well capitalized" the Bank
must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage
ratios as set forth in the table. There are no conditions or events since that
notification that management believes have changed the institution's category.
F-22
<PAGE>
WORKINGMENS SAVINGS BANK, F.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
FOR CAPITAL TO BE WELL
ACTUAL ADEQUACY PURPOSES: CAPITALIZED
-------------------------------- --------------------------------- -------------------------
As of March 31, 1997 (unaudited) AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------------ ----------------- --------------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total Risk-Based Capital
(to Risk-Weighted Assets) $2,228,688 16.23% $1,098,880 8.00% $1,373,600 10.00%
Tier I Capital
(to Risk-Weighted Assets) 2,056,988 14.98 549,440 4.00 824,160 6.00
Tier I Capital
(to Adjusted Total Assets) 2,056,988 6.21 1,325,088 4.00 1,656,360 5.00
Tangible Capital
(to Adjusted Total Assets) 2,056,988 6.21 496,908 1.50 496,908 1.50
As of June 30, 1996
Total Risk-Based Capital
(to Risk-Weighted Assets) 2,207,953 17.29 1,021,360 8.00 1,276,700 10.00
Tier I Capital
(to Risk-Weighted Assets) 2,132,259 16.70 510,680 4.00 766,020 6.00
Tier I Capital
(to Adjusted Total Assets) 2,132,259 6.97 1,223,179 4.00 1,528,974 5.00
Tangible Capital
(to Adjusted Total Assets) 2,132,259 6.97 458,692 1.50 458,692 1.50
As of June 30, 1995
Total Risk-Based Capital
(to Risk-Weighted Assets) 2,186,618 19.97 875,920 8.00 1,094,900 8.00
Tier I Capital
(to Risk-Weighted Assets) 2,097,608 19.16 437,960 4.00 656,940 4.00
Tier I Capital
(to Adjusted Total Assets) 2,097,608 7.42 1,131,286 4.00 1,414,107 4.00
Tangible Capital
(to Adjusted Total Assets) 2,097,608 7.42 424,232 1.50 424,232 1.50
</TABLE>
Under the framework, the Association's capital levels do not allow the Bank to
accept brokered deposits without prior approval from regulators.
F-23
<PAGE>
WORKINGMENS SAVINGS BANK, F.S.B. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE R - PLAN OF CONVERSION (UNAUDITED)
On May 19, 1997, the Bank's Board of Directors formally approved a plan ("Plan")
to convert from a federally-chartered mutual savings bank to a
federally-chartered stock savings bank subject to approval by the Bank's members
as of a still-to-be determined future voting record date. The Plan, which
includes formation of a holding company, is subject to approval by the Office of
Thrift Supervision (OTS) and includes the filing of a registration statement
with the Securities and Exchange Commission. As of March 31, 1997, the Bank had
incurred conversion costs of approximately $7,000. If the conversion is
ultimately successful, actual conversion costs will be accounted for as a
reduction in gross proceeds. If the conversion is unsuccessful, the conversion
costs will be expensed.
The Plan calls for the common stock of the Bank to be purchased by the holding
company and for the common stock of the holding company to be offered to various
parties in a subscription offering at a price based on an independent appraisal.
It is anticipated that any shares not purchased in the subscription offering
will be offered to the general public in a solicited offering.
The stockholders of the holding company will be asked to approve a proposed
stock option plan and a proposed restricted stock plan at a meeting of the
stockholders after the conversion. Shares issued to directors and employees
under these plans may be from authorized but unissued shares of common stock or
they may be purchased in the open market. In the event that options or shares
are issued under these plans, such issuances will be included in the earnings
per share calculation; thus, the interests of existing stockholders would be
diluted.
The Bank may not declare or pay a cash dividend if the effect thereof would
cause its net worth to be reduced below either the amounts required for the
liquidation account discussed below or the regulatory capital requirements
imposed by federal regulations.
At the time of conversion, the Bank will establish a liquidation account, which
will be a memorandum account that does not appear on the balance sheet, in an
amount equal to its retained earnings as reflected in the latest consolidated
balance sheet used in the final conversion prospectus. The liquidation account
will be maintained for the benefit of eligible account holders who continue to
maintain their deposit accounts in the Bank after conversion. In the event of a
complete liquidation of the Bank (and only in such an event), eligible
depositors who continue to maintain accounts shall be entitled to receive a
distribution from the liquidation account before any liquidation may be made
with respect to common stock.
F-24
<PAGE>
No dealer, salesman or other person has been authorized to give any information
or to make any representations not contained in this document in connection with
the offering made hereby, and, if given or made, such information or
representations must not be relied upon as having been authorized by Workingmens
Savings Bank, FSB, WSB Holding Company or Trident Securities, Inc. This document
does not constitute an offer to sell, or the solicitation of an offer to buy,
any of the securities offered hereby to any person in any jurisdiction in which
such offer or solicitation would be unlawful. Neither the delivery of this
document by Workingmens Savings Bank, FSB, WSB Holding Company or Trident
Securities, Inc. nor any sale made hereunder shall in any circumstances create
an implication that there has been no change in the affairs of Workingmens
Savings Bank, FSB or WSB Holding Company since any of the dates as of which
information is furnished herein or since the date hereof.
WSB Holding Company
Up to 287,500 Shares
(Anticipated Maximum)
Common Stock
PROSPECTUS
TRIDENT SECURITIES, INC.
Dated __________ ____ 1997
THESE SECURITIES ARE NOT DEPOSITS OR ACCOUNTS
AND ARE NOT FEDERALLY INSURED OR GUARANTEED.
Until the later of __________ ____, 1997, or 90 days after commencement of
the offering of common stock, all dealers that buy, sell or trade these
securities, whether or not participating in this distribution, may be required
to deliver a prospectus. This is in addition to the obligation of dealers to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Officers and Directors.
Sections 1741 through 1747 of the Pennsylvania Business Corporation Act
sets forth circumstances under which directors, officers, employees and agents
may be insured or indemnified against liability which they may incur in their
capacities as such.
The Articles of Incorporation of WSB Holding Company (the "Articles")
attached as Exhibit 3(i) hereto, requires indemnification of directors, officers
and employees to the fullest extent permitted by Pennsylvania law.
WSB Holding Company ("WSB") may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee, or agent of
WSB or is or was serving at the request of WSB as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity or arising out of his status as such, whether or not WSB would
have the power to indemnify him against such liability under the provisions of
the Articles.
Item 25. Other Expenses of Issuance and Distribution
* Special counsel and local counsel legal fees...... $ 50,000
* Printing and postage.............................. 45,000
* Appraisal/Business Plan........................... 22,000
* Accounting fees................................... 25,000
* Data processing/Conversion agent.................. 7,000
* SEC Registration Fee.............................. 1,000
* OTS Filing Fees................................... 8,400
* NASD Fairness Filing.............................. 800
* Blue Sky legal and filing fees.................... 10,000
* Underwriting fees................................. 60,000
* Underwriter's expenses, including legal fees...... 25,000
* Stock Certificates................................ 1,000
* Transfer Agent.................................... 4,000
* Miscellaneous expenses............................ 20,800
------
* TOTAL............................................. $280,000
=======
- -----------------
* Estimated.
<PAGE>
Item 26. Recent Sales of Unregistered Securities.
Not Applicable
Item 27. Exhibits:
The exhibits filed as part of this Registration Statement are as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1.1 Form of Sales Agency Agreement with Trident Securities, Inc.
2 Plan of Conversion of Workingmens Savings Bank, FSB
3(i) Articles of Incorporation of WSB Holding Company
3(ii) Bylaws of WSB Holding Company
4 Specimen Stock Certificate of WSB Holding Company
5.1 Opinion of Malizia, Spidi, Sloane & Fisch, P.C. regarding legality of securities registered
5.2 Opinion of Ferguson & Company as to the value of subscription rights
8.1 Federal Tax Opinion of Malizia, Spidi, Sloane & Fisch, P.C.
8.2 State Tax Opinion of Malizia, Spidi, Sloane & Fisch, P.C.
10 Form of Employment Agreement with Robert Neudorfer
23.1 Consent of Malizia, Spidi, Sloane & Fisch, P.C. (contained in its opinions filed as Exhibits 5.1,
8.1 and 8.2)
23.2 Consent of Hinds, Lind, Miller & Co.
23.3 Consent of Ferguson & Company
24 Power of Attorney (reference is made to the signature page)
27 Financial Data Schedule**
99.1 Stock Order Form
99.2 Appraisal Report of Ferguson & Company*
99.3 Marketing Materials
</TABLE>
---------------
* To be filed by amendment
** Electronic filing only
Item 28. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 ("Securities Act");
(ii) Reflect in the prospectus any facts or events which
individually or together, represent a fundamental change in the information in
the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and
<PAGE>
price represent no more than a 20 percent change in the maximum offering price
set forth in the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) Include any additional or changed material information on
the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(4) The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreement, certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act, and is therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the small business issuer of expenses incurred or paid by a director,
officer or controlling person of the small business issuer in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
small business issuer will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in Pittsburgh,
Pennsylvania, on June 17, 1997.
WSB HOLDING COMPANY
By: /s/Robert Neudorfer
-----------------------------------------------
Robert Neudorfer
President, Chief Executive Officer and Director
(Duly Authorized Representative)
We the undersigned directors and officers of WSB Holding Company do
hereby severally constitute and appoint Robert Neudorfer our true and lawful
attorney and agent, to do any and all things and acts in our names in the
capacities indicated below and to execute all instruments for us and in our
names in the capacities indicated below which said Robert Neudorfer may deem
necessary or advisable to enable WSB Holding Company to comply with the
Securities Act of 1933, as amended, and any rules, regulations and requirements
of the Securities and Exchange Commission, in connection with the registration
statement on Form SB-2 relating to the offering of WSB Holding Company's common
stock, including specifically but not limited to, power and authority to sign
for us or any of us, in our names in the capacities indicated below, the
registration statement and any and all amendments (including post-effective
amendments) thereto; and we hereby ratify and confirm all that Robert Neudorfer
shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated as of June 17, 1997.
<TABLE>
<CAPTION>
<S> <C>
/s/Joseph J. Manfred /s/Robert Neudorfer
- ------------------------------------------- -----------------------------------------------
Joseph J. Manfred Robert Neudorfer
Chairman of the Board and Director President, Chief Executive Officer and Director
(Principal Executive and Financial Officer)
/s/Robert W. Moreschi
- ------------------------------------------- -----------------------------------------------
Robert W. Moreschi Stanford H. Rosenberg
Treasurer and Chief Financial Officer Vice President and Director
(Principal Accounting Officer)
/s/John P. Mueller /s/Johanna C. Guehl
- ------------------------------------------- -----------------------------------------------
John P. Mueller Johanna C. Guehl
Director Director
/s/John T. Ringland
- -------------------------------------------
John T. Ringland
Director
</TABLE>
<PAGE>
EXHIBIT 1.1
<PAGE>
WSB Holding Company
212,500 to 287,500 Shares
Common Stock
(Par Value $.10 Per Share)
$10.00 Per Share
SALES AGENCY AGREEMENT
----------------------
Trident Securities, Inc.
4601 Six Forks Road, Suite 400
Raleigh, North Carolina 27609
Dear Sirs:
WSB Holding Company, a Pennsylvania-chartered corporation (the
"Company"), and Workingmens Savings Bank, FSB a federally chartered and insured
mutual savings bank (the "Bank"), hereby confirm, as of ________________, 1997,
their respective agreements with Trident Securities, Inc. ("Trident"), a
broker-dealer registered with the Securities and Exchange Commission
("Commission") and a member of the National Association of Securities Dealers,
Inc. ("NASD"), as follows:
1. Introductory. The Bank intends to convert from a federally chartered
mutual savings bank association to a federally chartered stock savings bank (to
be known as Workingmens Bank) as a wholly owned subsidiary of the Company
(together with the Offerings, as defined below, the issuance of shares of common
stock of the Bank to the Company and the incorporation of the Company, the
"Conversion") pursuant to a plan of conversion adopted on May 19, 1997 (as
amended, if amended, the "Plan"). In accordance with the Plan, the Company is
offering shares of its common stock, par value $.10 per share (the "Shares" and
the "Common Stock"), pursuant to nontransferable subscription rights in a
subscription offering (the "Subscription Offering") to certain depositors and
borrowers of the Bank and to the Bank's Employee Stock Ownership Plan (the
"ESOP"). Shares of the Common Stock not sold in the Subscription Offering may be
offered to the general public in a community offering, with preference given to
natural persons residing in _______________, Pennsylvania (the "Community
Offering"), subject to the right of the Company and the Bank, in their absolute
discretion, to reject orders in the Community Offering in whole or in part.
Shares not sold in the Subscription Offering or otherwise in the Community
Offering may be offered to certain members of the general public as part of the
Community Offering by a group of broker-dealers (the "Syndicated Community
Offering") (the Subscription Offering and, if any, the Community and Syndicated
Community Offerings are sometimes referred to collectively as the "Offerings").
In the Offerings, the Company is offering between 212,500 and 287,500 Shares,
with the possibility of offering up to 330,600 Shares without a resolicitation
of subscribers, as contemplated by Part 563b of Title 12 of the Code of Federal
Regulations. With the exception of the ESOP, no person may purchase in the
Offerings more than 7,500 Shares; no person or
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 2
persons purchasing through a single account, together with associates of and
persons acting in concert with such persons, may purchase in the Offerings more
than12,500 Shares.
The Company and the Bank have been advised by Trident that it will
utilize its best efforts in assisting the Company and the Bank with the sale of
the Shares in the Offerings, including any Syndicated Community Offering. Prior
to the execution of this Agreement, the Company has delivered to Trident a
prospectus dated as of the date hereof and all supplements thereto to be used in
the Offerings. Such prospectus contains information with respect to the Company,
the Bank and the Shares.
2. Representations and Warranties.
(a) The Company and the Bank jointly and severally represent
and warrant to Trident that:
(i) The Company has filed with the Commission a
registration statement, including exhibits and an amendment or
amendments thereto, on Form SB-2 (No. 333- __________), including
a prospectus relating to the Offerings, for the registration of
the Shares under the Securities Act of 1933, as amended (the
"Act"); and such registration statement has become effective
under the Act and no stop order has been issued with respect
thereto and no proceedings therefor have been initiated or, to
the Company's and the Bank's best knowledge, threatened by the
Commission. Except as the context may otherwise require, such
registration statement, as amended or supplemented, on file with
the Commission at the time the registration statement became
effective, including the prospectus, financial statements,
schedules, exhibits and all other documents filed as part
thereof, as amended and supplemented, is herein called the
"Registration Statement," and the prospectus, as amended or
supplemented, on file with the Commission at the time the
Registration Statement became effective is herein called the
"Prospectus," except that if the prospectus filed by the Company
with the Commission pursuant to Rule 424(b) of the general rules
and regulations of the Commission under the Act (together with
the enforceable published policies and actions of the Commission
thereunder, the "SEC Regulations") differs from the form of
prospectus on file at the time the Registration Statement became
effective, the term "Prospectus" shall refer to the Rule 424(b)
prospectus from and after the time it is filed with or mailed for
filing to the Commission and shall include any amendments or
supplements thereto from and after their dates of effectiveness
or use, respectively.
(ii) The Bank has filed an Application for Approval of
Conversion on
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 3
Form AC, including exhibits (as amended or supplemented, the
"Form AC," and together with the Form H-(e)1-S referred to below,
the "Conversion Application") with the Office of Thrift
Supervision (the "Office") under the Home Owners' Loan Act, as
amended (the "HOLA") and the enforceable rules and regulations,
including published policies and actions, of the Office
thereunder (the "OTS Regulations"), which has been approved by
the Office; and the Prospectus and the proxy statement for the
solicitation of proxies from members for the special meeting to
approve the Plan (the "Proxy Statement") included as part of the
Form AC have been approved for use by the Office. No order has
been issued by the Office preventing or suspending the use of the
Prospectus or the Proxy Statement; and no action by or before the
Office revoking such approvals is pending or, to the Bank's best
knowledge, threatened. The Company has filed with the Office the
Company's application on Form H-(e)1-S promulgated under the
savings and loan holding company provisions of the HOLA and the
OTS Regulations and has received approval of its acquisition of
the Bank from the Office. No action by or before the Office
revoking such approval is pending, or to the Company's best
knowledge, threatened.
(iii) At the date of the Prospectus and at all times
subsequent thereto through and including the Closing Date (i) the
Registration Statement and the Prospectus (as amended or
supplemented, if amended or supplemented) complied and will
comply with the Act and the Regulations, (ii) the Registration
Statement (as amended or supplemented, if amended or
supplemented) did not and will not contain an untrue statement of
a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, and (iii) the Prospectus (as amended or supplemented,
if amended or supplemented) did not and will not contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading. Representations or warranties in
this subsection shall not apply to statements or omissions made
in reliance upon and in conformity with written information
furnished to the Company or the Bank relating to Trident by or on
behalf of Trident expressly for use in the Registration Statement
or Prospectus.
(iv) The Company has been duly organized as a Pennsylvania
corporation, and the Bank has been duly organized as a mutual
savings bank under the laws of the United States, and each of
them is validly existing and in good standing under the laws of
the jurisdiction of its organization with full power and
authority to own its property and conduct its business as
described in the
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 4
Registration Statement and Prospectus; the Bank is a member in
good standing of the Federal Home Loan Bank of Pittsburgh; and
the deposit accounts of the Bank are insured by the Savings
Association Insurance Fund ("SAIF") administered by the Federal
Deposit Insurance Corporation ("FDIC") up to the applicable legal
limits. Each of the Company and the Bank is not required to be
qualified to do business as a foreign corporation in any
jurisdiction where non-qualification would have a material
adverse effect on the condition (financial or otherwise),
operations, business, assets, earnings or properties of Company,
the Bank and the Subsidiary, taken as a whole ("Material Adverse
Effect"). The Bank does not own equity securities of or an equity
interest in any business enterprise except for all of the
outstanding capital stock of Workingmens Service Corporation, a
Pennsylvania corporation (the "Subsidiary") and except as
described in the Prospectus. Upon amendment of the Bank's charter
and bylaws as provided in the rules and regulations of the Office
and completion of the sale by the Company of the Shares as
contemplated by the Prospectus, (i) the Bank will be converted
pursuant to the Plan to a federally chartered capital stock
savings bank with full power and authority to own its property
and conduct its business as described in the Prospectus, (ii) all
of the authorized and outstanding capital stock of the Bank will
be owned of record and beneficially by the Company, and (iii) the
Company will have no direct subsidiaries other than the Bank.
(v) The Bank and the Subsidiary have good, marketable and
insurable title to all assets material to their business and to
those assets described in the Prospectus as owned by them, free
and clear of all material liens, charges, encumbrances or
restrictions, except for liens for taxes not yet due, except as
described in the Prospectus and except as could not in the
aggregate have a Material Adverse Effect; and all of the leases
and subleases material to the operations or financial condition
of the Bank and the Subsidiary, taken as a whole, under which
either the Bank or Subsidiary holds properties, including those
described in the Prospectus, are in full force and effect as
described therein.
(vi) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary actions on the part
of each of the Company and the Bank, and this Agreement is a
valid and binding obligation with valid execution and delivery of
each of the Company and the Bank, enforceable in accordance with
its terms (except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, reorganization or similar
laws relating to or affecting the enforcement of creditors'
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 5
rights generally or the rights of creditors of savings and loan
holding companies the accounts of whose subsidiaries are insured
by the FDIC or by general equity principles, regardless of
whether such enforceability is considered in a proceeding in
equity or at law, and except to the extent that the provisions of
Sections 8 and 9 hereof may be unenforceable as against public
policy or pursuant to Section 23A of the Federal Reserve Act, 12
U.S.C. Section 371c ("Section 23A")).
(vii) There is no litigation or governmental proceeding
pending or, to the best knowledge of the Company or the Bank,
threatened against or involving the Company, the Bank, the
Subsidiary or any of their respective assets which individually
or in the aggregate would reasonably be expected to have a
Material Adverse Effect.
(viii) The Company and the Bank have received the opinions
of Malizia, Spidi, Sloane & Fisch, P.C. with respect to federal
tax consequences of the Conversion, and of _______________ with
respect to Pennsylvania tax consequences of the Conversion, to
the effect that the Conversion will constitute a tax-free
reorganization under the Internal Revenue Code of 1986, as
amended, and will not be a taxable transaction for the Bank or
the Company under the laws of Pennsylvania, and the facts relied
upon in such opinions are accurate and complete.
(ix) Each of the Company and the Bank has all such
corporate power, authority, authorizations, approvals and orders
as may be required to enter into this Agreement and to carry out
the provisions and conditions hereof, subject to the limitations
set forth herein and subject to the satisfaction of certain
conditions imposed by the Office in connection with its approvals
of the Form AC and the Application H-(e)1-S, and except as may be
required under the securities laws of various jurisdictions, and
in the case of the Company, as of the Closing Date, will have
such approvals and orders to issue and sell the Shares to be sold
by the Company as provided herein, and in the case of the Bank,
as of the Closing Date, will have such approvals and orders to
issue and sell the Shares of its Common Stock to be sold to the
Company as provided in the Plan, subject to the issuance of
amended charter in the form required for federally chartered
stock savings associations (the "Stock Charter"), the form of
which Stock Charter has been approved by the Office.
(x) Neither the Company, the Bank nor the Subsidiary is in
violation of any rule or regulation of the Office or the FDIC
that could reasonably be expected to result in any enforcement
action against the Company, the Bank, the Subsidiary or their
officers or directors that might have a Material Adverse Effect.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 6
(xi) The consolidated financial statements and any related
notes or schedules which are included in the Registration
Statement and the Prospectus fairly present the consolidated
financial condition, income, retained earnings and cash flows of
the Bank at the respective dates thereof and for the respective
periods covered thereby and comply as to form with the applicable
accounting requirements of the SEC and OTS Regulations. Such
financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied
throughout the periods involved, except as set forth therein, and
such financial statements are consistent with financial
statements and other reports filed by the Bank with supervisory
and regulatory authorities except as such generally accepted
accounting principles may otherwise require. The tables in the
Prospectus accurately present the information purported to be
shown thereby at the respective dates thereof and for the
respective periods therein.
(xii) There has been no material change in the condition
(financial or otherwise), results of operations or business,
including assets and properties, of the Company, the Bank and the
Subsidiary, taken as a whole, since the latest date as of which
such condition is set forth in the Prospectus, except as set
forth therein; and the capitalization, assets, properties and
business of each of the Company, the Bank and the Subsidiary
conform to the descriptions thereof contained in the Prospectus.
None of the Company, the Bank or the Subsidiary has any material
liabilities of any kind, contingent or otherwise, except as set
forth in the Prospectus.
(xiii) There has been no breach or default (or the
occurrence of any event which, with notice or lapse of time or
both, would constitute a default) under, or creation or
imposition of any lien, charge or other encumbrance upon any of
the properties or assets of the Company, the Bank or the
Subsidiary pursuant to any of the terms, provisions or conditions
of any agreement, contract, indenture, bond, debenture, note,
instrument or obligation to which the Company, the Bank or the
Subsidiary is a party or by which any of them or any of their
respective assets or properties may be bound or is subject, or
violation of any governmental license or permit or any
enforceable published law, administrative regulation or order or
court order, writ, injunction or decree, which breach, default,
encumbrance or violation would have a Material Adverse Effect;
all agreements which are material to the condition (financial or
otherwise), results of operations or business of the Company, the
Bank and the Subsidiary, taken as a whole, are in full force and
effect, and no party to any such agreement has instituted or, to
the best knowledge of the Company and the Bank, threatened any
action or proceeding wherein the Company, the Bank or the
Subsidiary would be alleged to be in default thereunder.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 7
(xiv) None of the Company, the Bank or the Subsidiary is
in violation of its respective charter or bylaws. The execution
and delivery hereof and the consummation of the transactions
contemplated hereby by the Company and the Bank do not conflict
with or result in a breach of the charter or bylaws of the
Company, the Bank (in either mutual or stock form) or the
Subsidiary or constitute a material breach of or default (or an
event which, with notice or lapse of time or both, would
constitute a default) under, give rise to any right of
termination, cancellation or acceleration contained in, or result
in the creation or imposition of any lien, charge or other
encumbrance upon any of the properties or assets of the Company,
the Bank or the Subsidiary pursuant to any of the terms,
provisions or conditions of, any material agreement, contract,
indenture, bond, debenture, note, instrument or obligation to
which the Company, the Bank or the Subsidiary is a party or
violate any governmental license or permit or any enforceable
published law, administrative regulation or order or court order,
writ, injunction or decree (subject to the satisfaction of
certain conditions imposed by the Office in connection with its
approval of the Conversion Application), which breach, default,
encumbrance or violation would have a Material Adverse Effect.
(xv) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus
and prior to the Closing Date (as hereinafter defined), except as
otherwise may be indicated or contemplated therein, none of the
Company, the Bank or the Subsidiary has issued any securities
which will remain issued at the Closing Date or incurred any
liability or obligation, direct or contingent, or borrowed money,
except borrowings in the ordinary course of business, or entered
into any other transaction not in the ordinary course of business
and consistent with prior practices, which is material in light
of the business of the Company, the Bank and the Subsidiary,
taken as a whole.
(xvi) Upon consummation of the Conversion, the authorized,
issued and outstanding equity capital of the Company shall be
within the range as set forth in the Prospectus under the caption
"Capitalization," and no Common Stock of the Company shall be
outstanding immediately prior to the Closing Date; the issuance
and the sale of the Shares of the Company have been duly
authorized by all necessary action of the Company and approved by
the Office and, when issued in accordance with the terms of the
Plan and paid for, shall be validly issued, fully paid and
nonassessable and shall conform to the description thereof
contained in the Prospectus; the issuance of the Shares is not
subject to preemptive rights, except as set forth in the
Prospectus; and good title to the Shares will be transferred by
the Company upon issuance thereof against payment therefor, free
and clear of all claims, encumbrances, security interests and
liens against the Company whatsoever.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 8
The certificates representing the Shares will conform in all
material respects with the requirements of applicable laws and
regulations. The issuance and sale of the capital stock of the
Bank to the Company has been duly authorized by all necessary
action of the Bank and the Company and appropriate regulatory
authorities (subject to the satisfaction of various conditions
imposed by the Office in connection with its approval of the
Conversion Application), and such capital stock, when issued in
accordance with the terms of the Plan, will be fully paid and
nonassessable and will conform in all material respects to the
description thereof contained in the Prospectus.
(xvii) No approval of any regulatory or supervisory or
other public authority is required in connection with the
execution and delivery of this Agreement or the issuance of the
Shares, except for the declaration of effectiveness of any
required post-effective amendment of the Registration Statement
by the Commission and the issuance of the Stock Charter by the
Office.
(xviii) All contracts and other documents required to be
filed as exhibits to the Registration Statement or the Conversion
Application have been filed with the Commission and/or the
Office, as the case may be.
(xix) Hinds, Lind, Miller & Co., which has audited the
financial statements of the Bank at June 30, 1996 and 1995 and
for the years ended June 30, 1996 and 1995 included in the
Prospectus, is an independent public accountant within the
meaning of the Code of Professional Ethics of the American
Institute of Certified Public Accountants and Title 12 of the
Code of Federal Regulations, Section 571.2(c)(3).
(xx) For the past five years, the Company and the Bank
have timely filed all required federal, state and local tax
returns, and no deficiency has been asserted with respect to such
returns by any taxing authorities, and the Company and the Bank
have paid all taxes that have become due and, to the best of
their knowledge, have made adequate reserves for similar future
tax liabilities, except where any failure to make such filings,
payments and reserves, or the assertion of such a deficiency,
would not have a Material Adverse Effect.
(xxi) All of the loans represented as assets of the Bank
on the most recent financial statements of the Bank included in
the Prospectus meet or are exempt from all requirements of
federal, state or local law pertaining to lending and interest,
including, without limitation, truth in lending (including the
requirements of Regulation Z and 12 C.F.R. Part 226), real estate
settlement procedures, consumer
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 9
credit protection, equal credit opportunity and all disclosure
laws applicable to such loans, except for violations which, if
asserted, would not have a Material Adverse Effect.
(xxii) The records of account holders, depositors,
borrowers and other members of the Bank delivered to Trident by
the Bank or its agent for use during the Conversion have been
prepared or reviewed by the Bank and, to the best knowledge of
the Company and the Bank, are reliable and accurate.
(xxiii) None of the Company, the Bank, the Subsidiary or
the employees of the Company, the Bank or the Subsidiary has made
any payment of funds of the Company, the Bank or the Subsidiary
prohibited by law, and no funds of the Company, the Bank or the
Subsidiary have been set aside to be used for any payment
prohibited by law.
(xxiv) To the best knowledge of the Company and the Bank,
the Company, the Bank and the Subsidiary are in compliance with
all laws, rules and regulations relating to the discharge,
storage, handling and disposal of hazardous or toxic substances,
pollutants or contaminants and neither the Company, the Bank nor
the Subsidiary believes that the Company, the Bank or the
Subsidiary is subject to liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
as amended, or any similar law, except for violations which, if
asserted, would not have a Material Adverse Effect. There are no
actions, suits, regulatory investigations or other proceedings
pending or, to the best knowledge of the Company or the Bank,
threatened against the Company, the Bank or the Subsidiary
relating to the discharge, storage, handling and disposal of
hazardous or toxic substances, pollutants or contaminants. To the
best knowledge of the Company and the Bank, no disposal, release
or discharge of hazardous or toxic substances, pollutants or
contaminants, including petroleum and gas products, as any of
such terms may be defined under federal, state or local law, has
been caused by the Company, the Bank or the Subsidiary or, to the
best knowledge of the Company or the Bank, has occurred on, in or
at any of the facilities or properties of the Company, the Bank
or the Subsidiary, except such disposal, release or discharge
which would not have a Material Adverse Effect.
(xxv) At the Closing Date, the Company and the Bank will
have completed the conditions precedent to, and shall have
conducted the Conversion in all material respects in accordance
with, the Plan, the HOLA, the OTS Regulations and all other
applicable laws, regulations, published decisions and orders,
including all terms, conditions, requirements and provisions
precedent to the Conversion imposed by the
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 10
Office.
(xxvi) Ferguson & Company ("Ferguson"), which prepared the
Conversion appraisal dated as of ______________, 1997, described
in the Prospectus, is independent with respect to the Company and
the Bank within the meaning of the OTS Regulations, is believed
by the Company and the Bank to be experienced and expert in
rendering corporate appraisals of thrift institutions, and the
Company and the Bank believe that Ferguson has prepared the
pricing information set forth in the Prospectus in accordance
with the requirements of the OTS Regulation.
(xxvii) The Company, the Bank and the Subsidiary have
obtained all licenses, permits and other governmental
authorizations currently required for the conduct of their
respective businesses except where the failure to obtain such
licenses, permits and governmental authorizations would not have
a Material AdverseEffect; all such licenses, permits and other
governmental authorizations are in full force and effect, and the
Company, the Bank and the Subsidiary are complying therewith in
all material respects.
(b) Trident represents and warrants to the Company and the Bank
that:
(i) Trident is registered as a broker-dealer with the
Commission, and is in good standing with the Commission and the
NASD.
(ii) Trident is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation,
with full corporate power and authority to provide the services
to be furnished to the Company and the Bank hereunder.
(iii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary action on the part
of Trident, and this Agreement is a legal, valid and binding
obligation of Trident, enforceable in accordance with its terms
(except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, reorganization or similar
laws relating to or affecting the enforcement of creditors'
rights generally or the rights of creditors of registered
broker-dealers the accounts of which may be protected by the
Securities Investor Protection Corporation or by general equity
principles, regardless of whether such enforceability is
considered in a proceeding in equity or at law, and except to the
extent that the provisions of Sections 8 and 9 hereof may be
unenforceable as against public policy or pursuant to Section
23A).
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 11
(iv) Each of Trident and, to Trident's knowledge, its
employees, agents and representatives who shall perform any of
the services required hereunder to be performed by Trident shall
be duly authorized and shall have all licenses, approvals and
permits necessary to perform such services, and Trident is a
registered selling agent in the jurisdictions listed in Exhibit A
hereto and will remain registered in such jurisdictions in which
the Company is relying on such registration for the sale of the
Shares, until the Conversion is consummated or terminated.
(v) The execution and delivery of this Agreement by
Trident, the fulfillment of the terms set forth herein and the
consummation of the transactions contemplated hereby shall not
violate or conflict with the corporate charter or bylaws of
Trident or violate, conflict with or constitute a breach of, or
default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, any material agreement,
indenture or other instrument by which Trident is bound or under
any governmental license or permit or any law, administrative
regulation, authorization, approval or order or court decree,
injunction or order, which breach, default or violation would
have Material Adverse Effect on the condition (financial or
otherwise), operations business, assets, earnings or properties
of Trident.
(vi) Any funds received by Trident to purchase Common
Stock will be handled in accordance with Rule 15c2-4 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
(vii) There is not now pending or, to Trident's knowledge,
threatened against Trident any action or proceeding before the
Commission, the NASD, any state securities commission or any
state or federal court concerning Trident's activities as a
broker-dealer.
3. Employment of Trident; Sale and Delivery of the Shares. On the basis
of the representations and warranties herein contained, but subject to the terms
and conditions herein set forth, the Company and the Bank hereby employ Trident
as their agent to utilize its best efforts in assisting the Company with the
Company's sale of the Shares in the Subscription Offering and, if any, the
Community Offering. The employment of Trident hereunder shall terminate (a)
forty-five (45) days after the Subscription Offering closes, unless the Company
and the Bank, with the approval of the Office, are permitted to extend such
period of time, or (b) upon consummation of the Conversion, whichever date shall
first occur.
In the event the Company is unable to sell a minimum of 212,500 Shares
(or such lesser amount as the Office may permit) within the period herein
provided, this Agreement shall terminate,
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 12
and the Company and the Bank shall refund promptly to any persons who have
subscribed for any of the Shares, the full amount which it may have received
from them, together with interest as provided in the Prospectus, and no party to
this Agreement shall have any obligation to the other party hereunder, except as
set forth below and in Sections 6, 8(a) and 9 hereof. Appropriate arrangements
for placing the funds received from subscriptions for Shares in special
interest-bearing accounts with the Bank until all Shares are sold and paid for
were made prior to the commencement of the Offerings, with provision for prompt
refund to the purchasers as set forth above, or for delivery to the Company if
the required number of Shares is sold.
If all conditions precedent to the consummation of the Conversion are
satisfied, including the sale of all Shares required by the Plan to be sold, the
Company agrees to issue or have issued such Shares and to release for delivery
certificates to subscribers thereof for such Shares on the Closing Date against
payment to the Company by any means authorized pursuant to the Prospectus, at
the principal office of the Company at 807 Middle Street, Pittsburgh,
Pennsylvania 15212, or at such other place as shall be agreed upon between the
parties hereto. The date upon which Trident is paid the compensation due
hereunder is herein called the "Closing Date."
Trident agrees either (a) upon receipt of an executed order form of a
subscriber to forward the offering price of the Common Stock ordered on or
before twelve noon on the next business day following receipt or execution of an
order form by Trident to the Bank for deposit in a segregated account or (b) to
solicit indications of interest in which event (i) Trident will subsequently
contact any potential subscriber indicating interest to confirm the interest and
give instructions to execute and return an order form or to receive
authorization to execute the order form on the subscriber's behalf, (ii) Trident
will mail acknowledgments of receipt of orders to each subscriber confirming
interest on the business day following such confirmation, (iii) Trident will
debit accounts of such subscribers on the third business day ("debit date")
following receipt of the confirmation referred to in (i), and (iv) Trident will
forward completed order forms together with such funds to the Bank on or before
twelve noon on the next business day following the debit date for deposit in a
segregated account. Trident acknowledges that if the procedure in (b) is
adopted, subscribers' funds are not required to be in their accounts until the
debit date.
In addition to the expenses specified in Section 6 hereof, Trident shall
receive for its services hereunder a management fee of $85,000. Full payment of
such amount shall be made in same-day funds on the Closing Date or, if the
Conversion is not completed and is terminated for any reason full payment of
Trident's out-of-pocket expenses, including, but not limited to, travel,
communications and postage and legal fees and expenses, shall be reimbursed to
Trident within ten (10) business days of receipt by the Company of a written
request from Trident for reimbursement of its expenses. Trident acknowledges
receipt of $10,000 advance payment from the Bank which shall be credited against
the total reimbursement due Trident hereunder. The Company shall pay any stock
issue and transfer taxes which may be payable with respect to the sale
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 13
of the Shares. The Company and the Bank shall also pay all expenses of the
Conversion incurred by them or on their prior approval including but not limited
to their attorneys' fees, NASD filing fees, and attorneys' fees relating to any
required state securities laws research and filings, telephone charges, air
freight, rental equipment, supplies, transfer agent charges, fees relating to
auditing and accounting and costs of printing all documents necessary in
connection with the Conversion.
4. Offering. Subject to the provisions of Section 7 hereof, Trident is
assisting the Company on a best efforts basis in offering a minimum of 212,500
and a maximum of 287,500 Shares, with the possibility of offering up to 330,600
Shares (except as the Office may permit to be decreased or increased) in the
Offerings. The Shares are to be offered to the public at the price set forth on
the cover page of the Prospectus and the first page of this Agreement.
5. Further Agreements. The Company and the Bank jointly and severally
covenant and agree that:
(a) The Company shall deliver to Trident, from time to time, such
number of copies of the Prospectus as Trident reasonably may request.
The Company authorizes Trident to use the Prospectus in any lawful
manner in connection with the offer and sale of the Shares.
(b) The Company will notify Trident immediately upon discovery,
and confirm the notice in writing, (i) when any post-effective amendment
to the Registration Statement becomes effective or any supplement to the
Prospectus has been filed, (ii) of the issuance by the Commission of any
stop order relating to the Registration Statement or of the initiation
or the threat of any proceedings for that purpose, (iii) of the receipt
of any notice with respect to the suspension of the qualification of the
Shares for offering or sale in any jurisdiction, (iv) of the receipt of
any comments from the staff of the Commission relating to the
Registration Statement and (v) of the issuance by the Office of any stop
order relating to the Conversion or the use of the Prospectus or Proxy
Statement or the threat of any proceedings for that purpose. If the
Commission enters a stop order relating to the Registration Statement at
any time, the Company will make every reasonable effort to obtain the
lifting of such order at the earliest possible moment.
(c) During the time when a prospectus is required to be delivered
under the Act, the Company will comply so far as it is able with all
requirements imposed upon it by the Act, as now in effect and hereafter
amended, and by the Regulations, as from time to time in force, so far
as necessary to permit the continuance of offers and sales of or
dealings in the Shares in accordance with the provisions hereof and the
Prospectus. If during the period when the Prospectus is required to be
delivered in connection with the offer and sale of the Shares any event
relating to or affecting the Company and the Bank, taken as a whole,
shall
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 14
occur as a result of which it is necessary, in the opinion of counsel
for Trident, with the concurrence of counsel to the Company, to amend or
supplement the Prospectus in order to make the Prospectus not false or
misleading in light of the circumstances existing at the time it is
delivered to a purchaser of the Shares, the Company forthwith shall
prepare and furnish to Trident a reasonable number of copies of an
amendment or amendments or of a supplement or supplements to the
Prospectus (in form and substance satisfactory to counsel for Trident)
which shall amend or supplement the Prospectus so that, as amended or
supplemented, the Prospectus shall not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in light of the circumstances existing at
the time the Prospectus is delivered to a purchaser of the Shares, not
misleading. The Company will not file or use any amendment or supplement
to the Registration Statement or the Prospectus of which Trident has not
first been furnished a copy or to which Trident shall reasonably object
after having been furnished such copy. For the purposes of this
subsection the Company and the Bank shall furnish such information with
respect to themselves as Trident from time to time may reasonably
request.
(d) The Company and the Bank have taken or will take all
reasonably necessary action as may be required to qualify or register
the Shares for offer and sale by the Company under the securities laws
of such jurisdictions as Trident and either the Company or its counsel
may agree upon; provided, however, that the Company shall not be
obligated to qualify as a foreign corporation to do business under the
laws of any such jurisdiction. In each jurisdiction where such
qualification or registration shall be effected, the Company, unless
Trident agrees that such action is not necessary or advisable in
connection with the distribution of the Shares, shall file and make such
statements or reports as are, or reasonably may be, required by the laws
of such jurisdiction.
(e) Appropriate entries will be made in the financial records of
the Bank sufficient to establish a liquidation account for the benefit
of eligible account holders and supplemental eligible account holders in
accordance with the requirements of the Office.
(f) The Company will file a registration statement for the Common
Stock under Section 12(g) of the Exchange Act, prior to completion of
the stock offering pursuant to the Plan and shall request that such
registration statement be effective upon or before completion of the
Conversion. The Company shall maintain the effectiveness of such
registration for a minimum period of three years or for such shorter
period as may be required by applicable law.
(g) The Company will make generally available to its security
holders as soon as practicable, but not later than 90 days after the
close of the period covered thereby, an earnings statement (in form
complying with the provisions of Rule 158 of the regulations
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 15
promulgated under the Act) covering a twelve-month period beginning not
later than the first day of the Company's fiscal quarter next following
the effective date (as defined in said Rule 158) of the Registration
Statement.
(h) For a period of three (3) years from the date of this
Agreement (unless the Common Stock shall have been deregistered under
the Exchange Act), the Company will furnish to Trident, as soon as
publicly available after the end of each fiscal year, a copy of its
annual report to shareholders for such year; and the Company will
furnish to Trident (i) as soon as publicly available, a copy of each
report or definitive proxy statement of the Company filed with the
Commission under the Exchange Act or mailed to shareholders, and (ii)
from time to time, such other public information concerning the Company
as Trident may reasonably request.
(i) The Company shall use the net proceeds from the sale of the
Shares consistently with the manner set forth in the Prospectus.
(j) The Company shall not deliver the Shares until each and every
condition set forth in Section 7 hereof has been satisfied, unless such
condition is waived in writing by Trident.
(k) The Company shall advise Trident, if necessary, as to the
allocation of deposits, in the case of eligible account holders and
supplemental eligible account holders (as defined n the Plan), and
votes, in the case of other members, and of the Shares in the event of
an oversubscription and shall, after consultation with Trident, provide
Trident final instructions as to the allocation of the Shares
("Allocation Instructions") in such event and such information shall be
accurate and reliable. Trident shall be entitled to rely on such
instructions and shall have no liability in respect of its reliance
thereon, including without limitation, no liability for or related to
any denial or grant of a subscription in whole or in part.
(l) The Company and the Bank will take such actions and furnish
such information as are reasonably requested by Trident in order for
Trident to ensure compliance with the NASD's "Interpretation Relating to
Free-Riding and Withholding."
(m) If any Shares remain unsubscribed following completion of the
Subscription Offering and, if any, the Community Offering, the Company
(i) will promptly file with the Commission a post-effective amendment to
the Registration Statement relating to the results of the Subscription
Offering and, if any, the Community Offering, any additional information
with respect to the proposed plan of distribution and any revised
pricing information or (ii) if no such post-effective
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 16
amendment is required, will file with, or mail for filing to, the
Commission a prospectus or prospectus supplement containing information
relating to the results of the Subscription Offering and, if any, the
Community Offering and pricing information pursuant to Rule 424(c) of
the Regulations, in either case in a form reasonably acceptable to the
Company and Trident.
(n) The Company and the Bank will maintain appropriate arrangements
for depositing all funds received from persons mailing subscriptions for
or orders to purchase Common Stock in the Subscription Offering and
Community Offering on an interest bearing basis at the rate described in
the Prospectus until the Closing Date and satisfaction of all conditions
precedent to consummation of the Conversion or until refunds of such
funds have been made to the persons entitled thereto in accordance with
the Plan and as described in the Prospectus.
(o) The Company and the Bank will conduct the Conversion in
accordance with the Plan, the OTS Regulations and all other applicable
laws, regulations, decisions and orders, including all terms,
conditions, requirements and provisions precedent to the Conversion.
6. Payment of Expenses. Whether or not the Conversion is consummated,
the Company and the Bank shall pay or reimburse Trident for (a) all filing fees
paid or incurred by Trident in connection with all filings with the NASD with
respect to the Offerings and, (b) in addition, if the Company is unable to sell
a minimum of 212,500 Shares or such lesser amount as the Office may permit or
the Conversion is otherwise terminated, the Company and the Bank shall reimburse
Trident for allocable expenses incurred by Trident relating to the offering of
the Shares as provided in Section 3 hereof; provided, however, that neither the
Company nor the Bank shall pay or reimburse Trident for any of the foregoing
expenses accrued after Trident shall have notified the Company or the Bank of
its election to terminate this Agreement pursuant to Section 11 hereof or after
such time as the Company or the Bank shall have given notice in accordance with
Section 12 hereof that Trident is in breach of this Agreement.
7. Conditions of Trident's Obligations. Except as may be waived in
writing by Trident, the obligations of Trident as provided herein shall be
subject to the accuracy of the representations and warranties contained in
Section 2 hereof as of the date hereof and as of the Closing Date, to the
performance by the Company and the Bank of their obligations hereunder and to
the following conditions:
(a) At the Closing Date, Trident shall receive the favorable
opinions of Malizia, Spidi, Sloane & Fisch, P.C., special counsel for
the Company and the Bank, and Hirshberg, Gustine & Straka, counsel for
the Company and the Bank, dated the Closing
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 17
Date, addressed to Trident, in form and substance reasonably
satisfactory to counsel for Trident, substantially as set forth in
Exhibits B and C, respectively, hereto.
(b) At the Closing Date, Trident shall receive the letter of
Malizia, Spidi, Sloane & Fisch, P.C., special counsel for the Company
and the Bank, dated the Closing Date, addressed to Trident, in form and
substance reasonably satisfactory to counsel for Trident, substantially
as set forth in Exhibit D hereto.
(c) Counsel for Trident shall have been furnished such documents
as they reasonably may require for the purpose of enabling them to
review or pass upon the matters required by Trident, and for the purpose
of evidencing the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained, including
but not limited to, resolutions of the Board of Directors of the Company
and the Bank regarding the authorization of this Agreement and the
transactions contemplated hereby.
(d) Prior to and at the Closing Date, in the reasonable opinion
of Trident, (i) there shall have been no material change in the
condition, financial or otherwise, business or results of operations of
the Company and the Bank, taken as a whole, since the latest date as of
which such condition is set forth in the Prospectus, except as referred
to therein; (ii) there shall have been no transaction entered into by
the Company or the Bank after the latest date as of which the financial
condition of the Company or the Bank is set forth in the Prospectus
other than transactions referred to or contemplated therein,
transactions in the ordinary course of business, and transactions which
are not material to the Company and the Bank, taken as a whole; (iii)
none of the Company or the Bank shall have received from the Office or
Commission any direction (oral or written) to make any change in the
method of conducting their respective businesses which is material to
the business of the Company and the Bank, taken as a whole, with which
they have not complied; (iv) no action, suit or proceeding, at law or in
equity or before or by any federal or state commission, board or other
administrative agency, shall be pending or threatened against the
Company, the Bank or the Subsidiary or affecting any of their respective
assets, wherein an unfavorable decision, ruling or finding would have a
Material Adverse Effect; and (v) the Shares shall have been qualified or
registered for offering and sale by the Company under the securities
laws of such jurisdictions as Trident and the Company shall have agreed
upon.
(e) At the Closing Date, Trident shall receive a certificate of
the principal executive, financial and accounting officer(s) of each of
the Company and the Bank, dated the Closing Date, to the effect that:
(i) they have examined the Prospectus and, at the time the Prospectus
became authorized by the Company for use, the Prospectus did not contain
an untrue statement of a material fact or omit to state a material fact
necessary in order to
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 18
make the statements therein, in light of the circumstances under which
they were made, not misleading with respect to the Company or the Bank;
(ii) since the date the Prospectus became authorized by the Company for
use, no event has occurred which should have been set forth in an
amendment or supplement to the Prospectus which has not been so set
forth, including specifically, but without limitation, any material
change in the business, condition (financial or otherwise) or results of
operations of the Company or the Bank and, the conditions set forth in
clauses (i) through (v) inclusive of subsection (d) of this Section 7
have been satisfied; (iii) to the best knowledge of such officers, no
order has been issued by the Commission or the Office to suspend the
Offerings or the effectiveness of the Prospectus, and no action for such
purposes has been instituted or threatened by the Commission or the
Office; (iv) to the best knowledge of such officers, no person has
sought to obtain review of the final actions of the Office approving the
Plan; and (v) all of the representations and warranties contained in
Section 2 of this Agreement are true and correct, with the same force
and effect as though expressly made on the Closing Date.
(f) At the Closing Date, Trident shall receive, among other
documents, (i) copies of the letters from the Office authorizing the use
of the Prospectus and the Proxy Statement, (ii) a copy of the order of
the Commission declaring the Registration Statement effective; (iii)
copies of the letters from the Office evidencing the corporate existence
of the Bank; (iv) a copy of the letter from the appropriate Pennsylvania
authority evidencing the incorporation (and, if generally available from
such authority, good standing) of the Company; (v) a copy of the
Company's charter certified by the appropriate Pennsylvania governmental
authority; and, (vi) if available, a copy of the letter from the Office
approving the Bank's Stock Charter.
(g) As soon as available after the Closing Date, Trident shall
receive a copy of the Bank's Certified Stock Charter executed by the
appropriate federal governmental authority.
(h) Concurrently with the execution of this Agreement, Trident
shall have received a letter from Hinds, Lind, Miller & Co., independent
certified public accountants, addressed to Trident and the Company, in
substance and form satisfactory to counsel for Trident, with respect to
the financial statements and certain financial information contained in
the Prospectus.
(i) At the Closing Date, Trident shall receive a letter in form
and substance satisfactory to counsel for Trident from Hinds, Lind,
Miller & Co., independent certified public accountants, dated the
Closing Date and addressed to Trident and the Company, confirming the
statements made by them in the letter delivered by them pursuant to the
preceding subsection as of a specified date not more than five (5) days
prior to the Closing
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 19
Date.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are, in the
reasonable opinion of Trident and its counsel, satisfactory to Trident
and its counsel. Any certificates signed by an officer or director of
the Company or the Bank prepared for Trident's reliance and delivered to
Trident or to counsel for Trident shall be deemed a representation and
warranty by the Company and the Bank to Trident as to the statements
made therein. If any condition to Trident's obligations hereunder to be
fulfilled prior to or at the Closing Date is not so fulfilled, Trident
may terminate this Agreement or, if Trident so elects, Trident may waive
in writing any such conditions which have not been fulfilled, or may
extend the time of their fulfillment. If Trident terminates this
Agreement as aforesaid, the Company and the Bank shall reimburse Trident
for its expenses as provided in Section 3 hereof.
8. Indemnification.
(a) The Company and the Bank jointly and severally agree to
indemnify and hold harmless Trident, its officers, directors and
employees and each person, if any, who controls Trident within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act,
against any and all loss, liability, claim, damage and expense
whatsoever and shall further promptly reimburse such persons for any
legal or other expenses reasonably incurred by each or any of them in
investigating, preparing to defend or defending against any such action,
proceeding or claim (whether commenced or threatened) arising out of or
based upon (A) any misrepresentation by the Company or the Bank in this
Agreement or any breach of warranty by the Company or the Bank with
respect to this Agreement or arising out of or based upon any untrue or
alleged untrue statement of a material fact or the omission or alleged
omission of a material fact required to be stated or necessary to make
not misleading any statements contained in (i) the Registration
Statement or the Prospectus or (ii) any application (including the Form
AC and the Form H-(e)1-S) or other document or communication (in this
Section 8 collectively called "Application") prepared or executed by or
on behalf of the Company or the Bank or based upon written information
furnished by or on behalf of the Company or the Bank, whether or not
filed in any jurisdiction, to effect the Conversion or qualify the
Shares under the securities laws thereof or filed with the Office or
Commission, unless such statement or omission was made in reliance upon
and in conformity with written information furnished to the Company or
the Bank with respect to Trident by or on behalf of Trident expressly
for use in the Prospectus or any amendment or supplement thereof or in
any Application, as the case may be, or (B) the participation by Trident
in the Conversion. This indemnity shall be in addition to any liability
the Company and the Bank may have to Trident otherwise.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 20
(b) The Company shall indemnify and hold Trident harmless for any
liability whatsoever arising out of (i) the Allocation Instructions or
(ii) any records of account holders, depositors, borrowers and other
members of the Bank delivered to Trident by the Bank or its agents for
use during the Conversion.
(c) Trident agrees to indemnify and hold harmless the Company and
the Bank, their officers, directors and employees and each person, if
any, who controls the Company or the Bank within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, to the same extent
as the foregoing indemnity from the Company and the Bank to Trident, but
only with respect to (A) statements or omissions, if any, made in the
Prospectus or any amendment or supplement thereof, in any Application or
to a purchaser of the Shares in reliance upon, and in conformity with,
written information furnished to the Company or the Bank with respect to
Trident by or on behalf of Trident expressly for use in the Prospectus
or in any Application; (B) any misrepresentation by Trident in Section
2(b) of this Agreement; or (C) any liability of the Company or the Bank
which is found in a final judgment by a court of competent jurisdiction
(not subject to further appeal) to have principally and directly
resulted from gross negligence or willful misconduct of Trident.
(d) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party
of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may
have to any indemnified party otherwise than under this Section 8. In
case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to
such indemnified party under this Section 8 for any legal or other
expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than the reasonable cost of investigation
except as otherwise provided herein. In the event the indemnifying party
elects to assume the defense of any such action and retain counsel
acceptable to the indemnified party, the indemnified party may retain
additional counsel, but shall bear the fees and expenses of such counsel
unless (i) the indemnifying party shall have specifically authorized the
indemnified party to retain such counsel or (ii) the parties to such
suit include such indemnifying party and the indemnified party, and such
indemnified party shall have been advised by counsel that one or more
material legal defenses may be available to the indemnified party which
may not be available to the indemnifying party, in which case the
indemnifying party shall not be entitled to assume the
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 21
defense of such suit notwithstanding the indemnifying party's obligation
to bear the fees and expenses of such counsel. An indemnifying party
against whom indemnity may be sought shall not be liable to indemnify an
indemnified party under this Section 8 if any settlement of any such
action is effected without such indemnifying party's consent. To the
extent required by law, this Section 8 is subject to and limited by the
provisions of Section 23A.
9. Contribution. In order to provide for just and equitable contribution
in circumstances in which the indemnity agreement provided for in Section 8
above is for any reason held to be unavailable to Trident, the Company and/or
the Bank other than in accordance with its terms, the Company or the Bank and
Trident shall contribute to the aggregate losses, liabilities, claims, damages,
and expenses of the nature contemplated by said indemnity agreement incurred by
the Company or the Bank and Trident (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Bank on the one
hand and Trident on the other from the offering of the Shares or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above, but also the relative fault of the Company or
the Bank on the one hand and Trident on the other hand in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Bank on
the one hand and Trident on the other shall be deemed to be in the same
proportions as the total net proceeds from the Conversion received by the
Company and the Bank bear to the total compensation received by Trident under
this Agreement. The relative fault of the Company or the Bank on the one hand
and Trident on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Bank or by Trident and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Bank and Trident agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by the indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 9, Trident shall not be required
to contribute any amount in excess of the amount by which the compensation owed
Trident pursuant to this Agreement exceeds the amount of any damages which
Trident has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 22
the Act) shall be entitled to contribution from any person who is not guilty of
such fraudulent misrepresentation. To the extent required by law, this Section 8
is subject to and limited by the provisions of Section 23A.
10. Survival of Agreements, Representations and Indemnities. The
respective indemnities of the Company and the Bank and Trident and the
representation and warranties of the Company and the Bank and of Trident set
forth in or made pursuant to this Agreement shall remain in full force and
effect, regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of Trident or the Company or the Bank or any
controlling person or indemnified
party referred to in Section 8 hereof, and shall survive any termination or
consummation of this Agreement and/or the issuance of the Shares, and any legal
representative of Trident, the Company, the Bank and any such controlling
persons shall be entitled to the benefit of the respective agreements,
indemnities, warranties and representations.
11. Termination. Trident may terminate this Agreement by giving the
notice indicated below in this Section at any time after this Agreement becomes
effective as follows:
(a) If any domestic or international event or act or occurrence
has materially disrupted the United States securities markets such as to
make it, in Trident's reasonable opinion, impracticable to proceed with
the offering of the Shares; or if trading on the New York Stock Exchange
shall have suspended; or if the United States shall have become involved
in a war or major hostilities; or if a general banking moratorium has
been declared by a state or federal authority which has material effect
on the Bank or the Conversion; or if a moratorium in foreign exchange
trading by major international banks or persons has been declared; or if
there shall have been a material change in the capitalization, condition
or business of the Company, the Bank or the Subsidiary, or if the Bank
shall have sustained a material or substantial loss by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or
malicious act, whether or not said loss shall have been insured; or if
there shall have been a material adverse change in the condition or
prospects of the Company, the Bank or the Subsidiary.
(b) If Trident elects to terminate this Agreement as provided in
this Section, the Company and the Bank shall be notified promptly by
Trident by telephone or telegram, confirmed by letter.
(c) If this Agreement is terminated by Trident for any of the
reasons set forth in subsection (a) above, and to fulfill its
obligations, if any, pursuant to Sections 3, 6, 8(a) and 9 of this
Agreement and upon demand, the Company and the Bank shall pay Trident
the full amount so owing thereunder.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 23
(d) The Bank may terminate the Conversion in accordance with the
terms of the Plan. Such termination shall be without liability to any
party, except that the Company and the Bank shall be required to fulfill
their obligations pursuant to Sections 3, 6, 8(a) and 9 of this
Agreement.
12. Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and if sent to Trident shall be
mailed, delivered or telegraphed and confirmed to Trident Securities, Inc., 4601
Six Forks Road, Suite 400, Raleigh, North Carolina 27609, Attention: Timothy E.
Lavelle (with a copy to Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., P.
O. Box 26000, Greensboro, NC 27402, Attention: Randall A. Underwood, Esquire)
and if sent to the Company or the Bank, shall be mailed, delivered or
telegraphed and confirmed to WSB Holding Company and Workingmens Savings Bank,
FSB (or Workingmens Bank, as applicable), 807 Middle Street, Pittsburgh,
Pennsylvania 15212, Attention: Mr. Robert Neudorfer, President (with a copy to
Malizia, Spidi, Sloane & Fisch, P.C., 1301 K Street, N.W., Suite 700 East,
Washington, D.C. 20005, Attention: Samuel J. Malizia, Esquire).
13. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon, Trident, the Company, the Bank and the controlling and
other persons referred to in Section 8 hereof, and their respective successors,
legal representatives and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained.
14. Construction. Unless governed by preemptive federal law, this
Agreement shall be governed by and construed in accordance with the substantive
laws of North Carolina.
15. Counterparts. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute but one and the same instrument.
Please acknowledge your agreement to the foregoing by signing below and
returning to the Company one copy of this letter.
WSB HOLDING COMPANY WORKINGMENS SAVINGS BANK, FSB
By: By:
------------------------- -------------------------
Robert Neudorfer Robert Neudorfer
President and Chief President and Chief
Executive Officer Executive Officer
Date: , 1997 Date: , 1997
--------------- ---------------
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 24
Agreed to and accepted:
TRIDENT SECURITIES, INC.
By:
----------------------------
Date: , 1997
---------------
<PAGE>
Exhibit A
Trident Securities, Inc. is a registered selling agent in the jurisdictions
listed below:
Alabama Missouri
Arizona Nebraska
Arkansas Nevada
California New Hampshire
Colorado New Jersey
Connecticut New Mexico
Delaware New York
District of Columbia North Carolina
Florida North Dakota
Trident Securities, Inc. only, no agents)
Georgia Ohio
Idaho Oklahoma
Illinois Oregon
Indiana Pennsylvania
Iowa Rhode Island
Kansas South Carolina
Kentucky Tennessee
Louisiana Texas
Maine Vermont
Maryland Virginia
Massachusetts Washington
Michigan Tennessee
Minnesota Wisconsin
Mississippi Wyoming
Trident Securities, Inc. is not a registered selling agent in the jurisdictions
listed below:
Alaska
Hawaii
Montana
South Dakota
Utah
<PAGE>
Exhibit B
, 1997
- ---------------
Trident Securities, Inc.
4601 Six Forks Road
Suite 400
Raleigh, North Carolina 27609
Re: Workingmens Savings Bank, FSB
WSB Holding Company
Ladies and Gentlemen:
We are rendering this opinion to Trident Securities, Inc. ("Trident" or
"you") as special counsel for Workingmens Savings Bank, FSB (the "Bank") and WSB
Holding Company (the "Company"), pursuant to Section 7(a) of the Sales Agency
Agreement dated _______________ (the "Agency Agreement") by and among the Bank,
the Company and you, as agent for the sale of up to 330,600 shares of common
stock, par value $0.10 per share, of the Company (the "Common Stock") issued in
connection with the conversion of the Bank from a federally chartered mutual
savings bank to a federally chartered capital stock savings bank and the
simultaneous issuance of all of the issued and outstanding stock of the
converted Bank to the Company in accordance with the Bank's Plan of Conversion
(the "Plan"). The sale of the Common Stock by the Company, the conversion of the
Bank from a federally chartered mutual savings bank to a federally chartered
capital stock savings bank and the issuance of the outstanding common stock of
the converted Bank to the Company are hereinafter collectively referred to as
the "Conversion." All references in this opinion to instruments and other
defined terms shall mean the instruments and other terms as defined in the
Agency Agreement, except to the extent they are otherwise defined herein or the
context otherwise requires.
As special counsel for the Bank and the Company, we have reviewed such
corporate records, certificates, and other documents, and such questions of law,
as we have considered necessary or appropriate for the purpose of rendering this
opinion. In the course of our review, we have assumed the genuineness of all
signatures on original documents, and the due execution and delivery of all
documents requiring due execution and delivery for the effectiveness thereof,
except the execution and delivery of the Agency Agreement by the Company and the
Bank as to which we have relied upon representations of officers of the Bank and
the Company. With respect to questions of good
<PAGE>
Trident Securities, Inc.
____________, 1997
Page 2
standing of the Bank and the Company, we have relied solely upon the official
letters of appropriate governmental authorities and representations of officers
of the Bank and the Company.
As to questions of fact material to the opinions hereinafter expressed,
we have relied upon the representations and warranties of the Company and the
Bank made in the Agency Agreement and the certificates of officers delivered at
the closing. We have made no examination or investigation for purposes of these
opinions to verify the accuracy or completeness of any financial, accounting,
pro forma, valuation, or statistical information or information with respect to
Trident set forth in the Registration Statement, the Prospectus, the Agency
Agreement, or any of the documents referred to herein or otherwise furnished to
Trident or with respect to any other accounting or financial matters and express
no opinion with respect thereto. We have also assumed for the purposes of the
opinions expressed herein that the Agency Agreement is a valid and binding
obligation of Trident.
Anything to the contrary, expressly stated or implied, notwithstanding,
each of the opinions hereinafter expressed is subject to the following further
qualifications whether or not such opinions refer to such qualifications:
(1) We offer no opinion and do not purport to opine as to the
enforceability of provisions contained in any documents relating to the
Conversion or contemplated by the Agency Agreement or documents as to which the
Bank or the Company is a party (a) relating to disclaimers, liability
limitations with respect to third parties, releases of legal or equitable
rights, or discharges of defenses and remedies, (b) fixing the amount of
liquidated damages, (c) requiring the payment of interest on interest, and (d)
relating to the payment of attorney's fees.
(2) Our opinions below are limited to the matters expressly set forth in
this opinion letter, and no opinion is to be implied or inferred beyond the
matters stated. Without limiting the foregoing, we express no opinion as to the
anti-fraud provisions of federal and state securities laws.
(3) We have made no independent investigation for purposes of these
opinions as to the accuracy or completeness of any representation, warranty,
date, or other information, written or oral, made or furnished in connection
with the Agency Agreement, and we have relied on the certificates of officers of
the Company and the Bank that none of such information contains any untrue
statement of a material fact or omits a material fact necessary to make the
statements made not misleading.
(4) We are not required to be licensed to practice law in any
jurisdiction other than the District of Columbia. The opinions expressed herein
are limited solely to the federal banking and securities laws and regulations
and Pennsylvania corporate law applicable to the Agency Agreement and the
transactions contemplated thereby, and we do not opine on any other federal law
or the laws of any other applicable jurisdiction.
<PAGE>
Trident Securities, Inc.
____________, 1997
Page 3
(5) We have acted as special counsel in connection with the application
of federal securities and banking law and regulations and Pennsylvania corporate
law applicable to the Agency Agreement and the Conversion and, consequently,
there may exist matters of a legal nature concerning the Company, the Bank,
Workingmens Service Corporation, a Pennsylvania corporation (the "Subsidiary"),
or affiliated parties in connection with which we have not been consulted and
have not represented the Company, the Bank, or the Subsidiary.
(6) Except as set forth in Sections (iv), (v), (xi) and (xiv), below,
this opinion should in no way be construed as an opinion as to the materiality
of the contents of the Registration Statement, the Prospectus, or the Conversion
Application.
(7) Except as otherwise expressly stated, this opinion shall be governed
and interpreted in accordance with the Legal Opinion Accord of the American Bar
Association Section of Business Law (1991).
Based upon and subject to the foregoing and in reliance thereon, and
subject to the assumptions, exceptions and qualifications set forth herein, it
is our opinion that:
(i) the Company has been duly incorporated and is validly
existing as a corporation under the laws of the State of Pennsylvania,
and the Bank is validly existing as a savings bank in mutual form under
the laws of the United States, each with full corporate power and
authority to own its properties and conduct its business as such
properties and business are described in the Prospectus;
(ii) the Bank is a member of the Federal Home Loan Bank of
Pittsburgh, and the deposit accounts of the Bank are insured by the SAIF
up to the applicable legal limits;
(iii) to our actual knowledge, the activities of the Bank, as
such activities are described in the Prospectus, are permitted under
federal and Pennsylvania law to subsidiaries of a Pennsylvania business
corporation, and to our actual knowledge the Bank does not have any
subsidiaries other than the Subsidiary;
(iv) the Plan complies with, and to our actual knowledge the
Conversion has been effected in all material respects in accordance
with, the HOLA and the OTS regulations; to our actual knowledge, all of
the terms, conditions, requirements and provisions with respect to the
Plan and the Conversion imposed by the Office, except with respect to
the filing or submission of certain required post-Conversion reports or
other materials by the Company or the Bank, have been complied with by
the Company and the Bank; and, to our actual knowledge, no person has
sought to obtain regulatory or judicial review of the final action of
the Office in approving the Plan;
<PAGE>
Trident Securities, Inc.
____________, 1997
Page 4
(v) the Company has authorized Common Stock as set forth in the
Registration Statement and the Prospectus, and the description of such
Common Stock in the Registration Statement and the Prospectus is
accurate in all material respects;
(vi) the issuance and sale of the Shares have been duly and
validly authorized by all necessary corporate action on the part of the
Company; the Shares, upon receipt of payment and issuance in accordance
with the terms of the Plan and the Agreement, will be validly issued,
fully paid, nonassessable and free of preemptive rights, and purchasers
of the Shares from the Company, upon issuance thereof against payment
therefor, will acquire such Shares free and clear of all claims,
encumbrances, security interests and liens created by the Company;
(vii) the form of certificate used to evidence the Shares is in
proper form and complies in all material respects with applicable
Tennessee law;
(viii) the issuance and sale of the capital stock of the Bank to
the Company have been duly authorized by all necessary corporate action
of the Bank and the Company and have received the approval of the
Office, and such capital stock, upon receipt of payment and issuance in
accordance with the terms of the Plan, will be validly issued, fully
paid and nonassessable and owned of record and, to our actual knowledge,
beneficially by the Company;
(ix) subject to the satisfaction of the conditions of the
Office's approval of the Conversion Application, no further approval,
authorization, consent or other order of any federal governmental board
or body is required in connection with the execution and delivery of the
Agency Agreement and the consummation of the Conversion, except with
respect to the issuance to the Bank of the Stock Charter by the Office
and as may be required under the securities laws of various states and
except for the approval by the NASD of the compensation payable to
Trident under the rules and regulations of the NASD;
(x) the execution and delivery of the Agreement and the
consummation of the Conversion have been duly and validly authorized by
all necessary corporate action on the part of each of the Company and
the Bank;
(xi) the statements in the Prospectus and incorporated by
reference in the Proxy Statement under the captions "Regulation,"
"Taxation," "Dividends," "Certain Restrictions on Acquisition of the
Holding Company," and "Description of Capital Stock," insofar as they
are, or refer to, statements of law or legal conclusions (excluding
financial data included therein, as to which no opinion is expressed),
have been prepared or reviewed by us and are
correct in all material respects;
<PAGE>
Trident Securities, Inc.
____________, 1997
Page 5
(xii) the Conversion Application has been approved by the Office,
and the Prospectus and the Proxy Statement have been authorized for use
by the Office; the Registration Statement and any post-effective
amendment thereto has been declared effective by the Commission; and to
our actual knowledge, no proceedings are pending by or before the
Commission or the Office seeking to revoke or rescind the orders
declaring the Registration Statement effective or approving the
Conversion Application or, to our actual knowledge, are contemplated or
threatened;
(xiii) the execution and delivery of the Agreement and the
consummation of the Conversion by the Company and the Bank do not
conflict with or result in a breach of the charter or bylaws of the
Company or the Bank (in either mutual or stock form); and
(xiv) the Conversion Application, the Registration Statement, the
Prospectus and the Proxy Statement, in each case as amended, comply as
to form in all material respects with the requirements of the Act, the
HOLA, the SEC Regulations and the OTS Regulations, as the case may be
(except as to information with respect to Trident included therein and
financial statements, notes to financial statements, financial tables
and other financial and statistical data, included therein, as to which
no opinion is expressed); to our actual knowledge, all documents and
exhibits required to be filed with the Conversion Application and the
Registration Statement have been so filed and the descriptions in the
Conversion Application and the Registration Statement of these documents
and exhibits are accurate in all material respects.
This opinion is being rendered solely for the benefit of the addressee
hereof and may not be relied upon by, nor may copies be delivered to, any other
person without our prior written consent. The opinion may be delivered to your
counsel. This opinion is given as of the date hereof and we assume no obligation
to advise you of changes that may hereafter be brought to our attention.
Very truly yours,
Malizia, Spidi, Sloane & Fisch, P.C.
<PAGE>
Exhibit C
, 1997
- --------------------
Trident Securities, Inc.
4601 Six Forks Road
Suite 400
Raleigh, North Carolina 27609
Re: Workingmens Savings Bank, FSB
WSB Holding Company
Ladies and Gentlemen:
We are rendering this opinion to Trident Securities, Inc. ("Trident" or
"you") as general counsel to Workingmens Savings Bank, FSB (the "Bank") and WSB
Holding Company (the "Company") at the time of the conversion of the Bank from a
federally chartered mutual savings bank to a federally chartered capital stock
savings bank, the simultaneous issuance of all of the issued and outstanding
stock of the converted Bank to the Company and the sale and issuance by the
Company of up to 330,600 shares of its Common Stock, par value $0.10 per share
(collectively, the "Conversion") in accordance with the Bank's Plan of
Conversion adopted on May 19, 1997 as amended (the "Plan"). Except to the extent
they are otherwise defined herein or the context otherwise requires, all
references in this opinion to instruments and other defined terms shall mean the
instruments and other terms as defined in the Sales Agency Agreement dated
_____________, 1997 (the "Agency Agreement") by and among the Bank, the Company,
and Trident. Our representation was limited solely to matters of Pennsylvania
law and this opinion is delivered to you pursuant to Section 7(a) of the Agency
Agreement.
As general counsel to the Company and the Bank, with respect to the Bank
and the Company, we have examined such corporate records, certificates, and
other documents, and such questions of law, as we have considered necessary or
appropriate for the purpose of rendering this opinion. In the course of our
examination, we have assumed the genuineness of all signatures on original
documents, and the due execution and delivery of all documents requiring due
execution and
<PAGE>
Trident Securities, Inc.
__________, 1997
Page 2
delivery for the effectiveness thereof. As to matters of fact relating to my
opinion, we have relied on certificates and written statements of officers of
the Bank and the Company.
Based upon and subject to the foregoing and in reliance thereon, and
subject to the assumptions, exceptions, and qualifications set forth herein, it
is my opinion that:
(i) to our actual knowledge, the Bank has obtained all licenses, permits
and other governmental authorizations currently required for the conduct of its
business as such business is described in the Prospectus, all such licenses,
permits and other governmental authorizations are in full force and effect, and
the Bank is in all material respects complying therewith, except where the
failure to obtain and hold such licenses, permits or governmental authorizations
or the failure to so comply would not have a Material Adverse Effect;
(ii) there are no material legal or governmental proceedings pending or,
to our actual knowledge, threatened against or involving the assets of the
Company or the Bank (provided that for this purpose we do not regard any
litigation or governmental procedure to be "threatened" unless the potential
litigant or government authority has manifested to the management of the Company
or the Bank, or to us, a present intention to initiate such litigation or
proceeding);
(iii) to our actual knowledge, the execution and delivery of the Agency
Agreement and the consummation of the Conversion by the Company and the Bank do
not constitute a material breach of or default (or an event which, with notice
or lapse of time or both, would constitute a default) under, give rise to any
right of termination, cancellation or acceleration contained in, or result in
the creation or imposition of any lien, charge or other encumbrance upon any of
the properties or assets of the Company or the Bank pursuant to any of the
terms, provisions or conditions of, any material agreement, contract, indenture,
bond, debenture, note, instrument or obligation to which the Company or the Bank
is a party or violate any governmental license or permit or any enforceable
published law, administrative regulation or order or court order, writ,
injunction or decree (subject to the satisfaction of certain conditions imposed
by the Office in connection with its approval of the Conversion Application),
which breach, default, encumbrance or violation would have a Material Adverse
Effect;
(iv) to our actual knowledge, there has been no material breach of any
provision of the Company's or the Bank's charter or bylaws or breach or default
(or the occurrence of any event which, with notice or lapse of time or both,
would constitute a default) under any agreement, contract, indenture, bond,
debenture, note, instrument or obligation to which the Company or the Bank is a
party or by which any of them or any of their respective assets or properties
may be bound, or any governmental license or permit, or a violation of any
enforceable published law, administrative regulation or order, or court order,
writ, injunction or decree which breach, default, encumbrance or violation would
have a Material Adverse Effect;
<PAGE>
Trident Securities, Inc.
__________, 1997
Page 3
(v) the Agency Agreement is a legal, valid and binding obligation of
each of the Company and the Bank, enforceable in accordance with its terms
(except as the enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization, receivership, conservatorship or similar laws
relating to or affecting the enforcement of creditors' rights generally or the
rights of creditors of depository institutions whose accounts are insured by the
FDIC or savings and loan holding companies the accounts of whose subsidiaries
are insured by the FDIC or by general equity principles, regardless of whether
such enforceability is considered in a proceeding in equity or at law, and
except to the extent that the provisions of Sections 8 and 9 thereof may be
unenforceable as against public policy or pursuant to Section 23A of the Federal
Reserve Act, as to which no opinion is rendered);
(vi) to our actual knowledge, the activities of the Bank, as such
activities are described in the Prospectus, are permitted under Pennsylvania law
to subsidiaries of a Pennsylvania business corporation;
(vii) each of the Company and the Bank has been duly qualified and is in
good standing to do business in Pennsylvania, to our actual knowledge, the only
state in which the Company or the Bank is doing business; and
(viii) subject to the satisfaction of the conditions of the Office's
approval of the Conversion Application, no further approval, authorization,
consent or other order of any governmental board or body is required in
connection with the execution and delivery of the Agency Agreement and the
consummation of the Conversion, except with respect to the issuance to the Bank
of the Stock Charter by the Office and as may be required under the securities
laws of various states and except for the approval by the NASD of the
compensation payable to Trident under the rules and regulations of the NASD.
This opinion is being rendered solely for the benefit of the addressee
hereof and that of the addressee's and the Company's special counsel and may not
be relied upon by, nor may copies be delivered to, any other person without our
prior written consent. We hereby consent to the delivery of this opinion to your
counsel named in the Agency Agreement and to the Company's special counsel in
connection with the consummation of the Conversion. This opinion is given as of
the date hereof and we assume no obligation to advise you of changes that may
hereafter be brought to our attention.
Very truly yours,
<PAGE>
Exhibit D
, 1997
- ---------------
Trident Securities, Inc.
4601 Six Forks Road
Suite 400
Raleigh, North Carolina 27609
Re: Workingmens Savings Bank, FSB
WSB Holding Company
Ladies and Gentlemen:
We have acted as special counsel for WSB Holding Company (the "Company")
and Workingmens Savings Bank, FSB (the "Bank") in connection with the
preparation and filing with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), of the Company's Registration Statement on Form SB-2 (No. 333-______), as
amended, and the Bank's Application for Conversion on Form AC, as amended,
relating to the offering of the Company's common stock (the "Common Stock") in a
subscription offering in connection with the conversion of the Bank from a
federally chartered mutual savings bank to a federally chartered stock savings
bank (the "Conversion") and the issuance of the Bank's capital stock to the
Company pursuant to the Bank's plan of conversion, originally adopted by the
Bank's Board of Directors on May 19, 1997. Such registration statement, as
amended, when it became effective is herein called the "Registration Statement,"
and the related Prospectus dated ______________ is herein called the
"Prospectus." Such application for conversion, as amended, when it received
approval is herein called the "Conversion Application." This letter is furnished
pursuant to Section 7(b) of the Agency Agreement dated ________________ (the
"Agency Agreement") among the Company, the Bank, and Trident Securities, Inc.
("Trident" or "you").
Because the primary purpose of our professional engagement was not to
establish or confirm factual matters or financial, accounting, or statistical
matters and because of the wholly or partially non-legal character of many of
the statements contained in the Conversion Application, the Registration
Statement, and the Prospectus, for purposes of this letter, we are not passing
upon and do not assume any responsibility for the accuracy, completeness, or
<PAGE>
Trident Securities, Inc.
_____________, 1997
Page 2
fairness of the statements contained in the Conversion Application, the
Registration Statement, or the Prospectus and we make no representation that we
have independently verified the accuracy, completeness, or fairness of such
statements. Without limiting the foregoing, for purposes of this letter, we
assume no responsibility for, and have not independently verified, the accuracy,
completeness, or fairness of the financial statements and schedules and other
financial and statistical data and stock valuation information, or information
regarding you included in the Conversion Application, the Registration
Statement, and the Prospectus, and we have not examined the accounting,
financial, or statistical records from which such financial statements,
schedules, and data are derived. We note that, although certain portions of the
Conversion Application, the Registration Statement, and the Prospectus
(including financial statements and schedules and stock valuation information)
have been included therein on the authority of "experts" within the meaning of
the Securities Act, we are not such experts with respect to any portion of the
Conversion Application or the Registration Statement, including without
limitation such financial statements or schedules or the other financial or
statistical data included therein.
However, in the course of our acting as special counsel to the Company
and the Bank in connection with its preparation of the Conversion Application,
the Registration Statement, and the Prospectus:
(i) We participated in conferences with certain officers of, the
independent public and internal accountants for, and other representatives of
the Company and the Bank, at which conferences the contents of the Conversion
Application, the Registration Statement and the Prospectus and related matters
were discussed and, while, for purposes of this letter, we have not confirmed
the accuracy or completeness of or otherwise verified the information contained
in the Conversion Application, the Registration Statement or the Prospectus, and
do not assume any responsibility for such information, based upon such
conferences and a review of documents deemed relevant for the purpose of
rendering our opinion (relying as to factual matters on certificates of officers
and other factual representations by the Company and the Bank), nothing has come
to our attention that would lead us to believe that the Conversion Application,
the Registration Statement, the Prospectus, or any amendment or supplement
thereto (except as to information in respect of Trident contained therein and
except as to the financial statements, the notes thereto, statements concerning
recent accounting pronouncements, and other tabular, financial, statistical and
appraisal data included therein as to which no view is made) contained, as of
the date of approval or effectiveness, as the case may be, or as of the date
hereof, an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
<PAGE>
Trident Securities, Inc.
_____________, 1997
Page 3
(ii) Since _________________, we have not participated with
representatives of the Bank or Company, representatives of the Company's
accountants, you or representatives of your counsel in any conferences or
telephone conversations during which the contents of the Conversion Application,
the Registration Statement, or the Prospectus were discussed, and since
_________________, we have not, for purposes of this letter, otherwise
undertaken any additional procedures for your benefit that were intended or
likely to elicit information concerning the accuracy, completeness, or fairness
of the statements made in the Conversion Application, the Registration Statement
or the Prospectus.
We are furnishing this letter to you solely for your benefit. This
letter is not to be used, circulated, quoted, or otherwise referred to for any
other purpose, except that a copy may be provided to your counsel.
Very truly yours,
Malizia, Spidi, Sloane & Fisch, P.C.
EXHIBIT 2
<PAGE>
PLAN OF CONVERSION
Adopted on
May 19, 1997
and Subsequently Amended
By the Board of Directors of
WORKINGMENS SAVINGS BANK, FSB
Pittsburgh, Pennsylvania
<PAGE>
TABLE OF CONTENTS
Page
1. Introduction................................................ 1
2. Definitions................................................. 2
3. Procedure for Conversion.................................... 5
4. Holding Company Applications and Approvals.................. 5
5. Sale of Conversion Stock.................................... 6
6. Number of Shares and Purchase Price of
Conversion Stock....................................... 6
7. Purchase by the Holding Company of the Stock
of the Institution..................................... 7
8. Subscription Rights of Eligible Account
Holders (First Priority)............................... 7
9. Subscription Rights of Employee Plans (Second Priority)..... 8
10. Subscription Rights of Supplemental Eligible
Account Holders (Third Priority)....................... 8
11. Subscription Rights of Other Members
(Fourth Priority)...................................... 9
12. Community Offering.......................................... 10
13. Public Offering and Syndicated Public Offering.............. 11
14. Limitation on Purchases..................................... 12
15. Payment for Conversion Stock................................ 13
16. Manner of Exercising Subscription Rights
Through Order Forms.................................... 14
17. Undelivered, Defective or Late Order Forms or
Insufficient Payment................................... 15
18. Restrictions on Resale or Subsequent Disposition............ 16
19. Voting Rights of Stockholders............................... 16
20. Establishment of Liquidation Account........................ 16
21. Transfer of Savings Accounts................................ 17
22. Restrictions on Acquisition of the Institution
and Holding Company.................................... 18
23. Payment of Dividends and Repurchases of Stock............... 19
24. Amendment of Plan........................................... 19
25. Charter and Bylaws.......................................... 19
26. Consummation of Conversion.................................. 19
27. Registration and Marketing.................................. 19
28. Residents of Foreign Countries and Certain States........... 20
29. Expenses of Conversion...................................... 20
30. Conditions to Conversion.................................... 20
31. Interpretation.............................................. 20
<PAGE>
EXHIBIT A
PLAN OF CONVERSION
FOR
WORKINGMENS SAVINGS BANK, FSB
PITTSBURGH, PENNSYLVANIA
1. INTRODUCTION
This Plan of Conversion ("Plan") provides for the conversion of
Workingmens Savings Bank, FSB ("INSTITUTION") into a federal capital stock
savings institution, to be known as "Workingmens Bank." The Board of Directors
of the INSTITUTION currently contemplates that all of the stock of the
INSTITUTION shall be held by another corporation (the "Holding Company"). The
purpose of this conversion is to enable the INSTITUTION to be in the stock form
of organization, like commercial banks and most other corporations. The
conversion will result in an increase in the INSTITUTION's capital available to
support growth and for expansion of its facilities, possible diversification
into other related financial services activities and further enhance the
INSTITUTION's ability to render services to the public and compete with other
financial institutions. The use of the Holding Company would also provide
greater organizational flexibility. Shares of capital stock of the INSTITUTION
will be sold to the Holding Company and the Holding Company will offer the
Conversion Stock upon the terms and conditions set forth herein to Eligible
Account Holders, the tax-qualified employee stock benefit plans (the "Employee
Plans") established by the INSTITUTION or the Holding Company, which may be
funded by the Holding Company, Supplemental Eligible Account Holders, and Other
Members in the respective priorities set forth in this Plan. Any shares of
Conversion Stock not subscribed for by the foregoing classes of persons may be
offered for sale to certain members of the public either directly by the
INSTITUTION and the Holding Company through a Community Offering or through a
Public Offering or Syndicated Public Offering. In the event that the INSTITUTION
decides not to utilize the Holding Company in the conversion, Conversion Stock
of the INSTITUTION, in lieu of the Holding Company, will be sold as set forth
above and in the respective priorities set forth in this Plan. In addition to
the foregoing, the INSTITUTION and the Holding Company intend to implement stock
option plans and other stock benefit plans at the time of or subsequent to the
conversion and may provide employment or severance agreements to certain
management employees and certain other benefits to the directors, officers and
employees of the INSTITUTION as described in the prospectus for the Conversion
Stock.
This Plan, which has been unanimously approved by the Board of Directors
of the INSTITUTION, must also be approved by the affirmative vote of a majority
of the total number of votes entitled to be cast by Voting Members of the
INSTITUTION at a special meeting to be called for that purpose. Prior to the
submission of this Plan to the Voting Members for consideration, the Plan must
be approved by the Office of Thrift Supervision (the "OTS").
Upon conversion, each Account Holder having a Savings Account at the
INSTITUTION prior to conversion will continue to have a Savings Account, without
payment therefor, in the same amount and subject to the same terms and
conditions (except for voting and liquidation rights) as in effect prior to the
conversion. After conversion, the INSTITUTION will succeed to all the rights,
interests, duties and obligations of the INSTITUTION before conversion,
including but not limited to all rights and
A-1
<PAGE>
interests of the INSTITUTION in and to its assets and properties, whether real,
personal or mixed. The INSTITUTION will continue to be a member of the Federal
Home Loan Bank System and all its insured savings deposits will continue to be
insured by the Federal Deposit Insurance Corporation (the "FDIC") to the extent
provided by applicable law.
2. DEFINITIONS
For the purposes of this Plan, the following terms have the following
meanings:
Account Holder - The term Account Holder means any Person holding a
Savings Account in the INSTITUTION.
Acting in Concert - The Term "Acting in Concert" means (i) knowing
participation in a joint activity or interdependent conscious parallel action
towards a common goal whether or not pursuant to an express agreement; (ii) a
combination or pooling of voting or other interests in the securities of an
issuer for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise; or
(iii) a person or company which acts in concert with another person or company
("other party") shall also be deemed to be acting in concert with any person or
company who is also acting in concert with that other party, except that any
tax-qualified employee stock benefit plan will not be deemed to be acting in
concert with its trustee or a person who serves in a similar capacity solely for
the purpose of determining whether stock held by the trustee and stock held by
the plan will be aggregated.
Associate - The term Associate when used to indicate a relationship with
any person, means (i) any corporation or organization (other than the
INSTITUTION or a majority-owned subsidiary of the INSTITUTION) of which such
person is an officer or partner or is, directly or indirectly, the beneficial
owner of 10 percent or more of any class of equity securities, (ii) any trust or
other estate in which such person has a substantial beneficial interest or as to
which such person serves as trustee or in a similar fiduciary capacity except
that for the purposes of Sections 8 and 14 hereof, the term "Associate" does not
include any Tax-Qualified Employee Stock Benefit Plan or any Tax-Qualified
Employee Stock Benefit Plan in which a person has a substantial beneficial
interest or serves as a trustee or in a similar fiduciary capacity, and except
that, for purposes of aggregating total shares that may be held by Officers and
Directors the term "Associate" does not include any Tax-Qualified Employee Stock
Benefit Plan, and (iii) any relative or spouse of such person, or any relative
of such spouse, who has the same home as such person or who is a Director or
Officer of the INSTITUTION or the Holding Company, or any of its parents or
subsidiaries.
Community Offering - The term Community Offering means the offering for
sale to certain members of the general public directly by the Holding Company,
of shares not subscribed for in the Subscription Offering.
Conversion Stock - The term Conversion Stock means the $.10 par value
common stock offered and issued by the Holding Company upon conversion.
Director - The term Director means a member of the Board of Directors of
the INSTITUTION and, where applicable, a member of the Board of Directors of the
Holding Company.
A-2
<PAGE>
Eligible Account Holder - The term Eligible Account Holder means any
person holding a Qualifying Deposit in a Savings Account at the INSTITUTION on
the Eligibility Record Date. Only the name(s) of the Person(s) listed on the
account as of the Eligibility Record Date (or a successor entity or estate) is
an Eligible Account Holder. Any Person(s) added to a Savings Account after the
Eligibility Record Date is not an Eligible Account Holder.
Eligibility Record Date - The term Eligibility Record Date means the
date for determining Eligible Account Holders in the INSTITUTION and is the
close of business on March 31, 1996.
Employees - The term Employees means all Persons who are employed by the
INSTITUTION.
Employee Plans - The term Employee Plans means the Tax-Qualified
Employee Stock Benefit Plans, including the Employee Stock Ownership Plan,
approved by the Board of Directors of the INSTITUTION.
Estimated Valuation Range. The term Estimated Valuation Range means the
range of the estimated pro forma market value of the Conversion Stock as
determined by the Independent Appraiser prior to the Subscription Offering and
as it may be amended from time to time thereafter.
FDIC - The term FDIC means the Federal Deposit Insurance Corporation.
Holding Company - The term Holding Company means the corporation formed
for the purpose of acquiring all of the shares of capital stock of the
INSTITUTION to be issued upon its conversion to stock form unless the Holding
Company form of organization is not utilized. Shares of common stock of the
Holding Company will be issued in the Conversion to Participants and others in a
Subscription, Community, Public or Syndicated Public Offering, or through a
combination thereof.
Independent Appraiser - The term Independent Appraiser means an
appraiser retained by the INSTITUTION to prepare an appraisal of the pro forma
market value of the Conversion Stock.
Institution - The term INSTITUTION means Workingmens Savings Bank, FSB,
Pittsburgh, Pennsylvania.
Local Community - The term local community means the incorporated cities
and counties in which the INSTITUTION has offices.
Member - The term Member means any Person or entity who qualifies as a
member of the INSTITUTION pursuant to its charter and bylaws.
OTS - The term OTS means Office of Thrift Supervision of the Department
of the Treasury.
Officer - The term Officer means an executive officer of the INSTITUTION
and may include the Chairman of the Board, President, Vice Presidents in charge
of principal business functions, Secretary and Treasurer and any individual
performing functions similar to those performed by the foregoing persons.
A-3
<PAGE>
Order Form - The term Order Form means any form together with attached
cover letter, sent by the INSTITUTION to any Person containing among other
things a description of the alternatives available to such Person under the Plan
and by which any such Person may make elections regarding subscriptions for
Conversion Stock in the Subscription and Community Offerings.
Other Member - The term Other Member means any person, who is a Member
of the INSTITUTION (other than Eligible Account Holders or Supplemental Eligible
Account Holders) at the close of business on the voting record date.
Participants - The term Participants means the Eligible Account Holders,
Employee Plans, Supplemental Eligible Account Holders and Other Members.
Person - The term Person means an individual, a corporation, a
partnership, an association, a joint-stock company, a trust (including
Individual Retirement Accounts and KEOGH Accounts), any unincorporated
organization, a government or political subdivision thereof or any other entity.
Plan - The term Plan means this Plan of Conversion of the INSTITUTION as
it exists on the date hereof and as it may hereafter be amended in accordance
with its terms.
Public Offering - The term Public Offering means the offering for sale
through the Underwriter to the general public of any shares of Conversion Stock
not subscribed for in the Subscription Offering.
Purchase Order - The term Purchase Order means any form together with
attached cover letter, sent by the Underwriter to any Person containing among
other things a description of the alternatives available to such Person under
the Plan and by which any such Person may make elections regarding subscriptions
for Conversion Stock in the Public Offering.
Purchase Price - The term Purchase Price means the per share price at
which the Conversion Stock will be sold in accordance with the terms hereof.
Qualifying Deposit - The term Qualifying Deposit means the balance of
each Savings Account of $50 or more in the INSTITUTION at the close of business
on the Eligibility Record Date or Supplemental Eligibility Record Date. Savings
Accounts with total deposit balances of less than $50 shall not constitute a
Qualifying Deposit.
SEC - The term SEC refers to the Securities and Exchange Commission.
Savings Account - The term Savings Account includes savings accounts as
defined in Section 561.42 of the Rules and Regulations of the OTS and includes
certificates of deposit.
Special Meeting of Members - The term Special Meeting of Members means
the special meeting and any adjournments thereof held to consider and vote upon
this Plan.
Subscription Offering - The term Subscription Offering means the
offering of Conversion Stock for purchase through Order Forms to Participants.
Supplemental Eligibility Record Date - The term Supplemental Eligibility
Record Date means the close of business on the last day of the calendar quarter
preceding the approval of the Plan by the OTS.
A-4
<PAGE>
Supplemental Eligible Account Holder - The term Supplemental Eligible
Account Holder means a holder of a Qualifying Deposit in the INSTITUTION (other
than an officer or trustee or their Associates) at the close of business on the
Supplemental Eligibility Record Date.
Tax-Qualified Employee Stock Benefit Plan - The term Tax-Qualified
Employee Stock Benefit Plan means any defined benefit plan or defined
contribution plan, such as an employee stock ownership plan, stock bonus plan,
profit-sharing plan or other plan, which, with its related trust, meets the
requirements to be "qualified" under Section 401 of the Internal Revenue Code.
Syndicated Public Offering - The term Syndicated Public Offering means
the offering of Conversion Stock following the Subscription, Community (if
applicable) or Public Offerings through a syndicate of broker-dealers.
Underwriter - The term Underwriter means the investment banking firm or
firms through which the Conversion Stock will be offered and sold in the Public
Offering.
Voting Members - The term Voting Members means those Persons qualifying
as voting members of the INSTITUTION pursuant to its charter and bylaws.
Voting Record Date - The term Voting Record Date means the date fixed by
the Directors in accordance with OTS regulations for determining eligibility to
vote at the Special Meeting of Members.
3. PROCEDURE FOR CONVERSION
After approval of the Plan by the Board of Directors of the INSTITUTION,
the Plan shall be submitted together with all other requisite material to the
OTS for its approval. Notice of the adoption of the Plan by the Board of
Directors of the INSTITUTION will be published in a newspaper having general
circulation in each community in which an office of the INSTITUTION is located
and copies of the Plan will be made available at each office of the INSTITUTION
for inspection by the Members. Upon filing the application with the OTS, the
INSTITUTION also will cause to be published a notice of the filing with the OTS
of an application to convert in accordance with the provisions of the Plan.
Following approval by the OTS, the Plan will be submitted to a vote of the
Voting Members at a Special Meeting of Members called for that purpose. Upon
approval of the Plan by a majority of the total votes eligible to be cast by the
Voting Members, the INSTITUTION will take all other necessary steps pursuant to
applicable laws and regulations to convert the INSTITUTION to stock form. The
conversion must be completed within 24 months of the approval of the Plan by the
Voting Members, unless a longer time period is permitted by governing laws and
regulations.
The Board of Directors of the INSTITUTION intends to take all necessary
steps to form the Holding Company including the filing of an Application on Form
H-(e)1 or H-(e)1-S, if available to the Holding Company, with the OTS. Upon
conversion, the INSTITUTION will issue its capital stock to the Holding Company
and the Holding Company will issue and sell the Conversion Stock in accordance
with this Plan.
The Board of Directors of the INSTITUTION may determine for any reason
at any time prior to the issuance of the Conversion Stock not to utilize a
holding company form of organization in the Conversion, in which case, the
Holding Company's registration statement on Form S-1 or Form SB-2 will be
withdrawn from the SEC, the INSTITUTION will take all steps necessary to
complete the
A-5
<PAGE>
conversion from the mutual to the stock form of organization, including filing
any necessary documents with the OTS and will issue and sell the Conversion
Stock in accordance with this Plan. In such event, any subscriptions or orders
received for Conversion Stock of the Holding Company shall be deemed to be
subscriptions or orders for Conversion Stock of the INSTITUTION without any
further action by the INSTITUTION or the subscribers for the Conversion Stock.
Any references to the Holding Company in this Plan shall mean the INSTITUTION in
the event the Holding Company is eliminated in the Conversion.
The Conversion Stock will not be insured by the FDIC. The INSTITUTION
will not knowingly lend funds or otherwise extend credit to any Person to
purchase shares of the Conversion Stock.
4. HOLDING COMPANY APPLICATIONS AND APPROVALS
The Holding Company shall make timely applications for any requisite
regulatory approvals, including an Application on Form H-(e)1 or an H-(e)1-S, if
available to the Holding Company, to be filed with the OTS and a Registration
Statement on Form S-1 or Form SB-2 to be filed with the SEC. The INSTITUTION
shall be a wholly owned subsidiary of the Holding Company.
5. SALE OF CONVERSION STOCK
The Conversion Stock will be offered simultaneously in the Subscription
Offering to the Eligible Account Holders, Employee Plans, Supplemental Eligible
Account Holders and Other Members in the respective priorities set forth in
Sections 8 through 11 of this Plan. The Subscription Offering may be commenced
as early as the mailing of the Proxy Statement for the Special Meeting of
Members and must be commenced in time to complete the conversion within the time
period specified in Section 3.
Any shares of Conversion Stock not subscribed for in the Subscription
Offering may be offered for sale in the Community Offering, if any, as provided
in Section 12 of this Plan or offered in a Public Offering or Syndicated Public
Offering, as provided in Section 13, if necessary and feasible. The Subscription
Offering may be commenced prior to the Special Meeting of Members and, in that
event, the Community Offering or Public Offering may also be commenced prior to
the Special Meeting of Members. The offer and sale of Conversion Stock, prior to
the Special Meeting of Members shall, however, be conditioned upon approval of
the Plan by the Voting Members.
Shares of Conversion Stock may be sold in a Syndicated Public Offering
or in a Public Offering, as provided in Section 13 of this Plan in a manner that
will achieve the widest distribution of the Conversion Stock as determined by
the INSTITUTION. In the event of a Syndicated Public Offering or Public
Offering, the sale of all Conversion Stock subscribed for in the Subscription
Offering will be consummated simultaneously on the date the sale of Conversion
Stock in the Syndicated Public Offering or Public Offering is consummated and
only if all unsubscribed for Conversion Stock is sold.
The INSTITUTION may elect to pay fees on either a fixed fee or
commission basis or combination thereof to an investment banking firm which
assists it in the sale of the Conversion Stock in the offerings.
The INSTITUTION may also elect to offer to pay fees on a per share basis
to brokers who assist Persons in determining to purchase shares in the
Syndicated Public Offering and whose broker's name appears on the Order Form of
the Person.
A-6
<PAGE>
6. NUMBER OF SHARES AND PURCHASE PRICE OF CONVERSION STOCK
The total number of shares (or a range thereof) of Conversion Stock to
be issued and offered for sale will be determined by the Boards of Directors of
the INSTITUTION and the Holding Company, immediately prior to the commencement
of the Offerings, subject to adjustment thereafter if necessitated by a change
in the appraisal due to changes in market or financial conditions, with the
approval of the OTS, if necessary.
All shares sold in the Conversion will be sold at a uniform price per
share referred to in this Plan as the Purchase Price. The aggregate Purchase
Price for all shares of Conversion Stock will not be inconsistent with the
estimated consolidated pro forma market value of the INSTITUTION. The estimated
consolidated pro forma market value of the INSTITUTION will be determined for
such purpose by the Independent Appraiser. Prior to the commencement of the
Subscription and Community Offerings, an Estimated Valuation Range will be
established, which range will vary within 15% above to 15% below the midpoint of
such range. The number of shares of Conversion Stock to be issued and/or the
Purchase Price may be increased or decreased by the INSTITUTION. In the event
that the aggregate Purchase Price of the Conversion Stock is below the minimum
of the Estimated Valuation Range, or materially above the maximum of the
Estimated Valuation Range, resolicitation of purchasers may be required,
provided that up to a 15% increase above the maximum of the Estimated Valuation
Range will not be deemed material so as to require a resolicitation. Any such
resolicitation shall be effected in such manner and within such time as the
INSTITUTION shall establish, with the approval of the OTS, if required. Up to a
15% increase in the number of shares to be issued which is supported by an
appropriate change in the estimated pro forma market value of the INSTITUTION or
in order to fill the order by the Employee Plans will not be deemed to be
material so as to require a resolicitation of subscriptions.
Based upon the independent valuation, as updated prior to the
consummation of the Subscription and Community Offerings, the Boards of
Directors of the INSTITUTION and the Holding Company will fix the Purchase
Price.
Notwithstanding the foregoing, no sale of Conversion Stock may be
consummated unless, prior to such consummation, the Independent Appraiser
confirms to the INSTITUTION and Holding Company and to the OTS that, to the best
knowledge of the Independent Appraiser, nothing of a material nature has
occurred which, taking into account all relevant factors, would cause the
Independent Appraiser to conclude that the aggregate value of the Conversion
Stock sold at the Purchase Price is incompatible with its estimate of the
aggregate consolidated pro forma market value of the INSTITUTION. If such
confirmation is not received, the INSTITUTION may cancel the Subscription
Offering, Community Offering and/or the Public Offering and Syndicated Public
Offering, reopen or hold new Offerings to take such other action as the OTS may
permit.
The Conversion Stock to be issued in the Conversion shall be fully paid
and nonassessable.
7. PURCHASE BY THE HOLDING COMPANY OF THE STOCK OF THE INSTITUTION
Upon the consummation of the sale of all of the Conversion Stock, the
Holding Company will purchase from the INSTITUTION all of the capital stock of
the INSTITUTION to be issued by the INSTITUTION in the conversion in exchange
for the Conversion proceeds that are not permitted to be retained by the Holding
Company.
A-7
<PAGE>
The Holding Company will apply to the OTS to retain up to 50% of the
proceeds of the Conversion. Assuming the Holding Company is not eliminated, a
lesser percentage may be acceptable.
8. SUBSCRIPTION RIGHTS OF ELIGIBLE ACCOUNT HOLDERS (FIRST PRIORITY)
A. Each Eligible Account Holder shall receive, without payment,
nontransferable subscription rights to subscribe for shares of Conversion Stock
equal to the greater of: (i) the maximum established for the Community Offering;
(ii) one-tenth of one percent of the Conversion Stock offered; or (iii) 15 times
the product (rounded down to the next whole number) obtained by multiplying the
total number of shares of Conversion Stock offered by a fraction of which the
numerator is the amount of the Qualifying Deposit of such Eligible Account
Holder and the denominator is the total amount of Qualifying Deposits of all
Eligible Account Holders but in no event greater than the maximum purchase
limitation specified in Section 14 hereof. All such purchases are subject to the
maximum and minimum purchase limitations specified in Section 14 and are
exclusive of an increase in the total number of shares issued due to an increase
in the maximum of the Estimated Valuation Range of up to 15%. Only a Person(s)
with a Qualifying Deposit as of the Eligibility Record Date (or a successor
entity or estate) shall receive subscription rights. Any Person(s) added to a
Savings Account after the Eligibility Record Date is not an Eligible Account
Holder.
B. In the event that Eligible Account Holders exercise Subscription
Rights for a number of shares of Conversion Stock in excess of the total number
of such shares eligible for subscription, the shares of Conversion Stock shall
be allocated among the subscribing Eligible Account Holders so as to permit each
subscribing Eligible Account Holder, to the extent possible, to purchase a
number of shares sufficient to make his or her total allocation of Conversion
Stock equal to the lesser of 100 shares or the number of shares subscribed for
by the Eligible Account Holder. Any shares remaining after that allocation will
be allocated among the subscribing Eligible Account Holders whose subscriptions
remain unsatisfied in the proportion that the amount of the Qualifying Deposit
of each Eligible Account Holder whose subscription remains unsatisfied bears to
the total amount of the Qualifying Deposits of all Eligible Account Holders
whose subscriptions remain unsatisfied. If the amount so allocated exceeds the
amount subscribed for by any one or more Eligible Account Holders, the excess
shall be reallocated (one or more times as necessary) among those Eligible
Account Holders whose subscriptions are still not fully satisfied on the same
principle until all available shares have been allocated or all subscriptions
satisfied.
C. Subscription rights as Eligible Account Holders received by Directors
and Officers and their Associates which are based on deposits made by such
persons during the twelve (12) months preceding the Eligibility Record Date
shall be subordinated to the Subscription Rights of all other Eligible Account
Holders.
9. SUBSCRIPTION RIGHTS OF EMPLOYEE PLANS (SECOND PRIORITY)
Subject to the availability of sufficient shares after filling
subscription orders of Eligible Account Holders under Section 8, the Employee
Plans shall receive without payment nontransferable subscription rights to
purchase in the Subscription Offering the number of shares of Conversion Stock
requested by such Plans, subject to the purchase limitations set forth in
Section 14.
The Employee Plans shall not be deemed to be associates or affiliates of
or Persons Acting in Concert with any Director or Officer of the Holding Company
or the INSTITUTION.
A-8
<PAGE>
10. SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS (THIRD PRIORITY)
A. In the event that the Eligibility Record Date is more than 15 months
prior to the date of the latest amendment to the Application filed prior to OTS
approval, then, and only in that event, each Supplemental Eligible Account
Holder shall receive, without payment, nontransferable subscription rights
entitling such Supplemental Eligible Account Holder to purchase that number of
shares of Conversion Stock which is equal to the greater of: (i) the maximum
purchase limitation established for the Community Offering; (ii) one-tenth of 1%
of the Conversion Stock Offered; and (iii) or 15 times the product (rounded down
to the next whole number) obtained by multiplying the total number of shares of
Conversion Stock to be issued by a fraction of which the numerator is the amount
of the Qualifying Deposit of the Supplemental Eligible Account Holder and the
denominator is the total amount of the Qualifying Deposits of all Supplemental
Eligible Account Holders. All such purchases are subject to the maximum and
minimum purchase limitations in Section 14 and are exclusive of an increase in
the total number of shares issued due to an increase in the maximum of the
Estimated Valuation Range of up to 15%.
B. Subscription rights received pursuant to this Category shall be
subordinated to the subscription rights received by Eligible Account Holders and
by the Employee Plans.
C. Any subscription rights to purchase shares of Conversion Stock
received by an Eligible Account Holder in accordance with Section 8 shall reduce
to the extent thereof the subscription rights to be distributed pursuant to this
Section.
D. In the event of an oversubscription for shares of Conversion Stock
pursuant to this Section, shares of Conversion Stock shall be allocated among
the subscribing Supplemental Eligible Account Holders as follows:
(1) Shares of Conversion Stock shall be allocated
so as to permit each such Supplemental Eligible Account
Holder, to the extent possible, to purchase a number of
shares of Conversion Stock sufficient to make his total
allocation (including the number of shares of Conversion
Stock, if any, allocated in accordance with Section 8)
equal to 100 shares of Conversion Stock or the total
amount of his subscription, whichever is less.
(2) Any shares of Conversion Stock not allocated in
accordance with subparagraph (1) above shall be allocated
among the subscribing Supplemental Eligible Account
Holders on an equitable basis, related to the amounts of
their respective Qualifying Deposits as compared to the
total Qualifying Deposits of all subscribing Supplemental
Eligible Account Holders.
11. SUBSCRIPTION RIGHTS OF OTHER MEMBERS (FOURTH PRIORITY)
A. Each Other Member shall receive, without payment, nontransferable
subscription rights to subscribe for shares of Conversion Stock in an amount
equal to the greater of the maximum purchase limitation established for the
Community Offering or one-tenth of one percent of the Conversion Stock offered,
subject to the maximum and minimum purchase limitations specified in Section 14
and exclusive of an increase in the total number of shares issued due to an
increase in the maximum of the Estimated Valuation Range of up to 15%, which
will be allocated only after first allocating to Eligible Account
A-9
<PAGE>
Holders, the Employee Plans and Supplemental Eligible Account Holders all shares
of Conversion Stock subscribed for pursuant to Sections 8, 9 and 10 above.
B. In the event that such Other Members subscribe for a number of shares
of Conversion Stock which, when added to the shares of Conversion Stock
subscribed for by the Eligible Account Holders, the Employee Plans and the
Supplemental Eligible Account Holders is in excess of the total number of shares
of Conversion Stock being issued, the subscriptions of such Other Members will
be allocated among the subscribing Other Members so as to permit each
subscribing Other Member, to the extent possible, to purchase a number of shares
sufficient to make his total allocation of Conversion Stock equal to the lesser
of 100 shares or the number of shares subscribed for by the Other Member. Any
shares remaining will be allocated among the subscribing Other Members whose
subscriptions remain unsatisfied on a 100 shares (or whatever lesser amount is
available) per order basis until all orders have been filled or the remaining
shares have been allocated.
12. COMMUNITY OFFERING
If less than the total number of shares of Conversion Stock to be
subscribed for in the Conversion are sold in the Subscription Offering, shares
remaining unsubscribed may be made available for purchase in the Community
Offering to certain members of the general public, which may subscribe together
with any Associate or group of persons Acting in Concert for up to that number
of shares of Conversion Stock as shall equal $125,000 divided by the Purchase
Price, subject to the maximum and minimum purchase limitations specified in
Section 14 and exclusive of an increase in the total number of shares issued due
to an increase in the maximum of the Estimated Valuation Range of up to 15%. The
shares may be made available in the Community Offering through a direct
community marketing program which may provide for utilization of a broker,
dealer, consultant or investment banking firm, experienced and expert in the
sale of savings institution securities. In the Community Offering, if any,
shares will be available for purchase by the general public with preference
given first to natural persons residing in the Local Community and second, to
natural persons residing in the Commonwealth of Pennsylvania. Subject to these
preferences, the INSTITUTION shall make distribution of the Conversion Stock to
be sold in the Community Offering in such a manner as to promote the widest
distribution of Conversion Stock.
If the Community Purchasers in the Community Offering, whose orders
would otherwise be accepted, subscribe for more shares than are available for
purchase, the shares available to them will be allocated among persons
submitting orders in the Community Offering in an equitable manner as determined
by the Board of Directors. The INSTITUTION may establish all terms and
conditions of such offer.
The Community Offering, if any, may commence simultaneously with, during
or subsequent to the completion of the Subscription Offering and if commenced
simultaneously with or during the Subscription Offering the Community Offering
may be limited to Community Purchases. The Community Offering must be completed
within 45 days after the completion of the Subscription Offering unless
otherwise extended by the OTS.
The INSTITUTION and the Holding Company, in their absolute discretion,
reserve the right to reject any or all orders in whole or in part which are
received in the Community Offering, at the time of receipt or as soon as
practicable following the completion of the Community Offering.
A-10
<PAGE>
13. PUBLIC OFFERING AND SYNDICATED PUBLIC OFFERING
Any shares of Conversion Stock not sold in the Subscription Offering or
in the Community Offering, if any, may then be sold through the Underwriter to
the general public at the Purchase Price in the Public Offering, subject to such
terms, conditions and procedures as may be determined by the Boards of Directors
of the INSTITUTION and the Holding Company, in a manner that will achieve the
widest distribution of the Conversion Stock and subject to the right of the
INSTITUTION and the Holding Company, in their absolute discretion, to accept or
reject in whole or in part all subscriptions in the Public Offering. In the
Public Offering, if any, any person together with any Associate or group of
persons Acting in Concert may purchase up to the maximum purchase limitation
established for the Community Offering, subject to the maximum and minimum
purchase limitations specified in Section 14 and exclusive of an increase in the
total number of shares issued due to an increase in the maximum of the Estimated
Valuation Range of up to 15%. Shares purchased by any Person together with any
Associate or group of persons Acting in Concert pursuant to Section 12 shall be
counted toward meeting the maximum purchase limitation specified for this
Section. Provided that the Subscription Offering has commenced, the INSTITUTION
may commence the Public Offering at any time after the mailing to the Members of
the Proxy Statement to be used in connection with the Special Meeting of
Members, provided that the completion of the offer and sale of the Conversion
Stock shall be conditioned upon the approval of this Plan by the Voting Members.
It is expected that the Public Offering, if any, will commence just prior to, or
as soon as practicable after, the termination of the Subscription Offering. The
Public Offering shall be completed within 45 days after the termination of the
Subscription Offering, unless such period is extended as provided in Section 3,
above.
Shares of Conversion Stock not subscribed for in the Subscription
Offering, Community Offering, if any, and Public Offering may be sold in a
Syndicated Public Offering, subject to such terms, conditions and procedures as
may be determined by the Boards of Directors of the INSTITUTION and the Holding
Company, in a manner that will achieve the widest distribution of the Conversion
Stock subject to the right of the INSTITUTION and the Holding Company, in their
absolute discretion, to accept or reject in whole or in part all subscriptions
in the Syndicated Public Offering. In the Syndicated Public Offering, any person
together with any Associate or group of persons Acting in Concert may purchase
up to the maximum purchase limitation established for the Public Offering,
subject to the maximum and minimum purchase limitations specified in Section 14
and exclusive of an increase in the total number of shares issued due to an
increase in the maximum of the Estimated Valuation Range of up to 15%. Shares
purchased by any Person together with any Associate or group of persons Acting
in Concert pursuant to Section 12 shall be counted toward meeting the maximum
purchase limitation specified for this Section. Provided that the Subscription
Offering has commenced, the INSTITUTION may commence the Syndicated Public
Offering at any time after the mailing to the Members of the Proxy Statement to
be used in connection with the Special Meeting of Members, provided that the
completion of the offer and sale of the Conversion Stock shall be conditioned
upon the approval of this Plan by the Voting Members. If the Syndicated Public
Offering is not sooner commenced pursuant to the provisions of the preceding
sentence, the Syndicated Public Offering will be commenced as soon as
practicable following the date upon which the Subscription Offering and
Community Offering, if any, terminate.
If for any reason a Public Offering or Syndicated Public Offering of
shares of Conversion Stock not sold in the Subscription and Community Offerings
can not be effected, other purchase arrangements will be made for the sale of
unsubscribed shares by the INSTITUTION, if possible. Such other purchase
arrangements will be subject to the approval of the OTS.
A-11
<PAGE>
14. LIMITATION ON PURCHASES
The following limitations shall apply to all purchases of shares of
Conversion Stock:
A. The maximum number of shares of Conversion Stock which may be
purchased in the Subscription Offering by any person in the First Priority,
Third Priority and Fourth Priority shall not exceed such number of shares as
shall equal $75,000 divided by the Purchase Price.
B. The maximum number of shares of Conversion Stock which may be
subscribed for or purchased in all categories in the Conversion by any Person
(or persons through a single account) or Participant together with any Associate
or group of persons Acting in Concert shall not exceed such number of shares as
shall equal $125,000 divided by the Purchase Price, except for Employee Plans,
which in the aggregate may subscribe for up to 10% of the Conversion Stock
issued.
C. The maximum number of shares of Conversion Stock which may be
purchased in all categories in the conversion by Officers and Directors of the
INSTITUTION and their Associates in the aggregate shall not exceed 35% of the
total number of shares of Conversion Stock issued.
D. A minimum of 25 shares of Conversion Stock must be purchased by each
Person purchasing shares in the conversion to the extent those shares are
available; provided, however, that the minimum number of shares requirement will
not apply if the number of shares of Conversion Stock purchased times the price
per share exceeds $500.
If the number of shares of Conversion Stock otherwise allocable pursuant
to Sections 8 through 13, inclusive, to any Person or that Person's Associates
would be in excess of the maximum number of shares permitted as set forth above,
the number of shares of Conversion Stock allocated to each such person shall be
reduced to the lowest limitation applicable to that Person, and then the number
of shares allocated to each group consisting of a Person and that Person's
Associates shall be reduced so that the aggregate allocation to that Person and
his Associates complies with the above maximums, and such maximum number of
shares shall be reallocated among that Person and his Associates as they may
agree, or in the absence of an agreement, in proportion to the shares subscribed
by each (after first applying the maximums applicable to each Person,
separately).
Depending upon market or financial conditions, the Board of Directors of
the INSTITUTION and the Holding Company, without further approval of the
Members, may decrease or increase the purchase limitations in this Plan,
provided that the maximum purchase limitations may not be increased to a
percentage in excess of 5%. Notwithstanding the foregoing, the maximum purchase
limitation may be increased up to 9.99% provided that orders for Conversion
Stock exceeding 5% of the shares being offered shall not exceed, in the
aggregate, 10% of the total offering. If the INSTITUTION and the Holding Company
increase the maximum purchase limitations, the INSTITUTION and the Holding
Company are only required to resolicit Persons who subscribed for the maximum
purchase amount and may, in the sole discretion of the INSTITUTION and the
Holding Company, resolicit certain other large subscribers. For purposes of this
Section 14, the Directors of the INSTITUTION and the Holding Company shall not
be deemed to be Associates or a group affiliated with each other or otherwise
Acting in Concert solely as a result of their being Directors of the INSTITUTION
or the Holding Company.
In the event of an increase in the total number of shares offered in the
conversion due to an increase in the maximum of the Estimated Valuation Range of
up to 15% (the "Adjusted Maximum") the additional shares will be used in the
following order of priority: (i) to fill the Employees Plan's subscription to up
to 10% of the Adjusted Maximum; (ii) in the event that there is an
oversubscription
A-12
<PAGE>
at the Eligible Account Holder level, to fill unfilled subscriptions of Eligible
Account Holders exclusive of the Adjusted Maximum according to Section 8, with
preference given to Community Purchasers; (iii) in the event that there is an
oversubscription at the Supplemental Eligible Account Holder level, to fill
unfilled subscriptions of Supplemental Eligible Account Holders exclusive of the
Adjusted Maximum according to Section 10, with preference given to Community
Purchasers; (iv) in the event that there is an oversubscription at the Other
Member level, to fill unfilled subscriptions of Other Members exclusive of the
Adjusted Maximum in accordance with Section 11, with preference given to
Community Purchasers; and (v) to fill unfilled Subscriptions in the Community
Offering exclusive of the Adjusted Maximum, with preference given to Community
Purchasers.
Each Person purchasing Conversion Stock in the Conversion shall be
deemed to confirm that such purchase does not conflict with the above purchase
limitations contained in this Plan.
For a period of three years following the conversion, no Officer,
Director or their Associates shall purchase, without the prior written approval
of the OTS, any outstanding shares of common stock of the Holding Company,
except from a broker-dealer registered with the SEC. This provision shall not
apply to negotiated transactions involving more than one percent of the
outstanding shares of common stock of the Holding Company, the exercise of any
options pursuant to a stock option plan or purchases of common stock of the
Holding Company, made by or held by any Tax-Qualified Employee Stock Benefit
Plan or Non-Tax Qualified Employee Stock Benefit Plan of the INSTITUTION or the
Holding Company (including the Employee Plans) which may be attributable to any
Officer or Director. As used herein, the term "negotiated transaction" means a
transaction in which the securities are offered and the terms and arrangements
relating to any sale are arrived at through direct communications between the
seller or any person acting on its behalf and the purchaser or his investment
representative. The term "investment representative" shall mean a professional
investment advisor acting as agent for the purchaser and independent of the
seller and not acting on behalf of the seller in connection with the
transaction.
15. PAYMENT FOR CONVERSION STOCK
All payments for Conversion Stock subscribed for in the Subscription,
Community, Public and Syndicated Public Offerings must be delivered in full to
the INSTITUTION, together with a properly completed and executed Order Form, or
Purchase Order in the case of the Public or Syndicated Public Offering, on or
prior to the expiration date specified on the Order Form or Purchase Order, as
the case may be, unless such date is extended by the INSTITUTION; provided,
however, that if the Employee Plans subscribes for shares during the
Subscription Offering, the Employee Plan will not be required to pay for the
shares at the time they subscribe but rather may pay for such shares of
Conversion Stock upon consummation of the Conversion. The INSTITUTION may make
scheduled discretionary contributions to an Employee Plan provided such
contributions do not cause the INSTITUTION to fail to meet its regulatory
capital requirement.
Notwithstanding the foregoing, the INSTITUTION and the Holding Company
shall have the right, in their sole discretion, to permit institutional
investors to submit contractually irrevocable orders in the Community Offering,
Public Offering or Syndicated Public Offering and to thereafter submit payment
for the Conversion Stock for which they are subscribing in the Community
Offering, Public Offering or Syndicated Public Offering at any time prior to the
completion of the Conversion.
Payment for Conversion Stock subscribed for shall be made either in cash
(if delivered in person), check or money order. Alternatively, subscribers in
the Offerings may pay for the shares subscribed for
A-13
<PAGE>
by authorizing the INSTITUTION on the Order Form or Purchase Order to make a
withdrawal from the subscriber's Savings Account at the INSTITUTION in an amount
equal to the purchase price of such shares. Such authorized withdrawal, whether
from a savings passbook or certificate account, shall be without penalty as to
premature withdrawal. If the authorized withdrawal is from a certificate
account, and the remaining balance does not meet the applicable minimum balance
requirement, the certificate shall be canceled at the time of withdrawal,
without penalty, and the remaining balance will earn interest at the passbook
rate. Funds for which a withdrawal is authorized will remain in the subscriber's
Savings Account but may not be used by the subscriber until the Conversion Stock
has been sold or the 45-day period (or such longer period as may be approved by
the OTS) following the Subscription Offering has expired, whichever occurs
first. Thereafter, the withdrawal will be given effect only to the extent
necessary to satisfy the subscription (to the extent it can be filled) at the
Purchase Price per share. Interest will continue to be earned on any amounts
authorized for withdrawal until such withdrawal is given effect. Interest will
be paid by the INSTITUTION at not less than the passbook annual rate on payments
for Conversion Stock received in cash or by money order or check. Such interest
will be paid from the date payment is received by the INSTITUTION until
consummation or termination of the conversion. If for any reason the Conversion
is not consummated, all payments made by subscribers in the Offerings will be
refunded to them with interest. In case of amounts authorized for withdrawal
from Savings Accounts, refunds will be made by canceling the authorization for
withdrawal.
16. MANNER OF EXERCISING SUBSCRIPTION RIGHTS THROUGH ORDER FORMS
As soon as practicable after the Prospectus prepared by the Holding
Company and INSTITUTION has been declared effective by the OTS and the SEC,
Order Forms will be distributed to the Participants at their last known
addresses appearing on the records of the INSTITUTION for the purpose of
subscribing to shares of Conversion Stock in the Subscription Offering and will
be made available for use in the Community Offering. Notwithstanding the
foregoing, the INSTITUTION may elect to send Order Forms only to those Persons
who request them after such notice as is approved by the OTS and is adequate to
apprise the Participants of the pendency of the Subscription Offering has been
given. Such notice may be included with the proxy statement for the Special
Meeting of Members and may also be included in a notice of the pendency of the
conversion and the Special Meeting of Members sent to all Eligible Account
Holders in accordance with regulations of the OTS.
Each Order Form or Purchase Order will be preceded or accompanied by the
Prospectus (if a holding company form of organization is utilized) or the
Offering Circular (if the holding company form of organization is not utilized)
describing the Holding Company (if utilized), the INSTITUTION, the Conversion
Stock and the Offerings. Each Order Form or Purchase Order will contain, among
other things, the following:
A. A specified date by which all Order Forms and Purchase Orders must be
received by the INSTITUTION, which date shall be not less than twenty (20), nor
more than forty-five (45) days, following the date on which the Order Forms are
mailed by the INSTITUTION, and which date will constitute the termination of the
Subscription Offering;
B. The purchase price per share for shares of Conversion Stock to be
sold in the Offerings;
C. A description of the minimum and maximum number of shares of
Conversion Stock which may be subscribed for pursuant to the exercise of
Subscription Rights or otherwise purchased in the Community Offering, Public
Offering or Syndicated Public Offering;
A-14
<PAGE>
D. Instructions as to how the recipient of the Order Form or Purchase
Order is to indicate thereon the number of shares of Conversion Stock for which
such person elects to subscribe and the available alternative methods of payment
therefor;
E. An acknowledgment that the recipient of the Order Form or Purchase
Order has received a final copy of the Prospectus or Offering Circular, as the
case may be, prior to execution of the Order Form or Purchase Order.
F. A statement to the effect that all subscription rights are
nontransferable, will be void at the end of the Subscription Offering, and can
only be exercised by delivering within the subscription period such properly
completed and executed Order Form, together with cash (if delivered in person),
check or money order in the full amount of the purchase price as specified in
the Order Form for the shares of Conversion Stock for which the recipient elects
to subscribe in the Subscription Offering (or by authorizing on the Order Form
that the INSTITUTION withdraw said amount from the subscriber's Savings Account
at the INSTITUTION) to the INSTITUTION; and
G. A statement to the effect that the executed Order Form or Purchase
Order, once received by the INSTITUTION, may not be modified or amended by the
subscriber without the consent of the INSTITUTION.
Notwithstanding the above, the INSTITUTION and the Holding Company
reserve the right in their sole discretion to accept or reject orders received
on photocopied or facsimiled order forms or whose payment is to be made by wire
transfer.
17. UNDELIVERED, DEFECTIVE OR LATE ORDER FORMS: INSUFFICIENT PAYMENT
In the event Order Forms (a) are not delivered and are returned to the
INSTITUTION by the United States Postal Service or the INSTITUTION is unable to
locate the addressee, (b) are not received back by the INSTITUTION or are
received by the INSTITUTION after the expiration date specified thereon, (c) are
defectively filled out or executed, (d) are not accompanied by the full required
payment, or, in the case of institutional investors in the Community Offering,
Public Offering or Syndicated Public Offering, by delivering irrevocable orders
together with a legally binding commitment to pay in cash, check, money order or
wire transfer the full amount of the purchase price prior to 48 hours before the
completion of the conversion for the shares of Conversion Stock subscribed for
(including cases in which savings accounts from which withdrawals are authorized
are insufficient to cover the amount of the required payment), or (e) are not
mailed pursuant to a "no mail" order placed in effect by the account holder, the
subscription rights of the person to whom such rights have been granted will
lapse as though such person failed to return the completed Order Form within the
time period specified thereon; provided, however, that the INSTITUTION may, but
will not be required to, waive any immaterial irregularity on any Order Form or
Purchase Order or require the submission of corrected Order Forms or Purchase
Orders or the remittance of full payment for subscribed shares by such date as
the INSTITUTION may specify. The interpretation of the INSTITUTION of terms and
conditions of the Plan and of the Order Forms or Purchase Orders will be final,
subject to the authority of the OTS.
A-15
<PAGE>
18. RESTRICTIONS ON RESALE OR SUBSEQUENT DISPOSITION
A. All shares of Conversion Stock purchased by Directors or Officers of
the INSTITUTION or the Holding Company in the conversion shall be subject to the
restriction that, except as provided in Section 18B, below, or as may be
approved by the OTS, no interest in such shares may be sold or otherwise
disposed of for value for a period of one (1) year following the date of
purchase.
B. The restriction on disposition of shares of Conversion Stock set
forth in Section 18A above shall not apply to the following:
(i) Any exchange of such shares in connection with a merger or
acquisition involving the INSTITUTION or the Holding Company, which has been
approved by the OTS; and
(ii) Any disposition of such shares following the death of the
person to whom such shares were initially sold under the terms of the Plan.
C. With respect to all shares of Conversion Stock subject to
restrictions on resale or subsequent disposition, each of the following
provisions shall apply;
(i) Each certificate representing shares restricted within the
meaning of Section 18A, above, shall bear a legend prominently stamped on its
face giving notice of the restriction;
(ii) Instructions shall be issued to the stock transfer agent for
the Holding Company not to recognize or effect any transfer of any certificate
or record of ownership of any such shares in violation of the restriction on
transfer; and
(iii) Any shares of capital stock of the Holding Company issued
with respect to a stock dividend, stock split, or otherwise with respect to
ownership of outstanding shares of Conversion Stock subject to the restriction
on transfer hereunder shall be subject to the same restriction as is applicable
to such Conversion Stock.
19. VOTING RIGHTS OF STOCKHOLDERS
Upon conversion, the holders of the capital stock of the INSTITUTION
shall have the exclusive voting rights with respect to the INSTITUTION as
specified in its charter. The holders of the common stock of the Holding Company
shall have the exclusive voting rights with respect to the Holding Company.
20. ESTABLISHMENT OF LIQUIDATION ACCOUNT
The INSTITUTION shall establish at the time of conversion a liquidation
account in an amount equal to its net worth as of the latest practicable date
prior to conversion. The liquidation account will be maintained by the
INSTITUTION for the benefit of the Eligible Account Holders and Supplemental
Eligible Account Holders who continue to maintain their Savings Accounts at the
INSTITUTION. Each Eligible Account Holder and Supplemental Eligible Account
Holder shall, with respect to his Savings Account, hold a related inchoate
interest in a portion of the liquidation account balance, in relation to his
Savings Account balance at the Eligibility Record Date and Supplemental
Eligibility Record Date or to such balance as it may be subsequently reduced, as
hereinafter provided.
A-16
<PAGE>
In the unlikely event of a complete liquidation of the INSTITUTION (and
only in such event), following all liquidation payments to creditors (including
those to Account Holders to the extent of their Savings Accounts) each Eligible
Account Holder and Supplemental Eligible Account Holder shall be entitled to
receive a liquidating distribution from the liquidation account, in the amount
of the then adjusted subaccount balance for his Savings Account then held,
before any liquidation distribution may be made to any holders of the
INSTITUTION's capital stock. No merger, consolidation, purchase of bulk assets
with assumption of Savings Accounts and other liabilities, or similar
transactions with an FDIC institution, in which the INSTITUTION is not the
surviving institution, shall be deemed to be a complete liquidation for this
purpose. In such transactions, the liquidation account shall be assumed by the
surviving institution.
The initial subaccount balance for a Savings Account held by an Eligible
Account Holder or Supplemental Eligible Account Holder shall be determined by
multiplying the opening balance in the liquidation account by a fraction, the
numerator of which is the amount of such Eligible Account Holder's and
Supplemental Eligible Account Holder's Qualifying Deposit and the denominator of
which is the total amount of all Qualifying Deposits of all Eligible Account
Holders and Supplemental Eligible Account Holders in the INSTITUTION. Such
initial subaccount balance shall not be increased, but shall be subject to
downward adjustment as described below.
If, at the close of business on any annual closing date, commencing on
or after the effective date of conversion, the deposit balance in the Savings
Account of an Eligible Account Holder or Supplemental Eligible Account Holder is
less than the lesser of (i) the balance in the Savings Account at the close of
business on any other annual closing date subsequent to the Eligibility Record
Date or Supplemental Eligibility Record Date, as applicable, or (ii) the amount
of the Qualifying Deposit in such Savings Account, the subaccount balance of
such Savings Account shall be adjusted by reducing such subaccount balance in an
amount proportionate to the reduction in such deposit balance. In the event of
such downward adjustment, the subaccount balance shall not be subsequently
increased, notwithstanding any subsequent increase in the deposit balance of the
related Savings Account. If any such Savings Account is closed, the related
subaccount shall be reduced to zero.
The creation and maintenance of the liquidation account shall not
operate to restrict the use or application of any of the net worth accounts of
the INSTITUTION.
21. TRANSFER OF SAVINGS ACCOUNTS
Each person holding a Savings Account at the INSTITUTION at the time of
conversion shall retain an identical Savings Account at the INSTITUTION
following conversion in the same amount and subject to the same terms and
conditions (except as to voting and liquidation rights).
22. RESTRICTIONS ON ACQUISITION OF THE INSTITUTION AND HOLDING COMPANY
A. In accordance with OTS regulations, for a period of three years from
the date of consummation of conversion, no Person, other than the Holding
Company, shall directly or indirectly offer to acquire or acquire the beneficial
ownership of more than 10% of any class of an equity security of the INSTITUTION
without the prior written consent of the OTS.
A-17
<PAGE>
B.1. The charter of the INSTITUTION contains a provision stipulating
that no person, except the Holding Company, for a period of five years following
the date of conversion shall directly or indirectly offer to acquire or acquire
the beneficial ownership of more than 10% of any class of an equity security of
the INSTITUTION, without the prior written approval of the OTS. In addition,
such charter may also provide that for a period of five years following the
conversion, shares beneficially owned in violation of the above-described
charter provision shall not be entitled to vote and shall not be voted by any
person or counted as voting stock in connection with any matter submitted to
stockholders for a vote. In addition, special meetings of the stockholders
relating to changes in control or amendment of the charter may only be called by
the Board of Directors, and shareholders shall not be permitted to cumulate
their votes for the election of directors.
B.2. The Certificate of Incorporation of the Holding Company will
contain a provision stipulating that in no event shall any record owner of any
outstanding shares of the Holding Company's common stock who beneficially owns
in excess of 10% of such outstanding shares be entitled or permitted to any vote
in respect to any shares held in excess of 10%. In addition, the Certificate of
Incorporation and Bylaws of the Holding Company provide for staggered terms of
the directors, noncumulative voting for directors, limitations on the calling of
special meetings, a fair price provision for certain business combinations and
certain notice requirements.
C. For the purposes of this Section 22, B.1.:
(i) The term "person" includes an individual, a group acting in
concert, a corporation, a partnership, an association, a joint stock company, a
trust, an unincorporated organization or similar company, a syndicate or any
other group formed for the purpose of acquiring, holding or disposing of
securities of an insured institution;
(ii) The term "offer" includes every offer to buy or acquire,
solicitation of an offer to sell, tender offer for, or request or invitation for
tenders of, a security or interest in a security for value;
(iii) The term "acquire" includes every type of acquisition,
whether effected by purchase, exchange, operation of law or otherwise; and
(iv) The term "security" includes non-transferable subscription
rights issued pursuant to a plan of conversion as well as a "security"
as defined in 15 U.S.C. ss.78c(a)(10).
23. PAYMENT OF DIVIDENDS AND REPURCHASES OF STOCK
The INSTITUTION shall not declare or pay a cash dividend on, or
repurchase any of, its capital stock if the effect thereof would cause its
regulatory capital to be reduced below (i) the amount required for the
Liquidation Account or (ii) the federal regulatory capital requirement in
Section 567.2 of the Rules and Regulations of the OTS. Otherwise, the
INSTITUTION may declare dividends or make capital distributions in accordance
with applicable law and regulations.
A-18
<PAGE>
24. AMENDMENT OF PLAN
If deemed necessary or desirable, the Plan may be substantively amended
at any time prior to solicitation of proxies from Members to vote on the Plan by
a two-thirds vote of the INSTITUTION's Board of Directors, and at any time
thereafter by such vote of such Board of Directors with the concurrence of the
OTS. Any amendment to the Plan made after approval by the Members with the
approval of the OTS shall not necessitate further approval by the Members unless
otherwise required by the OTS. The Plan may be terminated by majority vote of
the INSTITUTION's Board of Directors at any time prior to the Special Meeting of
Members to vote on the Plan, and at any time thereafter with the concurrence of
the OTS.
By adoption of the Plan, the Members of the INSTITUTION authorize the
Board of Directors to amend or terminate the Plan under the circumstances set
forth in this Section.
25. CHARTER AND BYLAWS
By voting to adopt the Plan, members of the INSTITUTION will be voting
to adopt a charter and bylaws to read in the form of charter and bylaws for a
federally chartered stock institution. The effective date of the INSTITUTION's
amended charter and bylaws shall be the date of issuance and sale of the
Conversion Stock as specified by the OTS.
26. CONSUMMATION OF CONVERSION
The conversion of the INSTITUTION shall be deemed to take place and be
effective upon the completion of all requisite organizational procedures for
obtaining the federal stock charter for the INSTITUTION and sale of all
Conversion Stock.
27. REGISTRATION AND MARKETING
Within the time period required by applicable laws and regulations, the
Holding Company will register the securities issued in connection with the
conversion pursuant to the Securities Exchange Act of 1934 and will not
deregister such securities for a period of at least three years thereafter,
except that the maintenance of registration for three years requirement may be
fulfilled by any successor to the Holding Company. In addition, the Holding
Company will use its best efforts to encourage and assist a market-maker to
establish and maintain a market for the Conversion Stock and to list those
securities on a national or regional securities exchange or the NASDAQ System.
28. RESIDENTS OF FOREIGN COUNTRIES AND CERTAIN STATES
The INSTITUTION will make reasonable efforts to comply with the
securities laws of all States in the United States in which Persons entitled to
subscribe for shares of Conversion Stock pursuant to the Plan reside. However,
no such Person will be issued subscription rights or be permitted to purchase
shares of Conversion Stock in the Subscription Offering if such Person resides
in a foreign country or in a state of the United States with respect to which
any of the following apply: (i) a small number of Persons otherwise eligible to
subscribe for shares under the Plan reside in such state; (ii) the issuance of
subscription rights or the offer or sale of shares of Conversion Stock to such
Persons would require the INSTITUTION or the Holding Company, as the case may
be, under the securities laws of such state, to register as a broker, dealer,
salesman or agent or to register or otherwise qualify its securities for sale
A-19
<PAGE>
in such state; or (iii) such registration or qualification would be
impracticable for reasons of cost or otherwise.
29. EXPENSES OF CONVERSION
The INSTITUTION shall use its best efforts to assure that expenses
incurred by it in connection with the conversion shall be reasonable.
30. CONDITIONS TO CONVERSION
The conversion of the INSTITUTION pursuant to this Plan is expressly
conditioned upon the following:
(a) Prior receipt by the INSTITUTION of rulings of the United States
Internal Revenue Service and the Commonwealth of Pennsylvania taxing
authorities, or opinions of counsel, substantially to the effect that the
conversion will not result in any adverse federal or state tax consequences to
Eligible Account Holders or the INSTITUTION and the Holding Company before or
after the conversion;
(b) The sale of all of the Conversion Stock offered in the conversion;
and
(c) The completion of the conversion within the time period specified in
Section 3 of this Plan.
31. INTERPRETATION
All interpretations of this Plan and application of its provisions to
particular circumstances by a majority of the Board of Directors of the
INSTITUTION shall be final, subject to the authority of the OTS.
A-20
EXHIBIT 3.(i)
<PAGE>
ARTICLES OF INCORPORATION
OF
WSB HOLDING COMPANY
Article 1. Name. The name of the corporation is WSB Holding Company
(hereinafter, the "Company").
Article 2. Registered Office. The address of the initial registered
office of the Company in the Commonwealth of Pennsylvania is 807 Middle Street,
Pittsburgh, Pennsylvania 15212.
Article 3. Nature of Business. The Company is organized under the
Business Corporation Law of 1988, as amended, of the Commonwealth of
Pennsylvania (the "BCL") for the purpose of engaging in any lawful act or
activity for which a corporation may be organized under the laws of the
Commonwealth of Pennsylvania.
Article 4. Duration. The term of the existence of the Company shall be
perpetual.
Article 5. Capital Stock.
A. Authorized Amount. The total number of shares of capital stock that
the Company has authority to issue is 5,000,000 of which 1,000,000 shall be
serial preferred stock, no par value (hereinafter, the "Preferred Stock") and
4,000,000 shall be common stock, par value $0.10 per share (hereinafter, the
"Common Stock"). Except to the extent required by governing law, rule, or
regulation, the shares of capital stock may be issued from time to time by the
board of directors of the Company (hereinafter, the "Board of Directors")
without further approval of stockholders. The Company shall have the authority
to purchase its capital stock out of funds lawfully available therefor.
B. Common Stock. Except as provided in this Article 5 (or in any
resolution or resolutions adopted by the Board of Directors pursuant hereto),
the exclusive voting power shall be vested in the Common Stock, with each holder
thereof being entitled to one vote for each share of such Common Stock standing
in the holder's name on the books of the Company. Subject to any rights and
preferences of any class of stock having preference over the Common Stock,
holders of Common Stock shall be entitled to such dividends as may be declared
by the Board of Directors out of funds lawfully available therefor. Upon any
liquidation, dissolution, or winding up of the affairs of the Company, whether
voluntary or involuntary, holders of Common Stock shall be entitled to receive
pro rata the remaining assets of the Company after the holders of any class of
stock having preference over the Common Stock have been paid in full any sums to
which they may be entitled.
<PAGE>
C. Authority of Board to Fix Terms of Preferred Stock. A description of
each class of shares and a statement of the voting rights, designations,
preferences, qualifications, privileges, limitations, options, conversion
rights, and other special rights granted to or imposed upon the shares of each
class and of the authority vested in the Board of Directors to establish series
of Preferred Stock or to determine that Preferred Stock will be issued as a
class without series and to fix and determine the voting rights, designations,
preferences, and other special rights of the Preferred Stock as a class or of
the series thereof are as follows:
Preferred Stock may be issued from time to time as a class without
series or in one or more series. Each series shall be designated in
supplementary sections or amendments to these Articles of Incorporation by the
Board of Directors so as to distinguish the shares thereof from the shares of
all other series and classes. The Board of Directors may by resolution and
amendment to these Articles of Incorporation from time to time divide shares of
Preferred Stock into series, or determine that the Preferred Stock shall be
issued as a class without series, fix and determine the number of shares in a
series and the terms and conditions of the issuance of the class or the series,
and, subject to the provisions of this Article 5, fix and determine the rights,
preferences, qualifications, privileges, limitations, and other special rights,
if any, of the class (if none of such shares of the class have been issued) or
of any series so established, including but not limited to, voting rights (which
may be limited, multiple, fractional, or non-voting rights), the rate of
dividend, if any, and whether or to what extent, if any, such dividends shall be
cumulative (including the date from which dividends shall be cumulative, if
any), the price at and the terms and conditions on which shares may be redeemed,
if any, the preference and the amounts payable on shares in the event of
voluntary or involuntary liquidation, sinking fund provisions for the redemption
or purchase of shares in the event shares of the class or of any series are
issued with sinking fund provisions, and the terms and conditions on which the
shares of the class or of any series may be converted in the event the shares of
the class or of any series are issued with the privilege of conversion.
The Board of Directors may, in its discretion, at any time or from time
to time, issue or cause to be issued all or any part of the authorized and
unissued shares of Preferred Stock for consideration of such character and value
as the Board of Directors shall from time to time fix or determine.
D. Repurchase of Shares. The Company may, from time to time, pursuant to
authorization by the Board of Directors and without action by the stockholders,
purchase or otherwise acquire shares of any class, bonds, debentures, notes,
scrip, warrants, obligations, evidences of indebtedness, or other securities of
the Company in such manner, upon such terms, and in such amounts as the Board of
Directors shall determine; subject, however, to such limitations or
restrictions, if any, as are contained in the express terms of any class of
shares of the Company outstanding at the time of the purchase or acquisition in
question or as are imposed by law or regulation.
-2-
<PAGE>
Article 6. Incorporator. The name and business address of the sole
incorporator is as follows:
Name Address
---------------- -------------------------------
Robert Neudorfer 807 Middle Street
Pittsburgh, Pennsylvania 15212
Article 7. Directors. The business and affairs of the Company shall be
managed by or under the direction of the Board of Directors.
A. Number. The number of directors of the Company shall be such number,
not less than 5 nor more than 15 (exclusive of directors, if any, to be elected
by holders of Preferred Stock, voting separately as a class), as shall be
provided from time to time in accordance with the bylaws, provided that no
decrease in the number of directors shall have the effect of shortening the term
of any incumbent director, and provided further that no action shall be taken to
decrease or increase the number of directors from time to time unless at least
eighty percent (80%) of the directors then in office shall concur in said
action.
B. Classified Board. The Board of Directors shall be divided into four
classes of directors that shall be designated Class I, Class II, Class III and
Class IV. The members of each class shall be elected for a term of four years
and until their successors are elected and qualified. Such classes shall be as
nearly equal in number as the then total number of directors constituting the
entire Board of Directors shall permit, with the term of office of Class I to
expire at the first annual meeting of stockholders, the term of office of Class
II to expire at the annual meeting of stockholders one year thereafter, the term
of office of Class III to expire at the annual meeting of stockholders two years
thereafter and the term of Class IV to expire at the annual meeting of
stockholders three years thereafter. At each annual meeting of stockholders
following such initial classification and election, directors elected to succeed
those directors whose terms expire shall be elected for a term of office to
expire at the four succeeding annual meeting of stockholders after their
election.
Should the number of directors of the Company be reduced, the
directorship(s) eliminated shall be allocated among the classes so that the
number of directors in each class is as specified in the immediately preceding
paragraph. The Board of Directors shall designate, by the name of the
incumbent(s), the position(s) to be abolished. Should the number of directors of
the Company be increased, the additional directorships shall be allocated among
such classes so that the number of directors in each class is as specified in
the immediately preceding paragraph.
Whenever the holders of any one or more series of Preferred Stock of the
Company shall have the right, voting separately as a class, to elect one or more
directors of the Company, the Board of Directors shall consist of said directors
so elected in addition to the number of directors fixed as provided above in
this Article 7. Notwithstanding the foregoing, and except as otherwise may be
required by law, whenever the holders of any one or more series of Preferred
-3-
<PAGE>
Stock of the Company shall have the right, voting separately as a class, to
elect one or more directors of the Company, the terms of the director or
directors elected by such holders shall expire at the next succeeding annual
meeting of stockholders.
C. No Cumulative Voting. Stockholders of the Company shall not be
permitted to cumulate their votes for the election of directors.
D. Vacancies. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, any vacancy occurring on the Board of
Directors, including any vacancy created by reason of an increase in the number
of directors, shall be filled by a majority vote of the directors then in
office, whether or not a quorum is present, or by a sole remaining director, and
any director so chosen shall serve until the term of the class to which such
director was appointed shall expire and until a successor is elected and
qualified. When the number of directors is changed, the Board of Directors shall
determine the class or classes to which the increased or decreased number of
directors shall be appointed.
E. Removal. Unless otherwise required by law, a director (including
persons elected by directors to fill vacancies in the Board of Directors) may be
removed from office only for cause by an affirmative vote of not less than a
majority of the total votes eligible to be cast by stockholders. Cause for
removal by stockholders shall exist only if the director whose removal is
proposed has been either declared of unsound mind by an order of a court of
competent jurisdiction, convicted of a felony or of an offense punishable by
imprisonment for a term of more than one year by a court of competent
jurisdiction, or deemed liable by a court of competent jurisdiction for gross
negligence or misconduct in the performance of such director's duties to the
Company. At least 30 days prior to such meeting of stockholders, written notice
shall be sent to the director whose removal will be considered at the meeting.
Directors may also be removed from office in the manner provided in Sections
1726(b) and 1726(c) of the BCL, or any successors to such sections.
F. Nominations of Directors. Nominations of candidates for election as
directors at any annual meeting of stockholders may be made (a) by, or at the
direction of, a majority of the Board of Directors or (b) by any stockholder
entitled to vote at such annual meeting. Only persons nominated in accordance
with the procedures set forth in this Article 7.F shall be eligible for election
as directors at an annual meeting. Ballots bearing the names of all the persons
who have been nominated for election as directors at an annual meeting in
accordance with the procedures set forth in this Article 7.F shall be provided
for use at the annual meeting.
Nominations, other than those made by or at the direction of the Board
of Directors, shall be made pursuant to timely notice in writing to the
Secretary of the Company as set forth in this Article 7.F. To be timely, a
stockholder's notice shall be delivered to, or mailed and received at, the
principal executive offices of the Company not less than 60 days prior to the
anniversary date of the immediately preceding annual meeting of stockholders of
the Company; provided, however, that with respect to the first scheduled annual
meeting, notice by the stockholder must be so delivered or received no later
than the close of business on the tenth day following the day
-4-
<PAGE>
on which notice of the date of the scheduled meeting was mailed and must be
delivered or received no later than the close of business on the fifth day
preceding the date of the meeting. Such stockholder's notice shall set forth (a)
as to each person whom the stockholder proposes to nominate for election or
re-election as a director and as to the stockholder giving the notice (i) the
name, age, business address, and residence address of such person, (ii) the
principal occupation or employment of such person, (iii) the class and number of
shares of Company stock that are Beneficially Owned (as determined by Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended) by such
person on the date of such stockholder notice, and (iv) any other information
relating to such person that is required to be disclosed in solicitations of
proxies with respect to nominees for election as directors, pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or any
successor thereto; and (b) as to the stockholder giving the notice (i) the name
and address, as they appear on the Company's books, of such stockholder and any
other stockholders known by such stockholder to be supporting such nominees and
(ii) the class and number of shares of Company stock that are Beneficially Owned
by such stockholder on the date of such stockholder notice and, to the extent
known, by any other stockholders known by such stockholder to be supporting such
nominees on the date of such stockholder notice. At the request of the Board of
Directors, any person nominated by, or at the direction of, the Board of
Directors for election as a director at an annual meeting shall furnish to the
Secretary of the Company the same information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee.
The Board of Directors may reject any nomination by a stockholder not
timely made in accordance with the requirements of this Article 7.F. If the
Board of Directors, or a designated committee thereof, determines that the
information provided in a stockholder's notice does not satisfy the
informational requirements of this Article 7.F in any material respect, the
Secretary of the Company shall notify such stockholder of the deficiency in the
notice. The stockholder shall have an opportunity to cure the deficiency by
providing additional information to the Secretary within such period of time,
not to exceed five days from the date such deficiency notice is given to the
stockholder, as the Board of Directors or such committee shall reasonably
determine. If the deficiency is not cured within such period, or if the Board of
Directors or such committee reasonably determines that the additional
information provided by the stockholder, together with information previously
provided, does not satisfy the requirements of this Article 7.F in any material
respect, then the Board of Directors may reject such stockholder's nomination.
The Secretary of the Company shall notify a stockholder in writing whether such
person's nomination has been made in accordance with the time and informational
requirements of this Article 7.F. Notwithstanding the procedures set forth in
this paragraph, if neither the Board of Directors nor such committee makes a
determination as to the validity of any nominations by a stockholder, the
presiding officer of the annual meeting shall determine and declare at the
annual meeting whether the nomination was made in accordance with the terms of
this Article 7.F. If the presiding officer determines that a nomination was made
in accordance with the terms of this Article 7.F, such person shall so declare
at the annual meeting and ballots shall be provided for use at the meeting with
respect to such nominee. If the presiding officer determines that a nomination
was not made in accordance with the terms of this
-5-
<PAGE>
Article 7.F, such person shall so declare at the annual meeting and the
defective nomination shall be disregarded.
Notwithstanding the foregoing, and except as otherwise required by law,
whenever the holders of any one or more series of Preferred Stock shall have the
right, voting separately as a class, to elect one or more directors of the
Company, the provisions of this Article 7.F shall not apply with respect to the
director or directors elected by such holders of Preferred Stock.
Article 8. Preemptive Rights. No holder of any of the shares of any
class or series of stock or of options, warrants, or other rights to purchase
shares of any class or series or of other securities of the Company shall have
any preemptive right to purchase or subscribe for any unissued stock of any
class or series, any unissued bonds, certificates of indebtedness, debentures,
or other securities convertible into or exchangeable for stock of any class or
series or carrying any right to purchase stock of any class or series, or any
shares of any class, bonds, debentures, notes, scrip, warrants, obligations,
evidences of indebtedness, or other securities of the Company purchased by the
Company pursuant to Article 5.D; but any such unissued, or issued but not
outstanding, stock, bonds, certificates of indebtedness, debentures, or other
securities convertible into or exchangeable for stock or carrying any right to
purchase stock may be issued pursuant to resolution of the Board of Directors to
such persons, firms, corporations, or associations, whether or not holders
thereof, and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
Article 9. Elimination of Directors' Liability. A director of the
Company shall not be personally liable, as such, for monetary damages for any
action taken unless: (i) the director has breached or failed to perform such
director's fiduciary duties, or other duties under Chapter 17, Subchapter B of
the BCL, of such director's office, and (ii) the breach or failure to perform
constitutes self-dealing, willful misconduct, or recklessness; provided,
however, that the foregoing shall not apply to (i) the responsibility or
liability of a director pursuant to any criminal statute; or (ii) the liability
of a director for the payment of taxes pursuant to federal, state, or local law.
If the laws of the Commonwealth of Pennsylvania are amended after the effective
date of these Articles of Incorporation to eliminate further or limit the
personal liability of directors, then the liability of a director of the Company
shall be eliminated or limited to the fullest extent permitted by law.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Company shall not adversely affect any right or protection
of a director of the Company existing at the time of such repeal or
modification.
Article 10. Indemnification, etc. of Officers, Directors, Employees, and
Agents.
A. Persons. The Company shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending, or completed
action, suit, or proceeding, including actions by or in the right of the
Company, whether civil, criminal, administrative, or investigative, by reason of
the fact that such person is or was a director,
-6-
<PAGE>
officer, employee, fiduciary, trustee, or agent of the Company, or is or was
serving at the request of the Company as a director, officer, employee,
fiduciary, trustee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise.
B. Extent -- Derivative Actions. In the case of a threatened, pending,
or completed action or suit by or in the right of the Company against a person
named in paragraph A by reason of such person holding a position named in
paragraph A, the Company shall indemnify such person if such person satisfies
the standard in paragraph C, for expenses (including attorneys' fees) actually
and reasonably incurred by such person in connection with the defense or
settlement of the action or suit.
C. Standard -- Derivative Suits. In the case of a threatened, pending,
or completed action or suit by or in the right of the Company, a person named in
paragraph A shall be indemnified only if:
1. such person is successful on the merits or otherwise; or
2. such person acted in good faith in the transaction that is the
subject of the suit or action, and in a manner reasonably believed to be
in, or not opposed to, the best interests of the Company, including, but
not limited to, the taking of any and all actions in connection with the
Company's response to any tender offer or any offer or proposal of
another party to engage in a Business Combination (as defined in Article
13 of these Articles) not approved by the Board of Directors. However,
such person shall not be indemnified in respect of any claim, issue, or
matter as to which such person has been adjudged liable to the Company
unless (and only to the extent that) the court of common pleas or the
court in which the suit was brought shall determine, upon application,
that despite the adjudication of liability but in view of all the
circumstances, such person is fairly and reasonably entitled to
indemnity for such expenses as the court shall deem proper.
D. Extent -- Nonderivative Suits. In case of a threatened, pending, or
completed suit, action, or proceeding (whether civil, criminal, administrative,
or investigative), other than a suit by or in the right of the Company, together
hereafter referred to as a nonderivative suit, against a person named in
paragraph A by reason of such person holding a position named in paragraph A,
the Company shall indemnify such person if such person satisfies the standard in
paragraph E, for amounts actually and reasonably incurred by such person in
connection with the defense or settlement of the nonderivative suit, including,
but not limited to (i) expenses (including attorneys' fees), (ii) amounts paid
in settlement, (iii) judgments, and (iv) fines.
E. Standard -- Nonderivative Suits. In case of a nonderivative suit, a
person named in paragraph A shall be indemnified only if:
1. such person is successful on the merits or otherwise; or
-7-
<PAGE>
2. such person acted in good faith in the transaction that is the
subject of the nonderivative suit and in a manner such person reasonably
believed to be in, or not opposed to, the best interests of the Company,
including, but not limited to, the taking of any and all actions in
connection with the Company's response to any tender offer or any offer
or proposal of another party to engage in a Business Combination (as
defined in Article 13 of these Articles) not approved by the Board of
Directors and, with respect to any criminal action or proceeding, such
person had no reasonable cause to believe such person's conduct was
unlawful. The termination of a nonderivative suit by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent shall not, in itself, create a presumption that the person
failed to satisfy the standard of this paragraph E.2.
F. Determination That Standard Has Been Met. A determination that the
standard of paragraph C or E has been satisfied may be made by a court, or,
except as stated in paragraph C.2 (second sentence), the determination may be
made by:
1. the Board of Directors by a majority vote of a quorum
consisting of directors of the Company who were not parties to the
action, suit, or proceeding;
2. if such a quorum is not obtainable or if obtainable and a
majority of a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion; or
3. the stockholders of the Company.
G. Proration. Anyone making a determination under paragraph F may
determine that a person has met the standard as to some matters but not as to
others, and may reasonably prorate amounts to be indemnified.
H. Advancement of Expenses. Reasonable expenses incurred by a director,
officer, employee, or agent of the Company in defending a civil or criminal
action, suit, or proceeding described in Article 10.A may be paid by the Company
in advance of the final disposition of such action, suit, or proceeding upon
receipt of an undertaking by or on behalf of such person to repay such amount if
it shall ultimately be determined that the person is not entitled to be
indemnified by the Company.
I. Other Rights. The indemnification and advancement of expenses
provided by or pursuant to this Article 10 shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any insurance or other agreement, vote of stockholders or
directors, or otherwise, both as to actions in their official capacity and as to
actions in another capacity while holding an office, and shall continue as to a
person who has ceased to be a director, officer, employee, or agent and shall
inure to the benefit of the heirs, executors, and administrators of such person.
-8-
<PAGE>
J. Insurance. The Company shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee,
or agent of the Company, or is or was serving at the request of the Company as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Company would have the power to
indemnify such person against such liability under the provisions of this
Article 10.
K. Security Fund; Indemnity Agreements. By action of the Board of
Directors (notwithstanding their interest in the transaction), the Company may
create and fund a trust fund or fund of any nature, and may enter into
agreements with its officers, directors, employees, and agents for the purpose
of securing or insuring in any manner its obligation to indemnify or advance
expenses provided for in this Article 10.
L. Modification. The duties of the Company to indemnify and to advance
expenses to any person as provided in this Article 10 shall be in the nature of
a contract between the Company and each such person, and no amendment or repeal
of any provision of this Article 10, and no amendment or termination of any
trust or other fund created pursuant to Article 10.K hereof, shall alter to the
detriment of such person the right of such person to the advancement of expenses
or indemnification related to a claim based on an act or failure to act which
took place prior to such amendment, repeal, or termination.
M. Proceedings Initiated by Indemnified Persons. Notwithstanding any
other provision in this Article 10, the Company shall not indemnify a director,
officer, employee, or agent for any liability incurred in an action, suit, or
proceeding initiated by (which shall not be deemed to include counter-claims or
affirmative defenses) or participated in as an intervenor or amicus curiae by
the person seeking indemnification unless such initiation of or participation in
the action, suit, or proceeding is authorized, either before or after its
commencement, by the affirmative vote of a majority of the directors then in
office.
N. Savings Clause. If this Article 10 or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify each director, officer, employee, and agent
of the Company as to costs, charges, and expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement with respect to any action,
suit, or proceeding, whether civil, criminal, administrative, or investigative,
including an action by or in the right of the Company to the fullest extent
permitted by any applicable portion of this Article 10 that shall not have been
invalidated and to the fullest extent permitted by applicable law.
If the laws of the Commonwealth of Pennsylvania are amended to permit
further indemnification of the directors, officers, employees, and agents of the
Company, then the Company shall indemnify such persons to the fullest extent
permitted by law. Any repeal or modification of this Article by the stockholders
of the Company shall not adversely affect any
-9-
<PAGE>
right or protection of a director, officer, employee, or agent existing at the
time of such repeal or modification.
Article 11. Meetings of Stockholders and Stockholder Proposals.
A. Special Meetings of Stockholders. Special meetings of the
stockholders of the Company may be called only by the Board of Directors
pursuant to a resolution approved by the affirmative vote of a majority of the
directors then in office.
B. Action Without a Meeting. Notwithstanding any other provision of
these Articles or the Bylaws of the Company, no action required to be taken or
which may be taken at any annual or special meeting of the stockholders of the
Company may be taken without a meeting, and the power of stockholders to consent
in writing, without a meeting, to the taking of any action is specifically
denied.
C. Stockholder Proposals. At an annual meeting of stockholders, only
such new business shall be conducted, and only such proposals shall be acted
upon, as shall have been brought before the annual meeting by, or at the
direction of, (1) the Board of Directors or (2) any stockholder of the Company
who complies with all the requirements set forth in this Article 11.C.
Proposals, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Company as set forth in this Article 11.C. For stockholder proposals to
be considered at the annual meeting of stockholders, the stockholder's notice
shall be delivered to, or mailed and received at, the principal executive
offices of the Company not less than 60 days prior to the anniversary date of
the immediately preceding annual meeting of stockholders of the Company. Such
stockholder's notice shall set forth as to each matter the stockholder proposes
to bring before the annual meeting (a) a brief description of the proposal
desired to be brought before the annual meeting and the reasons for conducting
such business at the annual meeting, (b) the name and address, as they appear on
the Company's books, of the stockholder proposing such business and, to the
extent known, any other stockholders known by such stockholder to be supporting
such proposal, (c) the class and number of shares of the Company stock that are
Beneficially Owned by the stockholder on the date of such stockholder notice
and, to the extent known, by any other stockholders known by such stockholder to
be supporting such proposal on the date of such stockholder notice, and (d) any
financial interest of the stockholder in such proposal (other than interests
which all stockholders would have).
-10-
<PAGE>
The Board of Directors may reject any stockholder proposal not timely
made in accordance with the terms of this Article 11.C. If the Board of
Directors, or a designated committee thereof, determines that the information
provided in a stockholder's notice does not satisfy the informational
requirements of this Article 11.C in any material respect, the Secretary of the
Company shall promptly notify such stockholder of the deficiency in the notice.
The stockholder shall have an opportunity to cure the deficiency by providing
additional information to the Secretary within such period of time, not to
exceed five days from the date such deficiency notice is given to the
stockholder, as the Board of Directors or such committee shall reasonably
determine. If the deficiency is not cured within such period, or if the Board of
Directors or such committee determines that the additional information provided
by the stockholder, together with information previously provided, does not
satisfy the requirements of this Article 11.C in any material respect, then the
Board of Directors may reject such stockholder's proposal. The Secretary of the
Company shall notify a stockholder in writing whether such stockholder's
proposal has been made in accordance with the time and informational
requirements of this Article 11.C. Notwithstanding the procedures set forth in
this paragraph, if neither the Board of Directors nor such committee makes a
determination as to the validity of any stockholder proposal, the presiding
officer of the annual meeting shall determine and declare at the annual meeting
whether the stockholder proposal was made in accordance with the terms of this
Article 11.C. If the presiding officer determines that a stockholder proposal
was made in accordance with the terms of this Article 11.C, such person shall so
declare at the annual meeting and ballots shall be provided for use at the
meeting with respect to any such proposal. If the presiding officer determines
that a stockholder proposal was not made in accordance with the terms of this
Article 11.C, such person shall so declare at the annual meeting and any such
proposal shall not be acted upon at the annual meeting.
This provision shall not prevent the consideration and approval or
disapproval at the annual meeting of report of officers, directors, and
committees of the Board of Directors, but in connection with such reports, no
new business shall be acted upon at such annual meeting unless stated, filed,
and received as herein provided.
Article 12. Certain Limitations on Voting Rights
A. Limitations. Notwithstanding any other provision of these Articles,
in no event shall any record owner of any outstanding Common Stock which is
beneficially owned, directly or indirectly, by a person who, as of any record
date for the determination of stockholders entitled to vote on any matter,
beneficially owns in excess of 10% of the then-outstanding shares of Common
Stock (the "Limit"), be entitled, or permitted to any vote in respect of the
shares held in excess of the Limit. The number of votes which may be cast by any
record owner by virtue of the provisions hereof in respect of Common Stock
beneficially owned by such person owning shares in excess of the Limit shall be
a number equal to the total number of votes which a single record owner of all
Common Stock owned by such person would be entitled to cast, multiplied by a
fraction, the numerator of which is the number of shares of such class or series
which are both beneficially owned by such person and owned of record by such
record owner and the
-11-
<PAGE>
denominator of which is the total number of shares of Common Stock beneficially
owned by such Person owning shares in excess of the Limit.
Further, for a period of five years from the completion of the
conversion of Workingmens Savings Bank, FSB from mutual to stock form, no Person
shall directly or indirectly Offer to acquire or acquire the beneficial
ownership of more than 10% of any class of any equity security of the Company.
B. Definitions. The following definitions shall apply to this Article
12.
1. "Affiliate" shall have the meaning ascribed to it in Rule
12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as in effect on the date of filing of this Certificate.
2. "Beneficial Ownership" (including "Beneficially Owned") shall
be determined pursuant to Rule 13d-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934 (or any successor
rule or statutory provision), or, if said Rule 13d-3 shall be rescinded
and there shall be no successor rule or provision thereto, pursuant to
said Rule 13d-3 as in effect on the date of filing of this Certificate;
provided, however, that a Person shall, in any event, also be deemed the
"beneficial owner" of any Common Stock:
(a) which such Person or any of its Affiliates owns,
directly or indirectly; or
(b) which such Person or any of its Affiliates has (i)
the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding (but shall not be deemed
to be the Beneficial Owner of any voting shares solely by reason
of an agreement, contract, or other arrangement with this
Company to effect any transaction which is described in Section
A of Article 13) or upon the exercise of conversion rights,
exchange rights, warrants, or options or otherwise, or (ii) sole
or shared voting or investment power with respect thereto
pursuant to any agreement, arrangement, understanding,
relationship or otherwise (but shall not be deemed to be the
Beneficial Owner of any voting shares solely by reason of a
revocable proxy granted for a particular meeting of
stockholders, pursuant to a public solicitation of proxies for
such meeting, with respect to shares of which neither such
Person nor any such Affiliate is otherwise deemed the Beneficial
Owner); or
(c) which are owned directly or indirectly, by any other
Person with which such first mentioned Person or any of its
Affiliates acts as a partnership, limited partnership, syndicate
or other group pursuant to any agreement,
-12-
<PAGE>
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock of
this Company;
and provided further, however, that (1) no director or officer of this Company
(or any Affiliate of any such director or officer) shall, solely by reason of
any or all of such directors or officers acting in their capacities as such, be
deemed, for any purposes hereof, to Beneficially Own any Common Stock
Beneficially Owned by any other such director or officer (or any Affiliate
thereof), and (2) neither any employee stock ownership or similar plan of this
Company or any subsidiary of this Company, nor any trustee with respect thereto
or any Affiliate of such trustee (solely by reason of such capacity of such
trustee), shall be deemed, for any purposes hereof, to Beneficially Own any
Common Stock held under any such plan. For purposes of computing the percentage
Beneficial Ownership of Common Stock of a Person, the outstanding Common Stock
shall include shares deemed owned by such Person through application of this
subsection but shall not include any other Common Stock which may be issuable by
this Company pursuant to any agreement, or upon exercise of conversion rights,
warrants or options, or otherwise. For all other purposes, the outstanding
Common Stock shall include only Common Stock then outstanding and shall not
include any Common Stock which may be issuable by this Company pursuant to any
agreement, or upon the exercise of conversion rights, warrants or options, or
otherwise.
3. The term "Offer" shall mean every written offer to buy or
acquire, solicitation of an offer to sell, tender offer or request or invitation
for tender of, a security or interest in a security for value; provided that the
term "Offer" shall not include (i) inquiries directed solely to the management
of the Company and not intended to be communicated to stockholders which are
designed to elicit an indication of management's receptivity to the basic
structure of a potential acquisition with respect to the amount of cash and or
securities, manner of acquisition and formula for determining price, or (ii)
non-binding expressions of understanding or letters of intent with the
management of the Company regarding the basic structure of a potential
acquisition with respect to the amount of cash and/or securities, manner of
acquisition and formula for determining price.
4. A "Person" shall mean any individual, firm, corporation, or
other entity.
C. The board of directors shall have the power to construe and apply the
provisions of this Article 12 and to make all determinations necessary or
desirable to implement such provisions, including but not limited to matters
with respect to (i) the number of shares of Common Stock Beneficially Owned by
any Person, (ii) whether a Person is an Affiliate of another, (iii) whether a
Person has an agreement, arrangement, or understanding with another as to the
matters referred to in the definition of Beneficial Ownership, (iv) the
application of any other definition or operative provision of the section to the
given facts, or (v) any other matter relating to the applicability or effect of
this Article 12.
D. The board of directors shall have the right to demand that any Person
who is reasonably believed to Beneficially Own Common Stock in excess of the
Limit (or holders of
-13-
<PAGE>
record of Common Stock Beneficially Owned by any Person in excess of the Limit)
supply the Company with complete information as to (i) the record owner(s) of
all shares Beneficially Owned by such Person who is reasonably believed to own
shares in excess of the Limit and (ii) any other factual matter relating to the
applicability or effect of this Article 12 as may reasonably be requested of
such Person.
E. Except as otherwise provided by law or expressly provided in this
Article 12, the presence in person or by proxy of the holders of record of
shares of capital stock of the Company entitling the holders thereof to cast a
majority of the votes (after giving effect, if required, to the provisions of
this Article 12) entitled to be cast by the holders of shares of capital stock
of the Company entitled to vote shall constitute a quorum at all meetings of the
stockholders, and every reference in these Articles to a majority or other
proportion of capital stock (or the holders thereof) for purposes of determining
any quorum requirement or any requirement for stockholder consent or approval
shall be deemed to refer to such majority or other proportion of the votes (or
the holders thereof) then entitled to be cast in respect of such capital stock.
F. The provisions of this Article 12 shall not be applicable to any
tax-qualified defined benefit plan or defined contribution plan of the Company
or its subsidiaries or to the acquisition of more than 10% of any class of
equity security of the Company if such acquisition has been approved by
two-thirds of the entire Board of Directors, as described in Article 13 of this
Article; provided, however, that such approval shall only be effective if such
Directors shall have the power to construe and apply the provisions of this
Article 12 and to make all determinations necessary or desirable to implement
such provisions, including but not limited to matters with respect to (a) the
number of shares Beneficially Owned by any Person, (b) whether a Person has an
agreement, arrangement, or understanding with another as to the matters referred
to in the definition of Beneficial Ownership, (c) the application of any other
material fact relating to the applicability or effect of this Article 12. Any
constructions, applications, or determinations made by the Directors pursuant to
this Article 12 in good faith and on the basis of such information and
assistance as was then reasonably available for such purpose shall be conclusive
and binding upon the Company and its stockholders.
G. In the event any provision (or portion thereof) of this Article 12
shall be found to be invalid, prohibited or unenforceable for any reason, the
remaining provisions (or portions thereof) of this Article 12 shall remain in
full force and effect, and shall be construed as if such invalid, prohibited or
unenforceable provision had been stricken herefrom or otherwise rendered
inapplicable, it being the intent of this Company and its stockholders that each
such remaining provision (or portion thereof) of this Article 12 remain, to the
fullest extent permitted by law, applicable and enforceable as to all
stockholders, including stockholders owning an amount of stock over the Limit,
notwithstanding any such finding.
-14-
<PAGE>
Article 13. Stockholder Approval of Business Combinations
A. General Requirement. The definitions and other provisions set forth
in Article 12 are also applicable to this Article 13. The affirmative vote of
the holders of not less than eighty percent (80%) of the outstanding shares of
"Voting Shares" shall be required for the approval or authorization of any
"Business Combination" as defined and set forth below:
1. Any merger, consolidation, share exchange or division of the
Company or any Subsidiary of the Company with or into (i) any Interested
Shareholder (as hereinafter defined), or (ii) with, involving or resulting in
any other corporation (whether or not itself an Interested Shareholder of the
Company) which is, or after the merger, consolidation, share exchange or
division would be, an Affiliate or Associate of the Interested Shareholder;
2. A sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or series of transactions) to or with the
Interested Shareholders or any Affiliate or Associate or such Interested
Shareholder of assets of the Company or any Subsidiary of the Company (i) Having
an aggregate Market Value (as hereinafter defined) equal to 10% or more of the
aggregate Market Value of all the assets, determined on a consolidated bases, of
such Company; (ii) having an aggregate Market Value equal to 10% or more of the
aggregate Market Value of all outstanding shares of such Company; or (iii)
representing 10% or more of the earning power or net income, determined on a
consolidated basis, of such Company.
3. The issuance or transfer by the Company or any Subsidiary of
the Company (in one or a series of transactions) of any shares of such Company
or any Subsidiary of such Company which has an aggregate Market Value equal to
5% or more of the aggregate Market Value of all the outstanding shares of the
Company to the Interested Shareholder or any Affiliate or Associate of such
Interested Shareholder except pursuant to the exercise of option rights to
purchase shares, or pursuant to the conversion of securities having conversion
rights, offered, or a dividend or distribution paid or made, pro rata to all
shareholders of the Company.
4. The adoption at any time of any plan or proposal for the
liquidation or dissolution of the Company proposed by, or pursuant to any
agreement, arrangement or understanding with the Interested Shareholder or any
Affiliate or Associate of such Interested Shareholder.
5. A reclassification of securities (including, without
limitation, any split of shares, dividend of shares, or other distribution of
shares in respect of shares, or any reverse split of shares), or
recapitalization of the Company, or any merger or consolidation of the Company
with any Subsidiary of the Company, or any other transaction (whether or not
with or into or otherwise involving the Interested Shareholder), proposed by, or
pursuant to any agreement, arrangement or understanding (whether or not in
writing) with, the Interested Shareholder or any Affiliate or Associate of the
Interested Shareholder, which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class or
series of Voting Shares or securities convertible into Voting Shares of the
Company or any
-15-
<PAGE>
Subsidiary of the Company which is, directly or indirectly, owned by the
Interested Shareholder or any Affiliate or Associate of the Interested
Shareholder, except as a result of immaterial changes due to fractional share
adjustments.
6. The receipt by the Interested Shareholder or any Affiliate or
Associate of the Interested Shareholder of the benefit, directly or indirectly
(except proportionately as a shareholder of the Company), of any loans,
advances, guarantees, pledges or other financial assistance or tax credits or
other tax advantages provided by or through the Company.
The affirmative vote required by this Article 13 shall be in addition to
the vote of the holders of any class or series of stock of the Company otherwise
required by law, by any other Article of these Articles of Incorporation, as the
same may be amended from time to time, by any resolution of the Board of
Directors providing for the issuance of a class or series of stock, or by any
agreement between the Company and any national securities exchange.
B. Certain Definitions.
1. "Share Acquisition Date" means with respect to any Person and
the Company, the date that such person first became an Interested Shareholder
of the Company.
2. The "Market Value" of the common stock of the Company shall be
the highest closing sale price during the 30-day period immediately preceding
the date in question of the share of the composite tape for New York Stock
Exchange-listed shares, or, if the shares are not quoted on the composite tape
or if the shares are not listed on the exchange, on the principal United States
securities exchange registered under the exchange act, on which such shares are
listed, or, if the shares are not listed on any such exchange, the highest
closing bid quotation with respect to the share during the 30-day period
preceding the date in question on the National Association of Securities
Dealers, Inc. Automated Quotations System or any system then in use, or if no
quotations are available, the fair market value on the date in question of the
share as determined by the Board of Directors of the Company in good faith. In
the case of property other than cash or shares, the fair market value of the
property on the date in question as determined by the Board of Directors of the
Company in good faith.
3. The term "Interested Shareholder," means any Person (other
than the Company or any Subsidiary of the Company) that:
(i) Is the Beneficial Owner, directly or indirectly, of shares
entitling that Person to cast at least 20% of the votes that all shareholders
would be entitled to cast in an election of directors of the Company; or
(ii) Is an Affiliate or Associate of such Company and at any time
within the five-year period immediately prior to the date in question was the
Beneficial Owner, directly or indirectly, of shares entitling that Person to
cast at least 20% of the votes that all shareholders would be entitled to cast
in an election of directors of the Company.
-16-
<PAGE>
Exception - For the purpose of determining whether a Person is an
Interested Shareholder:
(1) The number of votes that would be entitled to be cast in an
election of directors of the Company shall be calculated by including shares
deemed to be beneficially owned by the Person through application of the
definition of "Beneficial Owner" in section 12.B, but excluding any other
unissued shares of such Company which may be issuable pursuant to any agreement,
arrangement or understanding, or upon exercise of conversion or option rights or
otherwise; and
(2) There shall be excluded from the Beneficial Ownership of the
Interested Shareholder any:
(i) Shares which were acquired pursuant to a stock split, stock
dividend, reclassification or similar recapitalization with respect to shares
described under this paragraph that have been held continuously since their
issuance by the Company by the natural Person or entity that acquired them from
the Company.
For the purpose only of determining the percentage of the outstanding
shares of Voting Stock which any corporation, partnership, person, or other
entity beneficially owns, directly or indirectly, the outstanding shares of
Voting Stock will be deemed to include any shares of Voting Stock which such
corporation, partnership, person or other entity beneficially owns pursuant to
the foregoing provisions of this subsection (whether or not such shares of
Voting Stock are in fact issued or outstanding), but shall not include any other
shares of Voting Stock which may be issuable either immediately or at some
future date pursuant to any agreement, arrangement, or understanding or upon
exercise of conversion rights, exchange rights, warrants, options, or otherwise.
C. Exceptions. The provisions of this Article 13 shall not apply to a
Business Combination which is approved by two-thirds of those members of the
Board of Directors who were directors prior to the time when the Interested
Shareholder became an Interested Shareholder (the "Continuing Directors"). The
provisions of this Article 13 also shall not apply to a Business Combination:
(1) Approved by the affirmative vote of the holders of shares
entitling such holders to cast a majority of the votes that all shareholders
would be entitled to cast in an election of directors of the Company, not
including any Voting Shares beneficially owned by the Interested Shareholder or
any Affiliate or Associate of such Interested Shareholder, at a meeting called
for such purpose no earlier than three months after the Interested Shareholder
became, and if at the time of the meeting the Interested Shareholder is, the
Beneficial Owner, directly or indirectly, of shares entitling the Interested
Shareholder to cast at least 80% of the votes that all shareholders would be
entitled to cast in an election of directors of the Company; or
-17-
<PAGE>
(2) Approved by the affirmative vote of all of the holders of
all of the outstanding common shares.
(3) Approved by the affirmative vote of the holders of shares
entitling such holders to cast a majority of the votes that all shareholders
would be entitled to cast in an election of directors of the Company, not
including any Voting Shares beneficially owned by the Interested Shareholder or
any Affiliate or Associate of the Interested Shareholder, at a meeting called
for such purpose no earlier than five years after the Interested Shareholder's
Share Acquisition Date.
(4) Approved at a shareholders' meeting called for such purpose
no earlier than five years after the Interested Shareholder's Share Acquisition
Date.
D. Additional Provisions. Nothing contained in this Article 13, shall be
construed to relieve an Interested Shareholder from any fiduciary obligation
imposed by law. In addition, nothing contained in this Article 13 shall prevent
any shareholder of the Company from objecting to any Business Combination and
from demanding any appraisal rights which may be available to such shareholder.
E. Amendments. Notwithstanding any provisions of these Articles of
Incorporation or the Bylaws of the Company (and notwithstanding the fact that a
lesser percentage may be specified by laws, these Articles of Incorporation or
the Bylaws of the Company), the affirmative vote of the holders of at least 80
percent of the outstanding shares entitled to vote thereon (and, if any class or
series is entitled to vote thereon separately, the affirmative vote of the
holders of at least 80 percent of the outstanding shares of each such class or
series) shall be required to amend or repeal this Article 13 or adopt any
provisions inconsistent with this Article.
Article 14. Evaluation of Offers. The Board of Directors of the Company,
when evaluating any offer to (A) make a tender or exchange offer for any equity
security of the Company, (B) merge or consolidate the Company with another
corporation or entity or (C) purchase or otherwise acquire all or substantially
all of the properties and assets of the Company, may, in connection with the
exercise of its judgment in determining what is in the best interest of the
Company and its stockholders, give due consideration to all relevant factors,
including, without limitation, the social and economic effect of acceptance of
such offer: on the Company's present and future customers and employees and
those of its subsidiaries; on the communities in which the Company and its
subsidiaries operate or are located; on the ability of the Company to fulfill
its corporate objectives as a financial institution holding company and on the
ability of its subsidiary financial institution to fulfill the objectives of a
federally insured financial institution under applicable statutes and
regulations.
Article 15. Stockholder Approval of Business Combinations
A. Stockholder Vote. Any merger, consolidation, liquidation, or
dissolution of the Company or any action that would result in the sale or other
disposition of all or substantially
-18-
<PAGE>
all of the assets of the Company ("Business Combination") shall require the
affirmative vote of the holders of at least eighty percent (80%) of the
outstanding shares of capital stock of the Company eligible to vote at a legal
meeting.
B. Board Approval. The provisions of Article 15.A shall not apply to a
particular Business Combination, and such Business Combination shall require
only such stockholder vote, if any, as would be required by Pennsylvania law, if
such Business Combination is approved by two-thirds of the entire Board of
Directors of the Company.
Article 16. Amendment of Articles and Bylaws.
A. Articles. The Company reserves the right to amend, alter, change, or
repeal any provision contained in these Articles of Incorporation, in the manner
now or hereafter prescribed by law, and all rights conferred upon stockholders
herein are granted subject to this reservation. No amendment, addition,
alteration, change, or repeal of these Articles of Incorporation shall be made
unless such amendment addition, alteration, change, or repeal is first proposed
and approved by the Board of Directors pursuant to a resolution proposed and
adopted by the affirmative vote of a majority of the directors then in office,
and thereafter is approved by the holders of a majority (except as provided
below) of the shares of the Company entitled to vote generally in an election of
directors, voting together as a single class, as well as such additional vote of
the Preferred Stock as may be required by the provisions of any series thereof.
Notwithstanding anything contained in these Articles of Incorporation to the
contrary, the affirmative vote of the holders of at least eighty percent (80%)
of the shares of the Company entitled to vote generally in an election of
directors, voting together as a single class, as well as such additional vote of
the Preferred Stock as may be required by the provisions of any series thereof,
shall be required to amend, adopt, alter, change, or repeal any provision
inconsistent with Articles 7, 8, 9, 10, 11, 12, 13, 14, 15 and 16.
B. Bylaws. The Board of Directors or stockholders may adopt, alter,
amend, or repeal the Bylaws of the Company. Such action by the Board of
Directors shall require the affirmative vote of a majority of the directors then
in office at any regular or special meeting of the Board of Directors. Such
action by the stockholders shall require the affirmative vote of the holders of
at least eighty percent (80%) of the shares of the Company entitled to vote
generally in an election of directors, voting together as a single class, as
well as such additional vote of the Preferred Stock as may be required by the
provisions of any series thereof.
-19-
EXHIBIT 3.(ii)
<PAGE>
BYLAWS
OF
WSB HOLDING COMPANY
ARTICLE I. OFFICES
1.1 Registered Office and Registered Agent. The registered office of WSB
Holding Company (the "Company") shall be located in the Commonwealth of
Pennsylvania at such place as may be fixed from time to time by the board of
directors of the Company (the "Board" or "Board of Directors") upon filing of
such notices as may be required by law, and the registered agent shall have a
business office identical with such registered office.
1.2 Other Offices. The Company may have other offices within or outside
the Commonwealth of Pennsylvania at such place or places as the Board of
Directors may from time to time determine.
ARTICLE II. STOCKHOLDERS' MEETING
2.1 Meeting Place. All meetings of the stockholders shall be held at the
principal place of business of the Company, or at such other place within or
without the Commonwealth of Pennsylvania as shall be determined by the Board of
Directors and stated in the notice of such meeting.
2.2 Annual Meeting Time. The annual meeting of the stockholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held each year on such date and time
as may be determined by the Board of Directors and stated in the notice of such
meeting.
2.3 Organization and Conduct. Each meeting of the stockholders shall be
presided over by the Chairman of the Board, or in the Chairman's absence by the
President, or if neither the Chairman nor the President is present, by any Vice
President. The Secretary, or in the Secretary's absence a temporary Secretary,
shall act as secretary of each meeting of the stockholders. In the absence of
the Secretary and any temporary Secretary, the chairman of the meeting may
appoint any person present to act as secretary of the meeting. The chairman of
any meeting of the stockholders, unless prescribed by law or regulation or
unless the Board of Directors has otherwise determined, shall determine the
order of the business and the procedure at the meeting, including such
regulation of the manner of voting and the conduct of discussions as shall be
deemed appropriate by such chairman in the chairman's sole discretion.
2.4 Notice.
(a) Notice of the date, time, and place of, and the general
business to be conducted at, an annual or special meeting of stockholders shall
be given by delivering personally, by facsimile transmission, or by mailing a
written or printed notice of the same, at least ten (10) days prior to the
meeting, to each stockholder of record entitled to vote at such meeting. When
any stockholders' meeting, either annual or special, is adjourned and a new
record date is fixed for an adjourned meeting of stockholders, notice of the
adjourned meeting shall be given as in the case of an original meeting. It shall
not be necessary to give any notice of the time and place of any meeting
adjourned unless new business
<PAGE>
is to be transacted thereat or a new record date is fixed therefor, other than
an announcement at the meeting at which such adjournment is taken.
2.5 Voting Lists. The officer or agent having charge of the transfer
books for shares of the Company shall make a complete list of the shareholders
entitled to vote at any meeting of shareholders, arranged in alphabetical order,
with the address of and the number of shares held by each. The list shall be
produced and kept open at the time and place of the meeting and shall be subject
to inspection of any shareholder during the whole time of the meeting for the
purposes thereof.
2.6 Quorum. Except as otherwise required by law:
(a) A quorum at any annual or special meeting of stockholders
shall consist of stockholders representing, either in person or by proxy, a
majority of the outstanding capital stock of the Company entitled to vote at
such meeting without regard to any shares for which a broker indicates on a
proxy that it does not have discretionary authority as to such shares to vote on
such matter ("Broker Non-votes").
(b) The votes of a majority of those present, without regard to
Broker Non-votes or votes of abstention, at any properly called meeting or
adjourned meeting of stockholders, at which a quorum as defined above is
present, shall be sufficient to transact business, unless such greater vote is
required by these Bylaws, the Articles of Incorporation, or the laws of the
Commonwealth of Pennsylvania.
2.7 Voting of Shares.
(a) Except as otherwise provided in these Bylaws or to the extent
that voting rights of the shares of any class or classes are limited or denied
by the Articles of Incorporation, each stockholder, on each matter submitted to
a vote at a meeting of stockholders, shall have one vote for each share of
capital stock registered in such person's name on the books of the Company.
(b) Directors are to be elected by a plurality of votes cast by
the shares entitled to vote in the election of directors at a meeting at which a
quorum is present. Stockholders shall not be permitted to cumulate their votes
for the election of directors. If, at any meeting of the stockholders, due to a
vacancy or vacancies or otherwise, directors of more than one class of the Board
of Directors are to be elected, each class of directors to be elected at the
meeting shall be elected in a separate election by a plurality vote.
2.8 Fixing Record Date. The Board of Directors may fix a time prior to
the date of any meeting of shareholders as a record date for the determination
of the shareholders entitled to notice of, or to vote at, the meeting, which
time, except in the case of an adjourned meeting, shall be not more than 90 days
prior to the date of the meeting of shareholders. Only shareholders of record on
the date fixed shall be so entitled notwithstanding any transfer of shares on
the books of the Company after any record date fixed as provided in this
subsection. The Board of Directors may similarly fix a record date for the
determination of shareholders of record for any other purpose. When a
determination of shareholders of record has been made as provided in this
section for purposes of a meeting, the determination shall apply to any
adjournment thereof unless the Board fixes a new record date for the adjourned
meeting.
2.9 Proxies. A stockholder may vote either in person or by proxy
executed in writing by the stockholder, or such person's duly authorized
attorney-in-fact. A telegram, telex, cablegram, datagram, or similar
transmission from a shareholder or attorney-in-fact, or a photographic,
facsimile, or similar reproduction of a writing executed by a shareholder or
attorney-in-fact may be treated as properly
2
<PAGE>
executed for purposes of this section and shall be so treated if it sets forth a
confidential and unique identification number or other mark furnished by the
Company to the shareholder for the purposes of a particular meeting or
transaction. No proxy shall be valid after three years from the date of its
execution, unless otherwise provided in the proxy.
2.10 Voting of Shares in the Name of Two or More Persons. Where shares
are held jointly or as tenants in common by two or more persons as fiduciaries
or otherwise, if only one or more of such persons is present in person or by
proxy, all of the shares standing in the names of such persons shall be deemed
to be represented for the purpose of determining a quorum and the Company shall
accept as the vote of all such shares the votes cast by such person or a
majority of them and if in any case such persons are equally divided upon the
manner of voting the shares held by them, the vote of such shares shall be
divided equally among such persons, without prejudice to the rights of such
joint owners or the beneficial owners thereof among themselves, except that, if
there shall have been filed with the Secretary of the Company a copy, certified
by an attorney-at-law to be correct, of the relevant portions of the agreements
under which such shares are held or the instrument by which the trust or estate
was created or the decree of court appointing them, or of a decree of court
directing the voting of such shares, the persons specified as having such voting
power in the latest such document so filed, and only such persons, shall be
entitled to vote such shares but only in accordance therewith.
2.11 Voting of Shares by Certain Holders. Shares standing in the name of
another corporation may be voted by an officer, agent, or proxy as the bylaws of
such corporation may prescribe, or, in the absence of such provision, as the
board of directors of such corporation may determine. Shares held by an
administrator, executor, guardian, or conservator may be voted by such person,
either in person or by proxy, without a transfer of such shares into such
person's name. Shares standing in the name of a trustee may be voted by the
trustee, either in person or by proxy. Shares standing in the name of a receiver
may be voted by such receiver without the transfer thereof into the receiver's
name if authority to do so is contained in an appropriate order of the court or
other public authority by which such receiver was appointed. A stockholder whose
shares are pledged shall be entitled to vote such shares until the shares have
been transferred into the name of the pledgee or nominee, and thereafter the
pledgee or nominee shall be entitled to vote the shares so transferred.
2.12 Judges of Election. For each meeting of stockholders, the Board of
Directors may appoint the judges of election. If for any meeting the
inspector(s) appointed by the Board of Directors shall be unable to act or the
Board of Directors shall fail to appoint any inspector, one or more inspectors
may be appointed at the meeting by the chairman thereof. The number of
inspectors shall be one or three. Except for such duties as may be designated in
the Articles of Incorporation to another person, such inspectors determine the
number of shares outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum, the authenticity,
validity, and effect of proxies, receive votes or ballots, hear and determine
all challenges and questions in any way arising in connection with the right to
vote, count and tabulate all votes, determine the result and do such acts as may
be proper to conduct the election or vote with fairness to all shareholders. If
there are three inspectors, the decision, act, or certificate of a majority
shall be effective in all respects as the decision, act, or certificate of all.
Inspectors need not be stockholders.
2.13 Action By Shareholders Without a Meeting. Action required to be
taken or which may be taken at any annual or special meeting of stockholders of
the Company may be taken without a meeting as set forth in the Articles of
Incorporation, which provisions are incorporated herein with the same effect as
if they were set forth herein.
3
<PAGE>
ARTICLE III. CAPITAL STOCK
3.1 Certificates. Certificates of stock shall be issued in numerical
order, and each stockholder shall be entitled to a certificate signed by the
President or a Vice President, and the Secretary or the Treasurer, and may be
sealed with the seal of the Company or a facsimile thereof. The signatures of
such officers may be facsimiles if the certificate is manually signed on behalf
of a transfer agent, or registered by a registrar, other than the Company itself
or an employee of the Company. If an officer who has signed or whose facsimile
signature has been placed upon such certificate ceases to be an officer of the
Company before the certificate is issued, it may be issued by the Company with
the same effect as if the person were an officer on the date of issue. Each
certificate of stock shall state:
(a) that the Company is incorporated under the laws of the
Commonwealth of Pennsylvania;
(b) the name of the person to whom issued;
(c) the number and class of shares and the designation of the
series, if any, which such certificate represents;
(d) the par value of each share represented by such certificate,
or a statement that such shares are without par value; and
(e) that the Company will furnish to any shareholder upon
request and without charge, a full statement of the designations, preferences,
limitations, and relative rights of each class authorized to be issued.
3.2 Transfers.
(a) Transfers of stock shall be made only upon the stock transfer
books of the Company, kept at the registered office of the Company or at its
principal place of business, or at the office of its transfer agent or
registrar, and before a new certificate is issued the old certificate shall be
surrendered for cancellation. The Board of Directors may, by resolution, open a
share register in any state of the United States, and may employ an agent or
agents to keep such register, and to record transfers of shares therein.
(b) Shares of stock shall be transferred by delivery of the
certificates therefor, accompanied either by an assignment in writing on the
back of the certificate or an assignment separate from the certificate, or by a
written power of attorney to sell, assign, and transfer the same, signed by the
holder of said certificate. No shares of stock shall be transferred on the books
of the Company until the outstanding certificates therefor have been surrendered
to the Company.
3.3 Registered Owner. Registered stockholders shall be treated by the
Company as the holders in fact of the stock standing in their respective names
and the Company shall not be bound to recognize any equitable or other claim to
or interest in any share on the part of any other person, whether or not it
shall have express or other notice thereof, except as expressly provided below
or by the laws of the Commonwealth of Pennsylvania. The Board of Directors may
adopt by resolution a procedure whereby a stockholder of the Company may certify
in writing to the Company that all or a portion of the shares registered in the
name of such stockholder are held for the account of a specified person or
persons. The resolution shall set forth:
4
<PAGE>
(a) The classification of stockholders who may certify;
(b) The purpose or purposes for which the certification may be
made;
(c) The form of certification and information to be contained
therein;
(d) If the certification is with respect to a record date or
closing of the stock transfer books, the date within which the certification
must be received by the Company; and
(e) Such other provisions with respect to the procedure as are
deemed necessary or desirable.
Upon receipt by the Company of a certification complying with a
resolution meeting the above requirements, the persons specified in the
certification shall be deemed, for the purpose or purposes set forth in the
certification, to be the holders of record of the number of shares specified in
place of the stockholder making the certification.
3.4 Mutilated, Lost, or Destroyed Certificates. In case of any
mutilation, loss, or destruction of any certificate of stock, another may be
issued in its place upon receipt of proof of such mutilation, loss, or
destruction. The Board of Directors may impose conditions on such issuance and
may require the giving of a satisfactory bond or indemnity to the Company in
such sum as the Board might determine, or the Board may establish such other
procedures as it deems necessary.
3.5 Fractional Shares or Scrip. The Company may (a) issue fractions of a
share which shall entitle the holder a proportional interest to exercise voting
rights, to receive dividends thereon, and to participate in any of the assets of
the Company in the event of liquidation; (b) arrange for the disposition of
fractional interests by those entitled thereto; (c) pay in cash the fair value
of fractions of a share as of the time when those entitled to receive such
shares are determined; or (d) issue scrip in registered or bearer form which
shall entitle to holder to receive a certificate for a full share upon the
surrender of such scrip aggregating a full share.
3.6 Shares of Another Company. Shares owned by the Company in another
corporation, domestic or foreign, may be voted by such officer, agent, or proxy
as the Board of Directors may determine or, in the absence of such
determination, by the President of the Company.
ARTICLE IV. BOARD OF DIRECTORS
4.1 Number and Powers. The management of all the affairs, property, and
interest of the Company shall be vested in a Board of Directors. The Board of
Directors shall be divided into three classes as nearly equal in number as
possible. The initial Board of Directors shall consist of five (5) persons. The
classification and term of the directors shall be as set forth in the Articles
of Incorporation, which provisions are incorporated herein with the same effect
as if they were set forth herein. Directors must own no less than twelve (12)
shares of the voting stock of the Company. Such shares shall be kept on deposit
in the vault of the Company. Any director shall cease to act when no longer
holding such shares, which fact shall be reported to the Board by the Secretary,
whereupon the Board shall declare the seat of such director vacant. Directors
need not be residents of the Commonwealth of Pennsylvania. In addition to the
powers, authorities, and duties expressly conferred upon it by these Bylaws and
the Articles of Incorporation, the Board of Directors may exercise all such
powers of the Company and do
5
<PAGE>
all such lawful acts and things as are not by statute or by the Articles of
Incorporation or by these Bylaws directed or required to be exercised or done by
the stockholders.
In discharging the powers and duties of their respective positions, the
Board of Directors, committees of the Board of Directors, and individual
directors may, in considering the best interests of the Company, consider to the
extent they deem appropriate the effects of any action upon any and all groups
affected by such action, including stockholders, employees, suppliers,
customers, and creditor of the Company, and upon the communities in which
offices or other establishments of the Company are located; the short-term and
long-term interests of the Company; the resources, intent, and conduct (past,
stated, and potential) of any person seeking to acquire control of the Company;
and any and all other factors, provided however, the Board of Directors,
committees of the Board of Directors, or any individual director shall not be
required, in considering the best interests of the Company or the effects of any
action, to regard any interest or interests of any particular group affected by
the action as a dominant or controlling interest or factor.
4.2 Change of Number. The number of directors may at any time be
increased or decreased by a vote of two-thirds of the Board of Directors,
provided that no decrease shall have the effect of shortening the term of any
incumbent director except as provided in Sections 4.4 and 4.5 hereunder.
Notwithstanding anything to the contrary contained within these Bylaws, the
number of directors may neither be less than five nor more than 15.
4.3 Resignation. Any director may resign at any time by sending a
written notice of such resignation to the home office of the Company addressed
to the Chairman or the President. Unless otherwise specified therein, such
resignation shall take effect upon receipt thereof by the Chairman or the
President.
4.4 Vacancies. All vacancies in the Board of Directors shall be filled
in the manner provided in the Articles of Incorporation, which provisions are
incorporated herein with the same effect as if they were set forth herein.
4.5 Removal of Directors. Directors may be removed in the manner
provided in the Articles of Incorporation, which provisions are incorporated
herein with the same effect as if they were set forth herein.
4.6 Regular Meetings. Regular meetings of the Board of Directors or any
committee thereof may be held without notice at the principal place of business
of the Company or at such other place or places, either within or without the
Commonwealth of Pennsylvania, as the Board of Directors or such committee, as
the case may be, may from time to time designate. The annual meeting of the
Board of Directors shall be held without notice immediately after the
adjournment of the annual meeting of stockholders.
4.7 Special Meetings.
(a) Special meetings of the Board of Directors may be called at
any time by the Chairman, President, or by a majority of the authorized number
of directors, to be held at the principal place of business of the Company or at
such other place or places as the Board of Directors or the person or persons
calling such meeting may from time to time designate. Notice of all special
meetings of the Board of Directors shall be given to each director at least five
(5) days prior to such meeting by telegram, telex, cablegram, courier,
facsimile, or other similar communication, by letter, or personally. Such notice
need neither specify the business to be transacted at, nor the purpose of, the
meeting.
6
<PAGE>
(b) Special meetings of any committee may be called at any time
by such person or persons and with such notice as shall be specified for such
committee by the Board of Directors, or in the absence of such specification, in
the manner and with the notice required for special meetings of the Board of
Directors.
4.8 Quorum. A majority of the Board of Directors shall be necessary at
all meetings to constitute a quorum for the transaction of business.
4.9 Waiver of Notice. Attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends
for the express purpose of objecting to the transaction of any business because
the meeting is not lawfully called or convened. A waiver of notice signed by the
director or directors, whether before, during, or after the time stated for the
meeting, shall be equivalent to the giving of notice.
4.10 Registering Dissent. A director who is present at a meeting of the
Board of Directors at which action on a corporate matter is taken shall be
presumed to have assented to such action unless such director's dissent is
entered in the minutes of the meeting, or unless the director files a written
dissent to such action with the person acting as the secretary of the meeting
before the adjournment thereof, or unless the director delivers a dissent in
writing to the Secretary of the Company immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a director who voted in favor
of such action.
4.11 Executive, Audit, and Other Committees. Standing or special
committees may be appointed by the Board of Directors from its own number from
time to time, and the Board of Directors may from time to time invest such
committees with such powers as it may see fit, subject to such conditions as may
be prescribed by the Board. An Executive Committee may be appointed by
resolution passed by a majority of the full Board of Directors. It shall have
and exercise all of the authority of the Board of Directors, except in reference
to the submission of any action requiring the approval of stockholders, the
creation or filling of vacancies on the Board of Directors, the adoption,
amendment, or repeal of these Bylaws, the amendment or repeal of any resolution
of the Board which, by its terms, is only amendable or repealable by the entire
Board, or any action on matters committed by these Bylaws or resolution of the
Board to another committee of the Board. An Audit Committee shall be appointed
by resolution passed by a majority of the full Board of Directors, and at least
a majority of the members of the Audit Committee shall be directors who are not
also officers of the Company. The Audit Committee shall review the records and
affairs of the Company to determine its financial condition, shall review the
Company's systems of internal control with management and the Company's
independent auditors, and shall monitor the Company's adherence in accounting
and financial reporting to generally accepted accounting principles, as well as
such other duties as may be assigned to it by the Board of Directors. All
committees appointed by the Board of Directors shall keep regular minutes of the
transactions of their meetings and shall cause them to be recorded in books kept
for that purpose in the office of the Company. The designation of any such
committee, and the delegation of authority thereto, shall not relieve the Board
of Directors, or any member thereof, of any responsibility imposed by law.
4.12 Remuneration. The Board of Directors, by the affirmative vote of a
majority of the directors then in office, and irrespective of any personal
interest of any of its members, shall have the authority to establish reasonable
fee for all directors for services to the Company as directors, officers, or
otherwise, or to delegate such authority to any appropriate committee; provided,
that nothing herein contained shall be construed to preclude any director from
serving the Company in any other capacity and receiving compensation therefor.
Members of standing or special committees may be allowed like compensation for
attending committee meetings.
7
<PAGE>
4.13 Action by Directors Without a Meeting. Any action which may be
taken at a meeting of the directors, or of a committee thereof, may be taken
without a meeting if a consent in writing, setting forth the action so taken or
to be taken, shall be signed by all of the directors, or all of the members of
the committee, as the case may be. Such consent shall have the same effect as a
unanimous vote.
4.14 Action of Directors by Communications Equipment. Any action which
may be taken at a meeting of directors, or of a committee thereof, may be taken
by means of a conference telephone or similar communications equipment by means
of which persons participating in the meeting can hear each other at the same
time. Participation in a meeting pursuant to this section shall constitute
presence in person at the meeting
ARTICLE V. OFFICERS
5.1 Designations. The officers of the Company may include the Chairman
of the Board, a President, a Secretary, and a Treasurer, as well as such Vice
Presidents (including Executive and Senior Vice Presidents), Assistant
Secretaries, and Assistant Treasurers as the Board may designate, who shall be
elected for one year by the directors at their first meeting after the annual
meeting of stockholders, and who shall hold office until their successors are
elected and qualify. Any two or more offices may be held by the same person,
except that the offices of President and Secretary and President and Treasurer
may not be held by the same person. The President and Chairman of the Board
shall be members of the Board.
5.2 Powers and Duties. The officers of the Company shall have such
authority and perform such duties as the Board of Directors may from time to
time authorize or determine. In the absence of action by the Board of Directors,
the officers shall have such powers and duties as generally pertain to their
respective offices.
5.3 Delegation. In the case of absence or inability to act of any
officer of the Company and of any person herein authorized to act in such
officer's place, the Board of Directors may from time to time delegate the
powers or duties of such officer to any other officer or any director or other
person whom it may select.
5.4 Vacancies. Vacancies in any office arising from any cause may be
filled by the Board of Directors at any regular or special meeting of the Board.
5.5 Other Officers. The Board may appoint such other officers and agents
as it shall deem necessary or expedient, who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors.
5.7 Term - Removal. The officers of the Company shall hold office until
their successors are chosen and qualified. Any officer or agent elected or
appointed by the Board of Directors may be removed at any time, with or without
cause, by the affirmative vote of a majority of the whole Board of Directors,
but such removal shall be without prejudice to the contractual rights, if any,
of the person so removed. The election or appointment of an officer or agent
shall not in itself create contractual rights.
8
<PAGE>
ARTICLE VI. FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the Company shall end on the 30th day of June of each
year. The Company shall be subject to an annual audit as of the end of its
fiscal year by independent public accountants appointed by and responsible to
the Board of Directors. The appointment of such accountants shall be subject to
annual ratification by the stockholders.
ARTICLE VII. DIVIDENDS AND FINANCE
7.1 Dividends. Dividends may be declared by the Board of Directors and
paid by the Company out of retained earnings of the Company subject to the
conditions and limitations imposed by the laws of the Commonwealth of
Pennsylvania.
7.2. Reserves. Before making any distribution of earned surplus, there
may be set aside out of the earned surplus of the Company such sum or sums as
the directors from time to time in their absolute discretion deem expedient as a
reserve fund to meet contingencies, or for equalizing dividends, or for
maintaining any property of the Company, or for any other purpose. Any earned
surplus of any year not distributed as dividends shall be deemed to have thus
been set apart until otherwise disposed of by the Board of Directors.
7.3 Depositories. The monies of the Company shall be deposited in the
name of the Company in such bank or banks or trust company or trust companies as
the Board of Directors shall designate, and shall be drawn out only by check or
other order for payment of money signed by such persons and in such manner as
may be determined by resolution of the Board of Directors.
ARTICLE VIII. NOTICES
Except as may otherwise be required by law, any notice to any
stockholder or director may be delivered personally, by mail, by telegram,
telex, or TWX (with answerback received), or by courier service or facsimile
transmission. If sent by mail, telegraph, or courier service, the notice shall
be deemed to have been given to the person when deposited in the United States
mail or with a telegraph or courier service for delivery to that person or, in
the case of telex or TWX, when dispatched to the address of the addressee at
such persons last known address (or to such persons telex, TWX, or facsimile
number) in the records of the Company, with postage or courier or other charges
thereon prepaid.
ARTICLE IX. SEAL
The corporate seal of the Company shall be in such form and bear such
inscription as may be adopted by resolution of the Board of Directors, or by
usage of the officers on behalf of the Company.
9
<PAGE>
ARTICLE X. BOOKS AND RECORDS
The Company shall keep correct and complete books and records of account
and shall keep minutes and proceedings of meetings of its stockholders and Board
of Directors; and it shall keep at its registered office or principal place of
business, or at the office of its transfer agent or registrar, a record of its
stockholders, giving the names and addresses of all stockholders and the number
and class of the shares held by each. Any books, records, and minutes may be in
written form or any other form capable of being converted into written form
within a reasonable time.
ARTICLE XI. AMENDMENTS
These Bylaws may be altered, amended or repealed only as set forth in
the Articles of Incorporation, which provisions are incorporated herein with the
same effect as if they were set forth herein.
10
EXHIBIT 4
<PAGE>
================================================================================
COMMON STOCK WSB HOLDING COMPANY CUSIP
CERTIFICATE NO. ------------
INCORPORATED UNDER THE
LAWS OF THE COMMONWEALTH OF PENNSYLVANIA SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT:
IS THE OWNER OF:
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK,
$0.10 PAR VALUE PER SHARE OF
WSB Holding Company
The shares represented by this certificate are transferable only on the
stock transfer books of the corporation by the holder of record hereof in
person, or by his duly authorized attorney or legal representative, upon the
surrender of this certificate properly endorsed. This certificate and the shares
represented hereby are issued and shall be held subject to all the provisions
contained in the corporation's official corporate papers filed with the
Secretary of the Commonwealth of Pennsylvania (copies of which are on file with
the Transfer Agent), to all of the provisions the holder by acceptance hereof,
assents.
This certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT
FEDERALLY INSURED OR GUARANTEED.
In Witness Whereof, WSB Holding Company has caused this certificate to
be executed by the facsimile signatures of its duly authorized officers and has
caused a facsimile of its corporate seal to be hereunto affixed.
DATED:
- ------------------------------------ -----------------------------------
PRESIDENT SECRETARY
SEAL
Incorporated 1997
================================================================================
<PAGE>
WSB HOLDING COMPANY
The shares represented by this certificate are subject to a limitation
contained in the articles of incorporation (the "Articles") to the effect that
in no event shall any record owner of any outstanding common stock which is
beneficially owned, directly or indirectly, by a person who beneficially owns in
excess of 10% of the outstanding shares of common stock ( the "Limit") be
entitled or permitted to any vote in respect of shares held in excess of the
Limit. In addition, for five years from the completion of the conversion, no
person or entity may offer to acquire or acquire over 10% of the then
outstanding shares of any class of equity securities of the corporation.
The Board of Directors of the corporation is authorized by
resolution(s), from time to time adopted, to provide for the issuance of serial
preferred stock in series and to fix and state the voting powers, designations,
preferences, and relative, participating, optional, or other special rights of
the shares of each such series and the qualifications, limitations, and
restrictions thereof. The corporation will furnish to any shareholder upon
request and without charge a full description of each class of stock and any
series thereof.
The shares represented by this certificate may not be cumulatively voted
in the election of directors of the corporation. The Articles also includes a
provision the effect of which is to require the approval of not less than 80% of
the corporation's voting stock prior to the corporation engaging in certain
business combinations (as defined in the Articles) with a person who is the
beneficial owner of 10% or more of the corporation's outstanding voting stock,
or with an affiliate or associate of the corporation (a "Principal
Stockholder"). This restriction does not apply if certain approvals are obtained
from the Board of Directors. The affirmative vote of holders of 80% of the
outstanding shares of capital stock of the corporation entitled to vote
generally in the election of directors (considered for this purpose as a single
class) is required to amend this and certain other provisions of the Articles.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TEN COM - as tenants in common UNIF TRANS MIN ACT - Custodian
--------------- ---------------
(Cus) (Minor)
TEN ENT - as tenants by the entireties under Uniform Transfers to Minors Act
-----------------------
JT TEN - as joint tenants with right of (State)
survivorship and not as tenants
in common
</TABLE>
Additional abbreviations may also be used though not in the above
list.
FOR VALUE RECEIVED hereby sell, assign and transfer unto
---------------
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
shares of the common stock represented by the within certificate and do hereby
irrevocably constitute and appoint
- --------------------------------------------------------------------------------
Attorney to transfer the said shares on the books of the within named
corporation with full power of substitution in the premises.
Dated X
--------------------- ------------------------------------------
X
------------------------------------------
NOTICE: The signatures to this assignment must correspond with the
name(s) as written upon the face of the certificate in every particular, without
alteration or enlargement or any change whatever.
SIGNATURE(S) GUARANTEED:
-------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS, AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM)
PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE>
Countersigned and Registered:
-------------------------------------------
Transfer Agent and Registrar
-------------------------------------------
Authorized Signature
EXHIBIT 5.1
<PAGE>
MALIZIA, SPIDI, SLOANE & FISCH, P.C.
Attorneys at Law
One Franklin Square
1301 K Street, N.W.
Suite 700 East
Washington, D.C. 20005
Telephone: (202) 434-4660
Telecopier: (202) 434-4661
June 17, 1997
Board of Directors
WSB Holding Company
807 Middle St.
Pittsburgh, Pennsylvania 15212
Re: Registration Statement Under the Securities Act of 1933
-------------------------------------------------------
Ladies and Gentlemen:
This opinion is rendered in connection with the Registration Statement
on Form SB-2 to be filed with the Securities and Exchange Commission under the
Securities Act of 1933 relating to the offer and sale of up to 330,600 shares of
common stock, par value $0.10 per share (the "Common Stock"), of WSB Holding
Company (the "Company"), including shares to be issued to certain employee
benefit plans of the Company and its subsidiary. The Common Stock is proposed to
be issued pursuant to the Plan of Conversion (the "Plan") of Workingmens Savings
Bank, FSB (the "Savings Bank") in connection with the Savings Bank's conversion
from a mutual savings bank form of organization to a stock savings bank form of
organization and reorganization into a wholly-owned subsidiary of the Company
(the "Conversion"). As special counsel to the Savings Bank and the Company, we
have reviewed the corporate proceedings relating to the Plan and the Conversion
and such other legal matters as we have deemed appropriate for the purpose of
rendering this opinion.
Based on the foregoing, we are of the opinion that the shares of Common
Stock of the Company covered by the aforesaid Registration Statement will, when
issued in accordance with the terms of the Plan against full payment therefor,
be validly issued, fully paid, and non-assessable shares of Common Stock of the
Company.
We assume no obligation to advise you of changes that may hereafter be
brought to our attention.
<PAGE>
Board of Directors
June 17, 1997
Page Two
We hereby consent to the use of this opinion and to the reference to our
firm appearing in the Company's Prospectus under the headings "The Conversion -
Effects of Conversion to Stock Form on Depositors and Borrowers of Workingmens
Savings Bank, FSB - Tax Effects" and "Legal and Tax Matters." We also consent to
any references to our legal opinion referred to under the aforementioned
headings in the Prospectus.
Very truly yours,
/s/ Malizia, Spidi, Sloane & Fisch, P.C.
MALIZIA, SPIDI, SLOANE & FISCH, P.C.
EXHIBIT 5.2
<PAGE>
FERGUSON Financial
& COMPANY Institution
Consulting
Suite 550
122 W. John Carpenter Frwy June 11, 1997
Irving, Texas 75039
(972) 869-1177
(972) 869-2743 Fax
Board of Directors
Workingmens Savings Bank, FSB
807 Middle Street
Pittsburgh, Pennsylvania 15212
Plan of Conversion, Subscription Rights
---------------------------------------
Dear Directors:
Terms used in this letter not otherwise defined herein have the same
meanings for such terms in the Plan of Conversion adopted by the Board of
Directors of Workingmens Savings Bank, FASB ("Workingmens" or the "Bank"), under
which the Bank will convert from a mutual savings bank to a stock savings bank
and issue all of the Bank's stock to WSB Holding Company (the "Holding
Company"). Simultaneously, the Holding Company will issue shares of common
stock.
We understand that in accordance with the Plan of Conversion, Subscription
Rights to purchase shares of Common Stock in the Holding Company are to be
issued to (1) Eligible Account Holders, (2) The Bank's tax qualified employee
plans, (3) Supplemental Eligible Account Holders, and (4) Other Members. Based
solely upon our observation that the Subscription Rights will be available to
such parties without cost, will be legally non-transferable and of short
duration, and will afford such parties the right only to purchase shares of
Common Stock at the same price to be paid by members of the general public in
the Community Offering, but without undertaking any independent investigation of
state or federal laws or the position of the Internal Revenue Service with
respect to such issue, we are of the belief that:
(1) the Subscription Rights will have no ascertainable market value; and
(2) the price at which the Subscription Rights are exercisable will not be
more or less than the pro forma market value of the shares upon
issuance.
Changes in the local and national economy, the legislative and regulatory
environment, the stock market, interests rates and other external forces (e.g.,
natural disasters or significant global events) occur from time to time and may
materially affect the value of thrift stocks as a whole or the Holding Company's
value. Accordingly, no assurance can be given that persons who subscribe to
shares of Common Stock in the Conversion will thereafter be able to sell such
shares at the same price paid in the Subscription Offering.
Sincerely,
/s/Robin L. Fussel
Robin L. Fussell
Principal
EXHIBIT 8.1
<PAGE>
MALIZIA, SPIDI, SLOANE & FISCH, P.C.
Attorneys at Law
One Franklin Square
1301 K Street, N.W.
Suite 700 East
Washington, D.C. 20005
Telephone: (202) 434-4660
Telecopier: (202) 434-4661
June 16, 1997
Board of Directors
Workingmens Savings Bank, FSB
807 Middle Street
Pittsburgh, Pennsylvania 15212
Re: Federal Income Tax Opinion Relating to the Proposed Conversion of
Workingmens Savings Bank, FSB from a Federally-Chartered Mutual
Savings Bank to a Federally-Chartered Stock Savings Bank Pursuant
to Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as
amended
-----------------------------------------------------------------
Members of the Board:
In accordance with your request, set forth hereinbelow is the opinion
of this firm relating to certain federal income tax consequences of the proposed
conversion (the "Conversion") of Workingmens Savings Bank, FSB (the "Bank") from
a federally-chartered mutual savings bank to a federally-chartered capital stock
savings bank (the "Stock Bank"), and formation of a parent holding company (the
"Holding Company") which will simultaneously acquire all of the outstanding
stock of Stock Bank. As proposed, the Conversion will be implemented pursuant to
Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended (the
"Code").
We have examined such corporate records, certificates and other
documents as we have considered necessary or appropriate for this opinion. In
such examination, we have accepted, and have not independently verified, the
authenticity of all original documents, the accuracy of all copies, and the
genuineness of all signatures. Further, the capitalized terms which are used in
this opinion and are not expressly defined herein shall have the meaning
ascribed to them in the Bank's Plan of Conversion adopted on May 19, 1997, as
amended (the "Plan of Conversion").
STATEMENT OF FACTS
------------------
Based solely upon our review of such documents, and upon such
information as the Bank has provided to us (which we have not attempted to
verify in any respect), and in reliance upon such documents and information, we
understand the relevant facts with respect to the Conversion to be as follows:
<PAGE>
Board of Directors
Workingmens Savings Bank, FSB
June 16, 1997
Page 2
The Bank is a federally-chartered mutual savings bank. As a mutual
savings bank, the Bank has no authorized capital stock. Instead, the Bank, in
mutual form, has a unique equity structure. A savings depositor of the Bank is
entitled to interest income on his or her account balance as declared and paid
by the Bank. A savings depositor has no right to a distribution of any earnings
of the Bank, but rather these amounts become retained earnings of the Bank.
However, a savings depositor has a right to share pro rata, with respect to the
withdrawal value of his or her respective savings account, in any liquidation
proceeds distributed in the event the Bank is ever liquidated. Voting rights in
the Bank are held by its members. Each member is entitled to cast one vote for
each $100 or a fraction thereof of the withdrawal value of the member's account
and each borrower member is entitled to one vote. Each member shall have a
maximum of 1,000 votes. All of the interests held by a savings depositor in the
Bank cease when such depositor closes his or her account(s) with the Bank.
The Board of Directors of the Bank has decided that in order to promote
the growth and expansion of the Bank through the raising of additional capital,
it would be advantageous for the Bank to: (i) convert from a federally-chartered
mutual savings bank to a federally-chartered capital stock savings bank, and
(ii) arrange for the Holding Company to simultaneously acquire all of the Stock
Bank's stock. The Bank's Board of Directors has determined that in order to
provide greater flexibility in future operations of the Bank, including
diversification of business opportunities and acquisition, it is advantageous to
have the Stock Bank's stock held by the Holding Company. Pursuant to the Plan of
Conversion, the Bank's certificate of incorporation to operate as a mutual
savings bank will be amended and a new certificate of incorporation will be
acquired to allow it to continue its operations in the form of a
federally-chartered capital stock savings bank. The Plan of Conversion provides
for the conversion of the Bank from mutual-to-stock form, and an appraisal of
the pro forma market value of the stock of the Stock Bank, which will be owned
solely by the Holding Company. The Plan of Conversion must be approved by the
Office of Thrift Supervision ("OTS"), and by an affirmative vote of at least a
majority of the total votes eligible to be cast at a special meeting of the
Bank's members called to vote on the Plan of Conversion.
The Holding Company is being formed under the laws of the Commonwealth
of Pennsylvania for the purpose of the proposed transaction described herein, to
engage in business as a savings and loan holding company and to hold all of the
stock of the Stock Bank. The Holding Company will issue shares of its voting
common stock ("Holding Company Stock") upon completion of the Conversion, as
described below, to persons purchasing such shares through a Subscription
Offering and to the general public in a Public Offering.
Following appropriate regulatory approval, the Plan of Conversion
provides for the issuance of shares of Holding Company Stock to eligible
depositors and borrowers of the Bank and others as described below and set forth
in the Plan of Conversion. The aggregate purchase price at which all shares of
Holding Company Stock will be offered and sold pursuant to the
<PAGE>
Board of Directors
Workingmens Savings Bank, FSB
June 16, 1997
Page 3
Plan of Conversion will be equal to the estimated pro forma market value of the
Bank at the time of the Conversion as held as a subsidiary of the Holding
Company. The estimated pro forma market value will be determined by an
independent appraiser. Pursuant to the Plan of Conversion, all such shares of
Holding Company Stock will be issued and sold at a uniform price per share. The
Conversion and the sale of newly issued shares of the Stock Bank's stock to the
Holding Company will be deemed effective concurrently with the closing of the
sale of Holding Company Stock.
As required by OTS regulations, shares of Holding Company Stock will be
offered pursuant to non-transferable subscription rights on the basis of
preference categories. All shares must be sold and to the extent that Holding
Company Stock is available, no subscriber will be allowed to purchase less than
25 shares of Holding Company Stock, provided that the aggregate purchase price
does not exceed $500. The Bank has established various preference categories
under which shares of Holding Company Stock may be purchased and a public
offering category for the sale of shares not purchased under the preference
categories. If the third preference category is determined to be inappropriate
to the Conversion, then there will only be three preference categories
consisting of the first, second, and fourth preference categories set forth
below, and all references herein to Supplemental Eligible Account Holder and the
Supplemental Eligibility Record Date shall not be applicable to the subject
transaction.
The first preference category is reserved for the Bank's Eligible
Account Holders. The Plan of Conversion defines "Eligible Account Holder" as any
person holding a Qualifying Deposit. The Plan of Conversion defines "Qualifying
Deposit" as the aggregate balance of all savings accounts of an Eligible Account
Holder in the Bank at the close of business on March 31, 1996, which is at least
equal to $50.00. If a savings account holder of the Bank qualifies as an
Eligible Account Holder, he or she will receive, without payment,
non-transferable subscription rights to purchase Holding Company Stock. The
number of shares that each Eligible Account Holder may subscribe to is equal to
the greater of (a) the maximum purchase limitation established for the Public
Offering; (b) one tenth of one percent of the total offering of shares; or (c)
fifteen times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Holding Company Stock to be issued by
a fraction of which the numerator is the amount of the Qualifying Deposit of the
Eligible Account Holder and the denominator is the total amount of the
Qualifying Deposits of all Eligible Account Holders. If there is an
oversubscription, shares will be allocated among subscribing Eligible Account
Holders so as to permit each account holder, to the extent possible, to purchase
a number of shares sufficient to make his or her total allocation equal to 100
shares. Any shares not then allocated shall be allocated among the subscribing
Eligible Account Holders on an equitable basis, related to the amounts of their
respective deposits as compared to the total deposits of Eligible Account
Holders on the Eligibility Record Date. Non-transferable subscription rights to
purchase Holding Company Stock received by officers and directors of the Bank
and their associates based on their increased deposits in the Bank in the one
year period
<PAGE>
Board of Directors
Workingmens Savings Bank, FSB
June 16, 1997
Page 4
preceding the Eligibility Record Date shall be subordinated to all other
subscriptions involving the exercise of nontransferable subscription rights to
purchase shares of Holding Company Stock under the first preference category.
The second preference category is reserved for tax-qualified employee
stock benefit plans of the Stock Bank. The Plan of Conversion defines "tax
qualified employee stock benefit plans" as any defined benefit plan or defined
contribution plan, such as an employee stock ownership plan, stock bonus plan,
profit-sharing plan or other plan, which, with its related trust meets the
requirements to be "qualified" under Section 401 of the Code. Under the Plan of
Conversion, the Stock Bank's tax-qualified employee stock benefit plans may
subscribe for up to 10% of the shares of Holding Company Stock to be offered in
the Conversion.
The third preference category is reserved for the Bank's Supplemental
Eligible Account Holders. The Plan of Conversion defines "Supplemental Eligible
Account Holder" as any person (other than officers or directors of the Bank and
their associates) holding a deposit in the Bank on the last day of the calendar
quarter preceding the approval of the Plan of Conversion by the OTS
("Supplemental Eligibility Record Date"). This third preference category will
only be used in the event that the Eligibility Record Date is more than 15
months prior to the date of the latest amendment to the Application for Approval
of Conversion on Form AC filed prior to approval by the OTS. The third
preference category provides that each Supplemental Eligible Account Holder will
receive, without payment, nontransferable subscription rights to purchase
Holding Company Stock to the extent that such shares of Holding Company Stock
are available after satisfying subscriptions for shares in the first and second
preference categories above. The number of shares to which a Supplemental
Eligible Account Holder may subscribe to is the greater of (a) the maximum
purchase limitation established for the Community Offering; (b) one-tenth of one
percent of the total offering of shares; or (c) fifteen times the product
(rounded down to the next whole number) obtained by multiplying the total number
of the shares of Holding Company Stock to be issued by a fraction of which the
numerator is the amount of the deposit of the Supplemental Eligible Account
Holder and the denominator is the total amount of the deposits of all
Supplemental Eligible Account Holders on the Supplemental Eligibility Record
Date. Subscription rights received pursuant to the third preference category
shall be subordinated to all rights under the first and second preference
categories. Non-transferable subscription rights to be received by a
Supplemental Eligible Account Holder in the third preference category shall be
reduced by the subscription rights received by such account holder as an
Eligible Account Holder under the first and second preference categories. In the
event of an oversubscription, shares will be allocated so as to enable each
Supplemental Eligible Account Holder, to the extent possible, to purchase a
number of shares sufficient to make his total allocation, including shares
previously allocated in the first and second preference categories, equal to 100
shares or the total amount of his subscription, whichever is less. Any shares
not then allocated shall be allocated among the subscribing Supplemental
Eligible Account Holders
<PAGE>
Board of Directors
Workingmens Savings Bank, FSB
June 16, 1997
Page 5
on an equitable basis related to the amount of their respective deposits as
compared to the total deposits of Supplemental Eligible Account Holders on the
Supplemental Eligibility Record Date.
If there is no oversubscription of the Holding Company Stock in the
first, second, and third preference categories, the fourth preference category
becomes operable. In the fourth preference category, members of the Bank
entitled to vote at the special meeting of members to approve the Plan of
Conversion who are not Eligible Account Holders or Supplemental Eligible Account
Holders ("Other Members") will receive, without payment, non-transferable
subscription rights entitling them to purchase Holding Company Stock. Other
Members shall each receive subscription rights to purchase up to the maximum
purchase limitation established for the Public Offering or one-tenth of one
percent of the total offering of shares, to the extent that Holding Company
Stock is available. In the event of an oversubscription by Other Members,
Holding Company Stock will be allocated pro rata according to the number of
shares subscribed for by each Other Member.
The Plan of Conversion further provides for limitations upon purchases
of Holding Company Stock. Specifically, any person by himself or herself or with
an associate or a group of persons acting in concert may subscribe for not more
than $125,000 of Holding Company Stock offered pursuant to the Plan of
Conversion, except that Tax-Qualified Employee Stock Benefit Plans may purchase
up to 10% of the total shares of Holding Company Stock issued. Subject to any
required regulatory approval and the requirements of applicable laws and
regulations, the Bank may increase or decrease any of the purchase limitations
set forth herein at any time. The Board of Directors of the Bank may, in its
sole discretion, increase the maximum purchase limitation up to 5.0%. Requests
to purchase additional shares of Holding Company Stock under this provision will
be allocated by the Board of Directors on a pro rata basis giving priority in
accordance with the priority rights set forth in the Plan of Conversion.
Officers and directors of the Bank and their associates may not purchase in the
aggregate more than 35% of the Holding Company Stock issued pursuant to the
Conversion. Directors of the Bank will not be deemed associates or a group
acting in concert solely as a result of their membership on the board of
directors of the Bank. All of the shares of Holding Company Stock purchased by
officers and directors will be subject to certain restrictions on sale for a
period of one year.
The Plan of Conversion provides that no person will be issued any
subscription rights or be permitted to purchase any Holding Company Stock if
such person resides in a foreign country or in a state of the United States with
respect to which all of the following apply: (a) a small number of persons
otherwise eligible to subscribe for shares under the Plan of Conversion reside
in such state; (b) the issuance of subscription rights or the offer or sale of
the Holding Company Stock in such state, would require the Bank or the Holding
Company under the securities law of such state to register as a broker or dealer
or to register or otherwise qualify its securities for
<PAGE>
Board of Directors
Workingmens Savings Bank, FSB
June 16, 1997
Page 6
sale in such state; and (c) such registration or qualification would be
impracticable for reasons of cost or otherwise.
The Plan of Conversion also provides for the establishment of a
Liquidation Account by Stock Bank for the benefit of all Eligible Account
Holders and Supplemental Eligible Account Holders (if applicable). The
Liquidation Account will be equal in amount to the net worth of Bank as of the
time of the Conversion. The establishment of the Liquidation Account will not
operate to restrict the use or application of any of the net worth accounts of
the Stock Bank, except that the Stock Bank will not declare or pay cash
dividends on or repurchase any of its stock if the result thereof would be to
reduce its net worth below the amount required to maintain the Liquidation
Account. The Liquidation Account will be for the benefit of the Bank's Eligible
Account Holders and Supplemental Eligible Account Holders who maintain accounts
in the Bank at the time of the Conversion. All such account holders, including
those not entitled to subscription rights for reasons of foreign or out-of-state
residency (as described above), will have an interest in the Liquidation
Account. The interest an Eligible Account Holder and Supplemental Eligible
Account Holder will have a right to receive, in the event of a complete
liquidation of the Stock Bank, is a distribution from the Liquidation Account in
the amount of the then current adjusted subaccount balances for savings accounts
then held, which will be made prior to any liquidation distribution with respect
to the capital stock of the Stock Bank.
The initial subaccount balance for a savings account held by an
Eligible Account Holder and/or Supplemental Eligible Account Holder shall be
determined by multiplying the opening balance in the Liquidation Account by a
fraction of which the numerator is the amount of the qualifying deposit in the
savings account, and the denominator is the total amount of qualifying deposits
of all Eligible Account Holders and Supplemental Eligible Account Holders in the
Stock Bank. The initial subaccount balance will never be increased, but may be
decreased if the deposit balance in any qualifying savings account of any
Eligible Account Holder or any savings account of any Supplemental Eligible
Account Holder on any annual closing date subsequent to the Eligibility Record
Date or Supplemental Eligibility Record Date, whichever is applicable, is less
than the lesser of (1) the deposit balance in the savings account at the close
of business on any other annual closing date subsequent to the Eligibility
Record Date or the Supplemental Eligibility Record Date, or (2) the amount of
the qualifying deposit in such savings account. In such event, the subaccount
balance for the savings account will be adjusted by reducing each subaccount
balance in an amount proportionate to the reduction in the savings account
balance. Once decreased, the Plan of Conversion provides that the subaccount
balance will never be subsequently increased, and if the savings account of an
Eligible Account Holder or Supplemental Eligible Account Holder is closed, the
related subaccount balance in the Liquidation Account will be reduced to zero.
The net proceeds from the sale of the shares of Holding Company Stock
will become the permanent capital of Holding Company, and the Holding Company
will in turn purchase 100%
<PAGE>
Board of Directors
Workingmens Savings Bank, FSB
June 16, 1997
Page 7
of the stock issued by Stock Bank, in exchange for up to 50% of the Holding
Company's stock offering net proceeds or such other percentage as is approved by
the Board of Directors with the concurrence of the OTS.
Following the Conversion, voting rights in Stock Bank will rest
exclusively in the Holding Company. Voting rights in the Holding Company will
rest exclusively in the stockholders of the Holding Company. The Conversion will
not interrupt the business of the Bank, and its business will continue as usual
under the Stock Bank. Each depositor will retain a withdrawable savings account
or accounts equal in amount to the withdrawable account or accounts at the time
of the Conversion. Mortgage loans of the Bank will remain unchanged and retain
their same characteristics in the Stock Bank after the Conversion. The Stock
Bank will continue membership in the Federal Home Loan Bank System, and will
remain subject to the regulatory authority of the OTS. Deposits in Stock Bank
will continue to be insured by the Savings Association Insurance Fund
administered by the Federal Deposit Insurance Corporation up to applicable
limits of insurance coverage.
Immediately prior to the Conversion, the Bank will have a positive net
worth in accordance with generally accepted accounting principles. The savings
account holders of the Bank will pay expenses of the Conversion solely
attributable to them, if any. Further, the Bank will pay its own expenses of the
Conversion and will not pay any expenses solely attributable to the Bank's
savings account holders or to the purchasers of Holding Company Stock.
REPRESENTATIONS BY MANAGEMENT
-----------------------------
In connection with the Conversion, the following statements,
representations and declarations have been made to us by management of the Bank:
1. The Conversion will be implemented in accordance with the terms of
the Plan of Conversion and all conditions precedent contained in the Plan of
Conversion shall be performed prior to the consummation of the Conversion.
2. The fair market value of the withdrawable savings accounts plus
interests in the Liquidation Account to be constructively received under the
Plan of Conversion will in each instance be equal to the fair market value of
each savings account of the Bank plus the interest in the residual equity of the
Bank surrendered in exchange therefor. All proprietary rights in the Bank form
an integral part of the withdrawable savings accounts being surrendered in the
Conversion.
3. The Holding Company and the Stock Bank each have no plan or
intention to redeem or otherwise acquire any of the Holding Company Stock issued
in the proposed transaction.
<PAGE>
Board of Directors
Workingmens Savings Bank, FSB
June 16, 1997
Page 8
4. To the best of the knowledge of the management of the Bank, there is
not now nor will there be at the time of the Conversion, any plan or intention,
on the part of the depositors in the Bank to withdraw their deposits following
the Conversion. Deposits withdrawn immediately prior to or immediately
subsequent to the Conversion (other than maturing deposits) are considered in
making these assumptions.
5. Immediately following the consummation of the proposed transaction,
the Stock Bank will possess the same assets and liabilities as the Bank held
immediately prior to the proposed transaction, plus substantially all of the net
proceeds from the sale of its stock to the Holding Company (except for assets
used to pay expenses in the Conversion). Assets used to pay expenses of the
Conversion (without reference to the expenses of the Subscription Offering and
the Public Offering) and all distributions (except for regular normal interest
payments made by the Bank immediately preceding the transaction) will in the
aggregate constitute less than one percent (1%) of the assets of the Bank, net
of liabilities associated with such assets, and will be paid by the Bank and the
Holding Company from the proceeds of the Subscription Offering and Public
Offering.
6. Following the Conversion, Stock Bank will continue to engage in its
business in substantially the same manner as engaged in by the Bank prior to the
Conversion. The Stock Bank has no plan or intention to sell or otherwise dispose
of any of its assets, except in the ordinary course of business.
7. No cash or property will be given to any member of the Bank in lieu
of subscription rights or an interest in the Liquidation Account of the Stock
Bank.
8. None of the compensation to be received by any deposit account
holder-employees of the Bank or the Holding Company will be separate
consideration for, or allocable to, any of their deposits in the Bank. No
interest in the Liquidation Account of the Stock Bank will be received by any
deposit account holder-employees as separate consideration for, or will
otherwise be allocable to, any employment agreement, and the compensation paid
to each deposit account holder-employee, during the twelve month period
preceding or subsequent to the Conversion, will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's length for similar services. No shares of Holding Company Stock will be
issued to or purchased by any deposit account holder-employee of the Bank or the
Holding Company at a discount or as compensation in the Conversion.
9. The aggregate fair market value of the Qualifying Deposits held by
Eligible Account Holders or Supplemental Eligible Account Holders (if
applicable) as of the close of business on the Eligibility Record Date or
Supplemental Eligibility Record Date (if applicable) entitled to interests in
the Liquidation Account to be established by Stock Bank equalled or
<PAGE>
Board of Directors
Workingmens Savings Bank, FSB
June 16, 1997
Page 9
exceeded 99% of the aggregate fair market value of all savings accounts
(including those accounts of less than $50.00) in the Bank as of the close of
business on such date.
10. There is no plan or intention for the Stock Bank to be liquidated
or merged with another corporation following the consummation of the Conversion.
11. For taxable years prior to January 1, 1996, the Bank utilized the
reserve method of accounting for bad debts in accordance with Section 593 of the
Code. Pursuant to the Small Business Job Protection Act of 1996, which was
signed by the President on August 20, 1996, the Stock Bank will utilize a
reserve for bad debts in accordance with Section 585 of the Code (following the
Conversion).
12. The Bank and the Stock Bank are corporations within the meaning of
Section 7701(a)(3) of the Code.
13. The Holding Company has no plan or intention to sell or otherwise
dispose of the stock of the Stock Bank received by it in the proposed
transaction.
14. Both the Stock Bank and the Holding Company have no plan or
intention, either currently or at the time of the Conversion, to issue
additional shares of common stock following the proposed transaction, other than
shares that may be issued to employees or directors pursuant to certain stock
option and stock incentive plans or that may be issued to employee benefit
plans.
15. If all of the net proceeds from the sale of Holding Company Stock
had been contributed by the Holding Company to the Stock Bank in exchange for
common stock of the Stock Bank in the Conversion, as opposed to the Holding
Company retaining a portion of such net proceeds ("retained proceeds"), and if
the Stock Bank immediately thereafter made a distribution of the retained
proceeds to the Holding Company, the Stock Bank would have sufficient current
and accumulated earnings and profits for tax purposes such that the distribution
would not result in the recapture of any portion of the bad debt reserves of the
Stock Bank under Section 593(e) of the Code.
16. At the time of the proposed transaction, the fair market value of
the assets of the Bank on a going concern basis (including intangibles) will
equal or exceed the amount of its liabilities plus the amount of liability to
which such assets are subject. The Bank will have a positive regulatory net
worth at the time of the Conversion.
17. The Bank is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code. The
proposed transaction does not involve a receivership, foreclosure, or similar
proceeding before a federal or state agency involving a financial institution to
which Section 585 or 593 of the Code applies.
<PAGE>
Board of Directors
Workingmens Savings Bank, FSB
June 16, 1997
Page 10
18. The Bank's savings depositors will pay expenses of the Conversion
solely attributable to them, if any. The Holding Company, the Stock Bank, and
the Bank will pay their own expenses of the Conversion and will not pay any
expenses solely attributable to the savings depositors or to the Holding Company
stockholders.
19. The liabilities of the Bank assumed by the Stock Bank plus the
liabilities, if any, to which the transferred assets are subject were incurred
by the Bank in the ordinary course of its business and are associated with the
assets transferred.
20. There will be no purchase price advantage for the Bank's deposit
account holders
who purchase Holding Company Stock in the Conversion.
21. Neither the Bank nor the Stock Bank is an investment company as
defined in Sections 368(a)(2)(F)(iii) and (iv) of the Code.
22. No creditors of the Bank have taken any steps to enforce their
claims against the Bank by instituting bankruptcy or other legal proceedings, in
either a court or appropriate regulatory agency, that would eliminate the
proprietary interests of the members of the Bank prior to the Conversion.
23. The proposed transaction does not involve the payment to the Stock
Bank or the Bank of financial assistance from federal agencies within the
meaning of Notice 89-102, 1989-40 C.B. 1.
24. The Eligible Account Holders' and Supplemental Eligible Account
Holders' proprietary interest in the Bank arise solely by virtue of the fact
that they are account holders in the Bank.
25. At the time of the Conversion, the Bank will not have outstanding
any warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire an equity interest in the Holding
Company or the Stock Bank.
26. The Stock Bank has no plan or intention to sell or otherwise
dispose of any of the assets of the Bank acquired in the transaction (except for
dispositions, including deposit withdrawals, made in the ordinary course of
business).
27. On a per share basis, the purchase price of the Holding Company
Stock in the Conversion will be equal to the fair market value of such stock at
the time of the completion of the proposed transaction.
<PAGE>
Board of Directors
Workingmens Savings Bank, FSB
June 16, 1997
Page 11
28. The Bank has received or will receive an opinion from Ferguson &
Company ("Appraiser's Opinion"), which concludes that subscription rights to be
received by Eligible Account Holders, Supplemental Eligible Account Holders, and
other eligible subscribers do not have any ascertainable fair market value,
because they are acquired by the recipients without cost, are non-transferable,
exist for such a short duration, and merely afford the recipients a right only
to purchase Holding Company Stock at a price equal to its estimated fair market
value, which will be the same price used in the Public Offering for unsubscribed
shares of Holding Company Stock.
29. The Bank will not have any net operating losses, capital loss
carryovers, or built- in losses at the time of the Conversion.
OPINION OF COUNSEL
------------------
Based solely upon the foregoing information and our analysis and
examination of current applicable federal income tax laws, rulings, regulations,
judicial precedents, and the Appraiser's Opinion, and provided the Conversion is
undertaken in accordance with the above assumptions, we render the following
opinion of counsel:
1. The change in the form of operation of the Bank from a federally
chartered mutual savings bank to a federally chartered capital stock savings
bank, as described above, will constitute a reorganization within the meaning of
Section 368(a)(1)(F) of the Code, and no gain or loss will be recognized to
either the Bank or to the Stock Bank as a result of such Conversion. (See Rev.
Rul. 80-105, 1980-1 C.B. 78). The Bank and the Stock Bank will each be a party
to a reorganization within the meaning of Section 368(b) of the Code. (Rev. Rul.
72-206, 1972-1 C.B. 104).
2. No gain or loss will be recognized by the Stock Bank on the receipt
of money in exchange for shares of Stock Bank stock. (Section 1032(a) of the
Code).
3. The Holding Company will recognize no gain or loss upon its receipt
of money in exchange for shares of Holding Company Stock. (Section 1032(a) of
the Code).
4. The assets of the Bank will have the same basis in the hands of the
Stock Bank as in the hands of the Bank immediately prior to the Conversion.
(Section 362(b) of the Code).
5. The holding period of the assets of the Bank to be received by the
Stock Bank will include the period during which the assets were held by the Bank
prior to the Conversion. (Section 1223(2) of the Code).
<PAGE>
Board of Directors
Workingmens Savings Bank, FSB
June 16, 1997
Page 12
6. Depositors will realize gain, if any, upon the issuance to them of
(i) withdrawable deposit accounts of the Stock Bank, (ii) subscription rights in
connection with the Conversion, and/or (iii) interests in the Liquidation
Account of the Stock Bank. Any gain resulting therefrom will be recognized, but
only in an amount not in excess of the fair market value of the Liquidation
Accounts and/or subscription rights received. The Liquidation Accounts will have
nominal, if any, fair market value. Based solely on the accuracy of the
conclusion reached in the Appraiser's Opinion, and our reliance on such opinion,
that the subscription rights have no value at the time of distribution or
exercise, no gain or loss will be required to be recognized by depositors upon
receipt or distribution of subscription rights. (Section 1001 of the Code).
See Paulsen v. Commissioner, 469 U.S. 131, 139 (1985).
Likewise, based solely on the accuracy of the aforesaid conclusion
reached in the Appraiser's Opinion, and our reliance thereon, we give the
following opinions: (a) no taxable income will be recognized by the borrowers,
directors, officers, and employees of the Bank upon distribution to them of
subscription rights or upon the exercise or lapse of the subscription rights to
acquire Holding Company Stock at fair market value; (b) no taxable income will
be realized by the depositors of the Bank as a result of the exercise or lapse
of the subscription rights to purchase Holding Company Stock at fair market
value (Rev. Rul. 56-572, 1956-2 C.B. 182); and (c) no taxable income will be
realized by the Bank, the Stock Bank, or the Holding Company on the issuance or
distribution of subscription rights to depositors of the Bank to purchase shares
of Holding Company Stock at fair market value (Section 311 of the Code).
Notwithstanding the Appraiser's Opinion, if the subscription rights are
subsequently found to have a fair market value greater than zero, income may be
recognized by various recipients of the subscription rights (in certain cases,
whether or not the rights are exercised) and the Holding Company and/or the
Stock Bank may be taxable on the distribution of the subscription rights.
(Section 311 of the Code). In this regard, the subscription rights may be taxed
partially or entirely at ordinary income tax rates.
7. The basis of the savings accounts in the Stock Bank received by the
account holders of the Bank will be the same as the basis of their savings
accounts in the Bank surrendered in exchange therefor (Section 358(a)(1)). The
basis of the interests in the Liquidation Account of the Stock Bank received by
the Eligible Account Holders and Supplemental Eligible Account Holders will be
zero, that being the cost of such property. (Paulsen v. Commissioner, 469 U.S.
131, 139 (1985)). The basis of the non-transferable subscription rights will be
zero, provided that such subscription rights are not deemed to have a fair
market value and that the subscription price of such stock issuable upon
exercise of such rights is equal to the fair market value of such stock. The
basis of the Holding Company Stock to its stockholders will be purchase price
thereof, increased by the basis, if any, of the subscription rights exercised
(Section 1012 of the Code). The holding period of Holding Company Stock will
commence upon the effective date of exercise of the subscription rights
<PAGE>
Board of Directors
Workingmens Savings Bank, FSB
June 16, 1997
Page 13
(Section 1223(6) of the Code). The holding period for the Holding Company Stock
purchased pursuant to the direct community offering, public offering or under
other purchase arrangements will commence on the date following the date on
which such stock is purchased. (Rev. Rul. 70- 598, 1970-2 C.B. 168).
8. The part of the taxable year of the Bank before the Conversion and
the part of the taxable year of the Stock Bank after the Conversion will
constitute a single taxable year of the Stock Bank. (See Rev. Rul. 57-276,
1957-1 C.B. 126). Consequently, the Bank will not be required to file a federal
income tax return for any portion of such taxable year (Section 1.381(b)-1(a)(2)
of the Treasury Regulations).
9. As provided by Section 381(c)(2) of the Code and Section
1.381(c)(2)-1 of the Treasury Regulations, the Stock Bank will succeed to and
take into account the earnings and profits or deficit in earnings and profits of
the Bank as of the date or dates of transfer.
10. Pursuant to the provisions of Section 381(c)(4) of the Code and
Section 1.381(c)(4)-1(a)(1)(ii) of the Treasury Regulations, the Stock Bank will
succeed to and take into account, immediately after the reorganization, those
accounts of the Bank which represent bad debt reserves in respect of which the
Bank has taken a bad debt deduction for taxable years ending on or before the
date of the reorganization. The bad debt reserves will not be required to be
restored to the gross income of either the Bank or the Stock Bank for the
taxable year of the reorganization, and such bad debt reserves will have the
same character in the hands of the Stock Bank as they would have had in the
hands of the Bank if no distribution or transfer had occurred. No opinion is
being expressed as to whether the bad debt reserves will be required to be
restored to the gross income of either the Bank or the Stock Bank for the
taxable year of the reorganization.
11. Regardless of book entries made for the creation of the Liquidation
Account, the Conversion, as described above, will not diminish the accumulated
earnings and profits of the Stock Bank available for the subsequent distribution
of dividends within the meaning of Section 316 of the Code. (Section 1.312-11(b)
and (c) of the Treasury Regulations).
12. For purposes of Section 381 of the Code, the Stock Bank will be
treated the same as the Bank would have been had there been no reorganization.
Accordingly, the taxable year of the Bank will not end on the effective date of
the proposed transaction merely because of the transfer of assets of the Bank to
the Stock Bank and the tax attributes of the Bank enumerated in Section 381(c)
will be taken into account by the Stock Bank as if there had been no
reorganization (Section 1.381(b)-1(a)(2)) of the Treasury Regulations).
No opinion is expressed as to the tax treatment of the Conversion under
the provisions of any of the other sections of the Code and Treasury Regulations
which may also be applicable
<PAGE>
Board of Directors
Workingmens Savings Bank, FSB
June 16, 1997
Page 14
thereto, or under federal law, or to the tax treatment of any conditions
existing at the time of, or effects resulting from, the transactions which are
not specifically covered by the items set forth above. Notwithstanding any
reference to Section 381 above, no opinion is expressed or intended to be
expressed herein as to the effect, if any, of this transaction on the continued
existence of, the carryover or carryback of, or the limitation on, any net
operating losses of the Bank or its successor, the Stock Bank, under the Code.
We hereby consent to the filing of this opinion as an exhibit to the
Application for Conversion on Form AC of the Bank filed with the OTS, the
Application H-(e)(1)-S of the Holding Company filed with the OTS, and the
Registration Statement on Form SB-2 of the Holding Company filed under the
Securities Act of 1933, as amended, and to the reference of our firm in the
prospectus related to this opinion.
Very truly yours,
/s/Malizia, Spidi, Sloane & Fisch, P.C.
MALIZIA, SPIDI, SLOANE & FISCH, P.C.
EXHIBIT 8.2
<PAGE>
MALIZIA, SPIDI, SLOANE & FISCH, P.C.
Attorneys at Law
One Franklin Square
1301 K Street, N.W.
Suite 700 East
Washington, D.C. 20005
Telephone: (202) 434-4660
Telecopier: (202) 434-4661
June 16, 1997
Board of Directors
Workingmens Savings Bank, FSB
807 Middle Street
Pittsburgh, Pennsylvania 15212
Board Members:
You have requested our opinion regarding certain Pennsylvania tax
consequences to Workingmens Savings Bank, FSB (the "Bank") and its depositors
under the laws of the Commonwealth of Pennsylvania of the proposed conversion
(the "Conversion") under which the Bank will be changed from a
federally-chartered mutual savings bank to a federally-chartered capital stock
savings bank (the "Stock Bank"), the simultaneous formation of a parent holding
company incorporated in Pennsylvania (the "Holding Company") that will acquire
all of the outstanding stock of the Stock Bank (the "Acquisition"), and the
offering of the stock of the Holding Company to the public (the "Offering"),
pursuant to a Plan of Conversion adopted by the Board of Directors of the Bank
on May 19, 1997, as amended (the "Plan").
We have previously provided the Bank an opinion of this firm regarding
certain federal income tax consequences of the Conversion, the Acquisition, and
the Offering (the "Federal Tax Opinion"). Based upon the facts stated in the
Federal Tax Opinion, including certain representations of the Bank, the Federal
Tax Opinion concludes, among other things, that the Conversion qualifies as a
tax-free reorganization under ss. 368(a)(1)(F) of the Internal Revenue Code of
1986, as amended, and that the Bank, the Stock Bank, and the Holding Company and
the depositors of the Bank will not recognize income, gain, or loss for federal
income tax purposes upon the implementation of the Conversion, the Acquisition,
and the Offering.
Based upon (1) the facts and circumstances attendant to the Conversion,
the Acquisition, and the Offering, including the representations of the Bank, as
described in the Federal Tax Opinion, (2) current provisions of Pennsylvania
law, as reflected in Pennsylvania statutes, administrative regulations and
rulings thereunder, and court decisions, (3) the Federal Tax Opinion, and (4)
the assumption that the Conversion, the Acquisition, and the Offering will not
result in the recognition of any gain or income on the books of the Bank, the
Stock Bank, or the Holding Company under generally accepted accounting
principles, it is our opinion that under the laws of the Commonwealth of
Pennsylvania, the implementation of the Conversion, the
<PAGE>
Board of Directors
Workingmens Savings Bank, FSB
June 16, 1997
Page 2
Acquisition and the Offering will not cause any tax liability to be incurred (a)
by the Bank or by the Stock Bank under the Pennsylvania Mutual Thrift
Institutions Tax ("MTIT"), 72 P.S. ss.8501 et seq., (b) by the depositors of the
Bank under the Pennsylvania Personal Income Tax ("PIT"), 72 P.S. ss.7301 et
seq., and (c) by the Holding Company under the Pennsylvania Corporate Net Income
Tax ("CNIT"), 72 P.S. ss.7401 et seq.
Our opinions herein are expressly limited to those taxes specified in
the immediately preceding paragraph and specifically do not include any opinions
with respect to the consequences to depositors of the implementation of the
Conversion, the Acquisition, or the Offering under any other taxes imposed by
the Commonwealth of Pennsylvania or any other subdivision thereof, or imposed by
states other than Pennsylvania and local jurisdictions of such states. In
addition, the opinions herein specifically do not include (1) an opinion with
respect to the consequences to the Bank, the Stock Bank, and the Holding Company
of the implementation of the Conversion, the Acquisition, or the Offering under
any local taxes imposed by any political subdivision of the Commonwealth of
Pennsylvania, and under any state or local realty or other transfer tax, or (2)
an opinion with respect to tax liabilities under the MTIT, the PIT, or the CNIT
attributable to events after the Conversion, the Acquisition and the Offering or
to any assets held or acquired by the Holding Company other than stock of the
Stock Bank.
Our opinion is based on the facts and conditions as stated herein,
whether directly or by reference to the Federal Tax Opinion. If any of the facts
and conditions are not entirely complete or accurate, it is imperative that we
be informed immediately, as the inaccuracy or incompleteness could have a
material effect on our conclusions. In rendering our opinion, we are relying
upon the relevant provisions of the Code, the laws of the Commonwealth of
Pennsylvania, as amended, the regulations and rules thereunder and judicial and
administrative interpretations thereof, which are subject to change or
modification by subsequent legislative, regulatory, administrative, or judicial
decisions. Any such changes could also have an effect on the validity of our
opinion. We undertake no responsibility to update or supplement our opinion. Our
opinion is not binding on the Internal Revenue Service or the Commonwealth of
Pennsylvania, nor can any assurance be given that any of the foregoing parties
will not take a contrary position or that our opinion will be upheld if
challenged by such parties.
Finally, we hereby consent to the filing of this opinion as an exhibit
to the Application for Conversion on Form AC ("Form AC") or similar filings of
the Bank filed with the Office of Thrift Supervision, the filing of this opinion
as an exhibit to the Application H-(e)(1)S of the Holding Company to be filed
with the Office of Thrift Supervision, and the filing of this opinion
<PAGE>
Board of Directors
Workingmens Savings Bank, FSB
June 16, 1997
Page 3
as an exhibit to the Holding Company's Registration Statement on Form SB-2
("Form SB-2") to be filed with the Securities and Exchange Commission, and to
reference to our firm in the offering circular contained in the Form AC, Form
SB-2 and related documents related to this opinion.
Very truly yours,
/s/Malizia, Spidi, Sloane & Fisch, P.C.
Malizia, Spidi, Sloane & Fisch, P.C.
EXHIBIT 10
<PAGE>
FORM OF EMPLOYMENT AGREEMENT
THIS AGREEMENT, made this 30th day of September, 1996, by and between
Workingmen's Savings Bank, F.S.B., hereinafter referred to as the Employer and
Robert D. Neudorfer, of Pittsburgh, Pennsylvania, hereinafter referred to as the
Employee.
Witnesseth, in consideration of the mutual covenants contained, it is
agreed as follows:
1. The Employer will continue to employ the full-time services of the
Employee in the position of the President of the Employer for the period
commencing from the date hereof until June 30, 1999.
2. The Employer will pay to the Employee a gross salary as determined
from time to time by its Board of Directors. Such salary shall be paid on a
bi-weekly basis with the deduction therefrom of all mandated withholding taxes
and such additional deductions as may be mutually agreed upon.
3. The Employee shall devote his full time to the appointed position.
The Employee shall perform the duties assigned by the Board of Directors and
conduct himself in accordance with the terms of this Agreement. It is hereby
agreed by the parties hereto that the Employer's Employment Agreement, its
Employee's Handbook, its By-laws and the policies and regulations duly
prescribed by the Board of Directors are incorporated herein by reference
thereto and thus form a part of this Agreement. The Employee acknowledges that
he has read and is familiar with the documents referred to herein and the duties
and obligations imposed therein. In the event that any provision of the
Employer's Employee Handbook is in conflict with this Agreement, the provisions
hereof shall bond the parties.
4. The parties hereto may terminate this Agreement at any time by mutual
consent. The Employer's Board of Directors may terminate Employee's employment
at any time, but any termination by the Board of Directors other than
termination for just cause shall not prejudice the Employee's right to
compensation or other benefits under this Agreement. The Employee shall have no
right to receive compensation or other benefits for any period after termination
for cause. Termination for cause shall include termination because of the
Employee's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease and desist order, or material
breach of any provision of this Agreement.
5. This Agreement is subject to the limitations and requirements
prescribed under 12 CFR 563.39 and any amendments thereof, to the extent that
said limitations and requirements do not affect any vested rights of the
contracting parties hereto.
EXHIBIT 23.2
<PAGE>
Hinds, Lind, Miller & Co.
A Professional Corporation
Certified Public Accountants
9401 McKninght Road PHONE (412) 364-6070
Pittsburgh, Pennsylvania 15237-6700 FAX (412) 364-6176
- --------------------------------------------------------------------------------
Consent of Independent Auditors
We have issued our report dated August 21, 1996, accompanying the consolidated
financial statements of Workingmens Savings Bank, F.S.B. and Subsidiary
contained in the Application to Convert a Mutual Savings Bank to a Stock Owned
Savings Bank of Workingmens Savings Bank, F.S.B. and in the Registration
Statement and accompanying prospectus of WSB Holding Company. We consent to the
use of the aforementioned report in the Application to Convert a Mutual Savings
Bank to a Stock Owned Savings Bank of Workingmens Savings Bank, F.S.B., and in
the Registration Statement and prospectus, and to the use of our name as it
appears under the caption "Experts".
/s/ Hinds, Lind, Miller & Co.
Pittsburgh, Pennsylvania
June 17, 1997
EXHIBIT 23.3
<PAGE>
FERGUSON Financial
& COMPANY Institution
Consulting
Suite 550
122 W. John Carpenter Frwy June 16, 1997
Irving, Texas 75039
(972) 869-1177
(972) 869-2743 Fax
Board of Directors
Workingmens Savings Bank, FSB
807 Middle Street
Pittsburgh, Pennsylvania 15212
Directors:
We hereby consent to the use of our firm's name in the Form AC Application
for Conversion of Workingmens Savings Bank, FSB, Pittsburgh, Pennsylvania, and
any amendments thereto, in the Form SB-2 Registration Statement of WSB Holding
Company and any amendments thereto, and in the Application H-(e)1-S for WSB
Holding Company. We also hereby consent to the inclusion of, summary of, and
references to our Appraisal Report and our opinion concerning subscription
rights in such filings including the Prospectus of WSB Holding Company.
Sincerely,
/s/Robin L. Fussel
Robin L. Fussell
Principal
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 12-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1996
<PERIOD-END> MAR-31-1997 JUN-30-1996
<CASH> 390,902 221,364
<INT-BEARING-DEPOSITS> 1,201,875 984,667
<FED-FUNDS-SOLD> 0 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 2,757,816 3,317,811
<INVESTMENTS-CARRYING> 12,988,802 10,892,081
<INVESTMENTS-MARKET> 12,828,035 10,782,060
<LOANS> 14,326,054 13,704,418
<ALLOWANCE> 200,596 75,694
<TOTAL-ASSETS> 33,127,204 30,579,474
<DEPOSITS> 27,859,505 28,156,791
<SHORT-TERM> 2,000,000 0
<LIABILITIES-OTHER> 248,170 331,717
<LONG-TERM> 1,000,000 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITIES-AND-EQUITY> 33,127,204 30,579,474
<INTEREST-LOAN> 861,065 1,122,699
<INTEREST-INVEST> 746,877 781,105
<INTEREST-OTHER> 67,389 149,012
<INTEREST-TOTAL> 1,675,331 2,052,016
<INTEREST-DEPOSIT> 935,206 1,256,267
<INTEREST-EXPENSE> 990,252 1,256,267
<INTEREST-INCOME-NET> 685,079 796,549
<LOAN-LOSSES> 127,844 35,142
<SECURITIES-GAINS> (1,608) 969
<EXPENSE-OTHER> 773,974 798,259
<INCOME-PRETAX> (151,683) 45,033
<INCOME-PRE-EXTRAORDINARY> (151,683) 45,033
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (75,271) 34,651
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<YIELD-ACTUAL> 3.02 2.82
<LOANS-NON> 775,844 727,567
<LOANS-PAST> 775,844 727,567
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 75,694 89,010
<CHARGE-OFFS> 2,942 53,800
<RECOVERIES> 0 5,342
<ALLOWANCE-CLOSE> 200,596 75,694
<ALLOWANCE-DOMESTIC> 0 0
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
EXHIBIT 99.1
<PAGE>
[LOGO]
STOCK ORDER FORM
<TABLE>
<CAPTION>
<S> <C>
DEADLINE
- -------- ----------------------------------------------------
Total
This order form, properly executed and with the full payment must Number of Purchase Total
and will be deemed received upon the date and the time of delivery Shares Price Amount
of the form to one of our offices. Please submit your order units
the enclosed postage-paid envelope or hand-delivering the order X $10.00 = $
for to any office of First Federal Savings and Loan delivering the order ---------------- ------ ---------
form to any office of fice of Workingmens Savings Bank, FSB. ----------------------------------------------------
NUMBER OF SHARES
- ----------------
Fill in the number of shares you wish to purchase and the total ----------------------------------------------------
amount due. No fractional shares will be issued. The minimum
order is 25 shares. With the exception of the ESOP, no person (or) [ ] Enclosed is a check or money order payable
persons who have subscription rights through a single account) to WSB Holding Company, Inc. for $ .
may purchase in the Offerings more than 10,000 shares of ---------
Common Stock and no person (or persons who have subscription
rights through a single account), together with associates of [ ] I authorize withdrawal from the following
persons acting in concert with such person, may purchase in the Workingmens Savings Bank, FSB accounts(s):
aggregate more than 10,000 shares of Common Stock. See the
Prospectus for a description of purchase limitations, including how Account Numbers(s) Amount
to determine whether your purchases will be aggregated with any
associates or persons acting in concert. $
--------------------------- ----------
METHOD OF PAYMENT $
--------------------------- ----------
Check the appropriate box(es). You may pay by cash, check, or $
money order. If paying by check or money order, please make it --------------------------- ----------
payable to WSB Holding Company. If paying by cash, please Total Withdrawal $
hand-deliver your order form. Your funds will earn interest at the ----------
the interest rate paid on passbook savings accounts from the date No penalty for early withdrawal.
of receipt until the offering is completed. You may also wish to pay
by authorizing withdrawal from your Workingmens Savings Bank, ----------------------------------------------------
FSB savings or certificate account(s). If paying by withdrawal,
please list the appropriate account number(s); these designated
funds will continue to earn interest at the contractual rate, but
cannot be withdrawn by you. ----------------------------------------------------
STOCK REGISTRATION ----------------------------------------------------
Name(s) in which stock is to be registered.
Print the name(s) in which you want the stock registered. If you
are a voting member, to protect your priority over other purchasers
as described in the Prospectus, you must take ownership in at least ----------------------------------------------------
one of the account holders' names. Name(s) in which stock is to be registered.
Enter the Social Security Number (or Tax I.D. Number) of a
registered owner. Only one number is required. ----------------------------------------------------
Address
Indicate the manner in which you wish to take ownership by
checking the appropriate box. If necessary, check "Other" and
note ownership such as corporation, estate or trust. If stock is ----------------------------------------------------
purchased for a trust, the date of the trust agreement and trust title City County
must be included. See the reverse side of this for registration
guidelines.
----------------------------------------------------
State Zip Code
----------------------------------------------------
Social Security # or Tax ID #
[ ] Individual [ ]Joint Tenants
[ ] Tenants in Common
[ ] Uniform Transfer to Minors
[ ] Other
-----------------------------------------
----------------------------------------------------
</TABLE>
<PAGE>
WSB Holding Company
GUIDELINES FOR REGISTERING STOCK
For reasons of clarity and standardization, the stock transfer
industry has developed uniform stockholder registrations which we will utilize
in the issuance of your WSB Holding Company stock certificate(s). If you have
any questions, please consult your legal advisor.
Stock ownership must be registered in one of the following manners:
- --------------------------------------------------------------------------------
INDIVIDUAL Avoid the use of two initials. Include the first given name,
middle initial and last name of the stockholder. Omit words of
limitation that do not affect ownership rights such as "special
account," "single man," "personal property," etc.
- --------------------------------------------------------------------------------
JOINT Joint ownership of stock by two or more persons shall be
inscribed on the certificate with one of the following types of
joint ownership. Names should be joined by "and," do not connect
with "or". Omit titles such as "Mrs.," "Dr.," etc. JOINT TENANTS
Joint Tenancy with Right of Survivorship and not as Tenants in
Common may be specified to identify two or more owners where
ownership is intended to pass automatically to the surviving
tenant(s). TENANTS IN COMMON Tenants in common may be specified
to identify two or more owners. When stock is held in a tenancy
in common, upon the death of one co-tenant, ownership of the
stock will be held by the surviving co-tenant(s) and by the
heirs of the deceased co-tenant. All parties must agree to the
transfer or sale of shares held in this form of ownership.
UNIFORM Stock may be held in the name of a custodian for a minor under
the Uniform Gifts to Minors laws of the individual states.
TRANSFER There may be only one custodian and one minor
designated on a stock certificate. The standard abbreviation of
custodian TO MINORS is "CUST," while the description "Uniform
Gifts to Minors Act" is abbreviated "UNIF GIFT MIN ACT."
Standard U.S. Postal Service state abbreviations should be used
to describe the appropriate state. For example, stock held by
John P. Jones under the Delaware Uniform Gifts to Minors Act
will be abbreviated.
JOHN P. JONES CUST SUSAN A. JONES
UNIF GIFT MIN ACT
<TABLE>
<CAPTION>
FIDUCIARIES Stock held in a fiduciary capacity must contain the following:
<S> <C> <C>
1. The name(s) of the fiduciary --
* If an individual, list the first given name, middle initial, and last name.
* If a corporation, list the corporate title.
* If an individual and a corporation, list the corporation's title before the initial.
2. The fiduciary capacity --
* Administrator
* Conservator
* Committee
* Executor
* Trustee
* Personal Representative
* Custodian
3. The type of document governing the fiduciary
relationship. Generally, such relationships are either
under a form of living trust agreement or pursuant to
a court order. Without a document establishing a
fiduciary relationship, your stock may not be
registered in a fiduciary capacity.
4. The date of document governing the relationship. The
date of the document need not be used in the
description of a trust created by a will.
5. Either of the following:
The name of the maker, donor or testator
or
The name of the beneficiary
Example of Fiduciary Ownership:
JOHN D. SMITH, TRUSTEE FOR TOM A. SMITH
UNDER AGREEMENT DATED ___/___/97
</TABLE>
<PAGE>
NASD AFFILIATIONS
- -----------------
Please refer to the National Association of Securities Dealers, Inc., ("NASD")
affiliation section and check the box, if applicable. The NASD Interpretation
With Respect to Free-Riding and Withholding (the "Interpretation") restricts the
sale of a "hot issue" (securities that trade at a premium in the aftermarket) to
NASD members, persons associated with NASD members (i.e., an owner, director,
officer, partner, employee, or agent of a NASD member) and certain members of
their families. Such persons are requested to indicate that they will comply
with certain conditions required for an exemption from the restrictions.
[ ] Check here and initial below if you are a member of the NASD or a person
associated with an NASD member or a partner with a securities brokerage firm or
a member of the immediate family of any such person to whose support such person
contributes directly or indirectly or if you have an account in which a NASD
member or a person associated with a NASD member has a beneficial interest. I
agree (i) not to sell, transfer or hypothecate the stock for a period of three
months following issuance, and (ii) to report this stock purchase in writing to
the applicable NASD member I am associated with within one day of the payment
for the stock. (Initials)
--------------
TELEPHONE INFORMATION
- ---------------------
Please enter both a daytime and an evening telephone number where you may be
reached in the event we cannot execute your order as given. Please include your
area code.
Daytime Phone ( )
----------------------------
Evening Phone ( )
----------------------------
ACKNOWLEDGMENT
--------------
Sign and date the order form. When purchasing as a custodian, corporate officer,
etc., add your full title to your signature. An additional signature is required
only when payment is by withdrawal from an account that requires more than one
signature to withdraw funds. Your order will be filled according to the
provisions of the Plan of Conversion as described in the Prospectus.
I (WE) ACKNOWLEDGE THAT THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IS
NOT FEDERALLY INSURED AND IS NOT GUARANTEED BY WORKINGMENS FEDERAL SAVINGS BANK,
FSB OR THE FEDERAL GOVERNMENT.
I (we) further certify that I (we) received a Prospectus prior to purchasing the
Common Stock of WSB Holding Company and acknowledge the terms and conditions
described therein. The Prospectus that I (we) received contains disclosure
concerning the nature of the security being offered and describes the risks
involved in the investment. These include, among others, (i) lack of active
market for common stock; (ii) decreased return on equity and increased expenses
immediately after conversion; (iii) potential impact of changes in interest
rates and the current interest rate environment; (iv) anti-takeover provisions
and statutory provisions that could discourage hostile acquisitions of control;
(v) possible voting control by directors and officers; (vi) possible dilutive
effect of RSP and stock options; (vii) financial institution regulation and
future of the thrift industry, and (viii) restrictions on repurchases of shares.
If anyone asserts that this security is federally insured or guaranteed, or is
as safe as an insured deposit, I (we) should call the Office of Thrift
Supervision Regional Director for the Northeast Region, at (201) 413-7543.
I (we) understand that, after receipt by WSB Holding Company this order may not
be modified or withdrawn without the consent of WSB Holding Company or
Workingmens Savings Bank, FSB. Further, I (we) certify that my (our) purchase
does not conflict with the purchase limitations in the Plan of Conversion and
that the shares being purchased are for my (our) account only and that there is
no present agreement or understanding regarding any subsequent sale or transfer
of such shares. Under penalties of perjury, I (we) certify that: (1) the Social
Security Number or Tax Identification Number given above is correct; and (2) I
(we) am (are) not subject to backup withholding. Instructions: You must cross
out #2 above if you have been notified by the Internal Revenue Service that you
are subject to withholding because of under-reporting interest or dividends on
your tax return.
- --------------------------------------------------------------------------------
Signature Date
- --------------------------------------------------------------------------------
Additional Signature (if required) Date
THIS ORDER NOT VALIDATED UNLESS SIGNED
FOR ASSISTANCE, PLEASE CALL OUR STOCK INFORMATION CENTER AT
(412) __________ (WORKINGMENS SAVINGS BANK, FSB)
FROM 9:00 A.M. TO 4:00 P.M., MONDAY THROUGH FRIDAY
EXHIBIT 99.3
<PAGE>
WSB Holding Company
Proposed Holding Company for
Workingmens Savings Bank, FSB
Pittsburgh, Pennsylvania
Proposed Marketing Materials
6-16-97
<PAGE>
Marketing Materials
WSB Holding Company
Pittsburgh, PA
Table of Contents
-----------------
I. Press Releases
A. Explanation
B. Schedule
C. Distribution List
D. Press Release Examples
II. Advertisements
A. Explanation
B. Schedule
C. Advertisement Examples
III. Question and Answer Brochure
A. Explanation
B. Method of Distribution
C. Example
IV. IRA Mailing
A. Explanation
B. Quantity
C. IRA Mailing Example
V. Counter Cards and Lobby Posters
A. Explanation
B. Quantity
VI. Proxy Reminder
A. Explanation
B. Example
<PAGE>
I. Press Releases
A. Explanation
In an effort to assure that all customers receive prompt accurate
information in a simultaneous manner, Trident advises the Savings Bank
to forward press releases to area newspapers, radio stations, etc. at
various points during the conversion process.
Only press releases approved by Conversion Counsel and the OTS will be
forwarded for publication in any manner.
B. Schedule
1. OTS Approval of Conversion
2. Close of Stock Offering
<PAGE>
C. Distribution List
National Distribution List
--------------------------
National Thrift News Wall Street Journal
- -------------------- -------------------
212 West 35th Street World Financial Center
13th Floor 200 Liberty
New York, New York 10001 New York, NY 10004
Richard Chang
American Banker SNL Securities
- --------------- --------------
One State Street Plaza Post Office Box 2124
New York, New York 10004 Charlottesville, Virginia 22902
Michael Weinstein
Barrons Investors Business Daily
- ------- ------------------------
Dow Jones & Company 12655 Beatrice Street
Barrons Statistical Information Post Office Box 661750
200 Burnett Road Los Angeles, California 90066
Chicopee, Massachusetts 01020
New York Times
- --------------
229 West 43rd Street
New York, NY 10036
<PAGE>
Local Media List
----------------
(To be provided)
Newspaper
- ---------
Radio
- -----
<PAGE>
PRESS RELEASE FOR IMMEDIATE RELEASE
---------------------
For More Information Contact:
Robert Neudorfer, President
(412) 231-7297
WORKINGMENS SAVINGS BANK, FSB
-----------------------------
CONVERSION TO STOCK FORM APPROVED
---------------------------------
Pittsburgh, Pennsylvania (____________, 1997) - Robert Neudorfer,
President of Workingmens Savings Bank, FSB ("Workingmens Savings Bank" or the
"Savings Bank"), Pittsburgh, Pennsylvania, announced that Workingmens Savings
Bank has received approval from the Office of Thrift Supervision to convert from
the mutual form to the stock form of organization. In connection with the
Conversion, Workingmens Savings Bank has formed a holding company, WSB Holding
Company, to hold all of the outstanding capital stock of Workingmens Savings
Bank.
WSB Holding Company is offering up to 287,500 shares of its common
stock, subject to adjustment, at a price of $10.00 per share. Certain account
holders and borrowers of the Savings Bank will have an opportunity to subscribe
for stock through a Subscription Offering that expires on ________, 1997. Shares
that are not subscribed for during the Subscription Offering may be offered
subsequently to the general public in a Community Offering. The Subscription
Offering and Community Offerings will be managed by Trident Securities, Inc. of
Raleigh, North Carolina. Copies of the Prospectus relating to the offerings and
describing the Plan of Conversion will be mailed to customers on or about
________, 1997.
As a result of the Conversion, Workingmens Savings Bank will be
structured in the stock form as are all commercial banks and an increasing
number of savings institutions and will be a wholly-owned subsidiary of WSB
Holding Company. According to Mr. Neudorfer, "Our day to day operations will not
change as a result of the Conversion and deposits will continue to be insured by
the FDIC up to the applicable legal limits."
Customers with questions concerning the stock offering should call the
Savings Bank's Stock Information Center at (412) ________, or visit Workingmens
Savings Bank's office.
<PAGE>
PRESS RELEASE FOR IMMEDIATE RELEASE
---------------------
For More Information Contact:
Robert Neudorfer, President and CEO
(412) 231-7297
WORKINGMENS SAVINGS BANK, FSB
-----------------------------
COMPLETES INITIAL STOCK OFFERING
--------------------------------
Pittsburgh, Pennsylvania - (____________, 1997) Robert Neudorfer,
President and Chief Executive Officer of Workingmens Savings Bank, FSB
("Workingmens Savings Bank" or the "Savings Bank"), announced today that WSB
Holding Company, the proposed holding company for Workingmens Savings Bank, has
completed its initial stock offering in connection with the Savings Bank's
conversion from mutual to stock form. A total of __________ shares were sold at
the price of $10.00 per share.
On ____________, 1997, Workingmens Savings Bank's Plan of Conversion
was approved by the Savings Bank's voting members at a special meeting of
members.
Mr. Neudorfer said that the officers and boards of directors of WSB
Holding Company and Workingmens Savings Bank wished to express their thanks for
the response to the stock offering and that Workingmens Savings Bank looks
forward to serving the needs of its customers and new stockholders as a
community-based stock institution. The stock is anticipated to commence trading
on _______, 1997. Trident Securities, Inc. of Raleigh, North Carolina managed
the stock offering.
<PAGE>
II. Advertisements
A. Explanation
The intended use of the attached advertisement "A" is to notify
Workingmens Savings Bank's customers and members of the local community
that the conversion offering is underway.
The intended use of advertisement "B" is to remind Workingmens Savings
Bank's customers of the closing date of the Subscription Offering.
B. Media Schedule
1. Advertisement A - To be run immediately following OTS approval
and possibly run weekly for the first three weeks.
2. Advertisement B - To be run during the last week of the
subscription offering.
Trident may feel it is necessary to run more ads in order to remind
customers of the close of the Subscription Offering and the Community
Offering, if conducted.
Alternatively, Trident may, depending upon the response from the
customer base, choose to run fewer ads or no ads at all.
These ads will run in the local newspapers.
The ad size will be as shown or smaller.
<PAGE>
- --------------------------------------------------------------------------------
This announcement is neither an offer to sell nor a solicitation of an offer
to buy these securities. The offer is made only by the prospectus. These
shares have not been approved or disapproved by the Securities and
Exchange Commission, the Office of Thrift Supervision or the Federal Deposit
Insurance Corporation, nor has such commission, office or corporation passed
upon the accuracy or adequacy of the prospectus. Any representation to
the contrary is unlawful.
- --------------------------------------------------------------------------------
New Issue ____________, 1997
- --------------------------------------------------------------------------------
287,500 Shares
These shares are being offered pursuant
to a Plan of Conversion whereby
Workingmens Savings Bank, FSB
of Pittsburgh, PA
will convert from a federal mutual savings bank to a
federal stock savings bank
and become a wholly owned subsidiary of
WSB Holding Company
Common Stock
---------------
Price $10.00 Per Share
---------------
Trident Securities, Inc.
For a copy of the prospectus call (412)________.
Copies of the prospectus may be obtained in any State in which this announcement
is circulated from Trident Securities, Inc. or such other brokers and dealers
as may legally offer these securities in such state.
The stock will not be insured by the FDIC
or any other government agency.
- --------------------------------------------------------------------------------
<PAGE>
Advertisement (B)
- --------------------------------------------------------------------------------
WORKINGMENS SAVINGS BANK, FSB
__________, 1997 IS THE DEADLINE TO
ORDER STOCK OF WSB HOLDING COMPANY
Customers of Workingmens Savings Bank, FSB
have the opportunity
to invest in Workingmens Savings Bank, FSB
by subscribing
for common stock in its proposed holding company
WSB HOLDING COMPANY
A Prospectus relating to these securities is
available at our office or by calling our
Stock Information Center at (412) ________.
This announcement is neither an offer to sell nor a
solicitation of an offer to buy the stock of
WSB Holding Company. The offer is made only by the
Prospectus. The shares of common stock are not
deposits or savings accounts and will not be insured
by the Federal Deposit Insurance Corporation
or any other government agency.
Copies of the Prospectus may be obtained in any State in which this announcement
is circulated from Trident Securities, Inc. or such other brokers and dealers
as may legally offer these securities in such state.
- --------------------------------------------------------------------------------
<PAGE>
III. Question and Answer Brochure
A. Explanation
The Question and Answer brochure is an essential marketing piece in any
conversion. It serves two purposes: a) to answer some of the most
commonly asked questions in "plain, everyday language"; and b) to
highlight in brochure form the purchase commitments of the Savings
Bank's officers and directors shown in the Prospectus. Although most of
the answers are taken verbatim from the Prospectus, it saves the
individual from searching for the answer to a simple question.
B. Method of Distribution
There are four primary methods of distribution of the Question and
Answer brochure. However, regardless of the method the brochures are
always accompanied by a Prospectus.
1. A Question and Answer brochure is sent out in the initial
mailing to all members of the Savings Bank.
2. Question and Answer brochures are available in Workingmens
Savings Bank's offices.
3. Question and Answer brochures are sent out in a standard
information packet to all interested investors who phone the
Stock Information Center requesting information.
<PAGE>
PROPOSED OFFICER AND DIRECTOR PURCHASES
Percent of Shares at
Maximum of
Anticipated Number Anticipated Dollar Estimated Valuation
Name of Shares Purchased Amount Purchased Range
THIS INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY WSB HOLDING COMPANY COMMON STOCK. SUCH OFFER AND SOLICITATION MAY
BE MADE ONLY BY THE PROSPECTUS. PLEASE READ THE PROSPECTUS PRIOR TO MAKING AN
INVESTMENT DECISION.
THE SHARES OF WSB HOLDING COMPANY COMMON STOCK ARE NOT SAVINGS OR DEPOSIT
ACCOUNTS AND ARE NOT INSURED BY THE SAVINGS ASSOCIATION INSURANCE FUND OF THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
<PAGE>
QUESTIONS AND ANSWERS
REGARDING
THE PLAN OF CONVERSION
On __________, 1997, the Board of Directors of Workingmens Savings Bank, FSB
("Workingmens Savings Bank" or the "Savings Bank") unanimously adopted, and on
______, 1997 unanimously amended, the Plan of Conversion, pursuant to which
Workingmens Savings Bank will convert from a federally-chartered mutual savings
bank to a federally-chartered stock savings bank ("Stock Conversion"). In
addition, all of Workingmens Savings Bank's outstanding capital stock will be
issued to the holding company, WSB Holding Company ("WSB Holding Company"),
which was organized by Workingmens Savings Bank to own Workingmens Savings Bank
as a subsidiary.
This brochure is provided to answer general questions you might have about the
Conversion. Following the Conversion, Workingmens Savings Bank will continue to
provide financial services to its depositors, borrowers and other customers as
it has in the past and will operate with its existing management and employees.
The Conversion will not affect the terms, balances, interest rates or existing
federal insurance coverage on Workingmens Savings Bank's deposits or the terms
or conditions of any loans to existing borrowers under their individual contract
arrangements with Workingmens Savings Bank.
For complete information regarding the Conversion, see the Prospectus and the
Proxy Statement dated ________, 1997. Copies of each of the Prospectus and the
Proxy Statement may be obtained by calling the Stock Information Center at (412)
________.
THIS INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY WSB HOLDING COMPANY COMMON STOCK. SUCH OFFER AND SOLICITATION MAY
BE MADE ONLY BY THE PROSPECTUS. PLEASE READ THE PROSPECTUS PRIOR TO MAKING AN
INVESTMENT DECISION.
THE SHARES OF WSB HOLDING COMPANY COMMON STOCK ARE NOT SAVINGS OR DEPOSIT
ACCOUNTS AND ARE NOT INSURED BY THE SAVINGS ASSOCIATION INSURANCE FUND OF THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
<PAGE>
QUESTIONS AND ANSWERS
WSB Holding Company
(the proposed holding company for
Workingmens Savings Bank, FSB)
Questions and Answers Regarding the Subscription and Community Offerings
MUTUAL TO STOCK CONVERSION
--------------------------
1. Q. What is a "Stock Conversion"?
A. Conversion is a change in the legal form of organization.
Workingmens Savings Bank currently operates as a
federally-chartered mutual savings bank with no stockholders.
Through the Stock Conversion, Workingmens Savings Bank will
become a federally-chartered stock savings bank, and the stock
of its holding company, WSB Holding Company, will be held by
stockholders who purchase stock in the Subscription, Community
and Syndicated Community Offerings or in the open market
following the Offerings.
2. Q. Why is Workingmens Savings Bank converting?
A. Currently, Workingmens Savings Bank, as a mutual savings bank,
does not have stockholders and has no authority to issue
capital stock. By converting to the stock form of
organization, the Savings Bank will be structured in the form
used by commercial banks, most business entities and a growing
number of savings institutions. The Stock Conversion will be
important to the future growth and performance of the Savings
Bank by providing a larger capital base from which the Savings
Bank may operate, the ability to attract and retain qualified
management through stock-based employee benefit plans,
enhanced ability to diversify into other financial services
related activities and expanded ability to render services to
the public.
The Board of Directors and management of Workingmens Savings
Bank believe that the stock form of organization is preferable
to the mutual form of organization for a financial
institution. The Board and management recognize the decline in
the number of mutual thrifts from over 12,500 mutual
institutions in 1929 to under 800 mutual thrifts today.
Workingmens Savings Bank believes that converting to the stock
form of organization will allow it to more effectively compete
with local community banks, thrifts, and with statewide and
regional banks, which are in stock form. Workingmens Savings
Bank believes that by combining its existing quality service
and products with a local ownership base the Savings Bank's
customers and community members who become stockholders will
be inclined to do more business with Workingmens Savings Bank.
Furthermore, because Workingmens Savings Bank competes with
local and regional banks not only for customers, but also for
employees, Workingmens Savings Bank believes that the stock
form of organization will better afford Workingmens Savings
Bank the opportunity to attract and retain employees,
management and directors through various stock benefit plans
which are not available to mutual savings institutions.
<PAGE>
3. Q. Is Workingmens Savings Bank's mutual to stock conversion
beneficial to the communities that the Savings Bank serves?
A. Management believes that the structure of the Subscription,
Community and Syndicated Community Offerings is in the best
interest of the various communities that Workingmens Savings
Bank serves because following the Stock Conversion it is
anticipated that a significant portion of the Common Stock
will be owned by local residents desiring to share in the
ownership of a local community financial institution.
Management desires that a significant portion of the shares of
common stock sold in the Offerings will be sold to residents
of the Savings Bank's Local Community.
4. Q. What effect will the Stock Conversion have on deposit accounts
and loans?
A. Terms and balances of accounts in Workingmens Savings Bank and
interest rates paid on such accounts will not be affected by
the Conversion. Insurable accounts will continue to be insured
by the Federal Deposit Insurance Corporation ("FDIC") up to
the maximum amount permitted by law. The Stock Conversion also
will not affect the terms or conditions of any loans to
existing borrowers or the rights and obligations of these
borrowers under their individual contractual arrangements with
Workingmens Savings Bank.
Q. Will the Stock Conversion cause any changes in Workingmens
Savings Bank's personnel?
A. No. Both before and after the Conversion, Workingmens Savings
Bank's business of accepting deposits, making loans and
providing financial services will continue without
interruption with the same board of directors, management and
staff.
6. Q. What approvals must be received before the Stock Conversion
becomes effective?
A. First, the Board of Directors of Workingmens Savings Bank must
adopt the Plan of Conversion, which occurred on _________,
1997. Second, the Office of Thrift Supervision must approve
the applications required to effect the Stock Conversion.
These approvals have been obtained. Third, the Plan of
Conversion must be approved by a majority of all votes
eligible to be cast by Workingmens Savings Bank's voting
members. A Special Meeting of voting members will be held on
___________, 1997, to consider and vote upon the Plan of
Conversion.
THE HOLDING COMPANY
-------------------
7. Q. What is a holding company?
A. A holding company is a company that owns another entity.
Concurrent with the Conversion, Workingmens Savings Bank will
become a subsidiary of WSB Holding Company, a Pennsylvania
corporation organized by Workingmens Savings Bank to acquire
all of the capital stock of Workingmens Savings Bank to be
outstanding after the Conversion.
8. Q. If I decide to buy stock in this offering, will I own
stock in WSB Holding Company or Workingmens Savings Bank?
A. You will own stock in WSB Holding Company. However, WSB
Holding Company, as a holding company, will own all of the
outstanding capital stock of Workingmens Savings Bank.
9. Q. Why did the Board of Directors form WSB Holding Company?
A. The Board of Directors believes that the Conversion of
Workingmens Savings Bank
<PAGE>
and the formation of WSB Holding Company as the holding
company for Workingmens Savings Bank will result in a stronger
financial institution with the ability to provide additional
flexibility to diversify the Savings Bank's business
activities through existing or newly-formed subsidiaries,
although there are no current arrangements or understandings
with respect to such diversification. WSB Holding Company will
also be able to use stock-based incentive programs to attract
and retain executive and other personnel for itself and its
subsidiaries.
ABOUT BECOMING A STOCKHOLDER
----------------------------
10. Q. What are the Subscription, Community and Syndicated Community
Offerings?
A. Under the Plan of Conversion adopted by Workingmens Savings
Bank, WSB Holding Company is offering shares of stock in the
Subscription Offering to certain current and former customers
of the Savings Bank and to the Savings Bank's Employee Stock
Ownership Plan ("ESOP"). Shares which are not subscribed for
in the Subscription Offering, if any, may be offered to the
general public in a Community Offering with preference given
to natural persons and trusts of natural persons who are
permanent residents of the Savings Bank's Local Community.
These Offerings are consistent with the board's objective of
WSB Holding Company being a locally owned financial
institution. The Subscription Offering and Community Offering
are being managed by Trident Securities, Inc. It is
anticipated that any shares not subscribed for in either the
Subscription or Community Offerings may be offered for sale in
a Syndicated Community Offering, which is an offering on a
best efforts basis by a selling group of broker-dealers.
11. Q. Must I pay a commission to buy stock in conjunction with the
Subscription, Community or Syndicated Community Offerings?
A. No. You will not pay a commission to buy the stock if the
stock is purchased in the Subscription, Community or
Syndicated Community Offerings.
12. Q. How many shares of WSB Holding Company common stock will be
issued in the Conversion?
A. It is currently expected that between 212,500 shares and
287,500 shares of common stock will be sold at a price of
$10.00 per share. Under certain circumstances the number of
shares may be increased to 330,600.
13. Q. How was the price determined?
A. The aggregate price of the common stock was determined by
Ferguson & Co., an independent appraisal firm specializing in
the thrift industry, and was approved by the Office of Thrift
Supervision. The price is based on the pro forma market value
of Workingmens Savings Bank and WSB Holding Company, as
converted as determined by the independent evaluation.
14. Q. Who is entitled to buy common stock in the Conversion?
A. The shares of common stock of WSB Holding Company to be issued
in the Stock Conversion are being offered in the Subscription
Offering in the following order of priority to: (i) depositors
at the Savings Bank as of March 31, 1996 ("Eligible Account
Holders"), (ii) the Savings Bank's tax qualified plans,
including ESOP, (iii) depositors with $50.00 or more on
deposit at the Savings Bank as of June 30, 1997 ("Supplemental
Eligible Account Holders"), and (iv) depositors and borrowers
of the Savings Bank as of _______, 1997 ("Voting Record
Date"), (Other Members"), subject to the priorities and
purchase limitations set forth in the Plan of Conversion.
Subject to the prior rights of holders of subscription rights,
Common Stock not subscribed for in the Subscription Offering
may be offered subsequently in the
<PAGE>
Community Offering to certain members of the general public,
with preference given to natural persons and trusts of natural
persons permanently residing in "Local Community". Shares, if
any, not subscribed for in the Subscription or Community
Offerings may be offered to the general public in the
Syndicated Community Offering.
15. Q. Are the subscription rights transferable?
A. No. Subscription rights granted to Workingmens Savings Bank's
Eligible Account Holders, Supplemental Eligible Account
Holders and Other Members in the Stock Conversion are not
transferable. Persons violating such prohibition, directly or
indirectly, may lose their right to purchase stock in the
Conversion and be subject to other possible sanctions. It is
the responsibility of each subscriber qualifying as an
Eligible Account Holder, Supplemental Eligible Account Holder
or Other Member to list completely all account numbers for
qualifying savings accounts or loans as of the qualifying date
on the stock order form.
16. Q. What are the minimum and maximum numbers of shares that I can
purchase in the Stock Conversion?
A. The minimum number of shares is 25. The maximum number of
shares that may be purchased in the Stock Conversion by any
persons or entity exercising subscription rights through a
single account currently is 7,500. The maximum number of
shares that may be purchased in the Stock Conversion by any
person or entity other than the ESOP, together with any
associate or persons or entities acting in concert with such
person, currently is 12,500 shares.
17. Q. Are the Board of Directors and management of Workingmens
Savings Bank buying shares of common stock of WSB Holding
Company?
A. Directors and executive officers of the Savings Bank are
expected to subscribe for __________ shares. The purchase
price paid by directors and executive officers will be the
same $10.00 per share price as that paid by all other persons
who order stock in the Subscription, Community or Syndicated
Community Offerings.
18. Q. How do I subscribe for shares of stock?
A. To subscribe for shares of stock in the Subscription Offering,
you should send or deliver a stock order form together with
full payment (or appropriate instructions for withdrawal from
permitted deposit accounts as described below) to Workingmens
Savings Bank in the postage-paid envelope provided, so that
the stock order form and payment or withdrawal authorization
instructions are received prior to the close of the
Subscription Offering, which will terminate at 12:00 p.m.,
Eastern Time, on ___________, 1997, unless extended. Payment
for shares may be made in cash (if made in person) or by check
or money order. Subscribers who have deposit accounts with
Workingmens Savings Bank may include instructions on the stock
order form requesting withdrawal from such deposit account(s)
to purchase shares of common stock of WSB Holding Company.
Withdrawals from certificates of deposit may be made without
incurring an early withdrawal penalty.
If shares remain available for sale after the expiration of
the Subscription Offering, they may be offered in the
Community Offering, which will begin as soon as practicable
after the end of the Subscription Offering, but may begin at
any time during the Subscription Offering. Persons who wish to
order stock in the Community Offering should return their
stock order form as soon as possible after the Community
Offering begins because it may terminate at any time after it
begins. Members of the general public should contact the Stock
Information Center at (412) ________ for additional
information.
<PAGE>
19. Q. May I use funds in a retirement account to purchase stock?
A. Yes. If you are interested in using funds held in your
retirement account at Workingmens Savings Bank, the Stock
Information Center can assist you in transferring those funds
to a self-directed IRA, if necessary, and directing the
trustee to purchase the stock. This process may be done
without an early withdrawal penalty and generally without a
negative tax consequence to your retirement account. Due to
the additional paperwork involved, IRA transfers from
Workingmens Savings Bank must be completed by _________. For
additional information, call the Stock Information Center at
(412) __________.
20. Q. Will I receive interest on funds I submit for a stock
purchase?
A. Yes. Workingmens Savings Bank will pay interest at its
passbook rate from the date the funds are received until
completion of the stock offering or termination of the Stock
Conversion. All funds authorized for withdrawal from deposit
accounts with Workingmens Savings Bank will continue to earn
interest at the contractual rate until the date of the
completion of the Stock Conversion.
21. Q. May I obtain a loan from Workingmens Savings Bank to pay for
shares purchased in the Conversion?
A. No. Federal regulations prohibit Workingmens Savings Bank from
making loans for this purpose. However, federal regulations do
not prohibit you from obtaining a loan from another source for
the purpose of purchasing stock in the Stock Conversion.
22. Q. If I buy stock in the Stock Conversion, how would I go about
buying additional shares or selling shares in the aftermarket?
A. WSB Holding Company expects to have the Common Stock quoted on
the _______ under the symbol "____." Therefore, once the stock
has commenced trading, interested investors may contact any
broker to buy or sell shares.
23. Q. What is WSB Holding Company's dividend policy?
A WSB Holding Company expects to establish a cash dividend
policy following the Conversion at a rate to be determined.
24. Q. Will the FDIC insure the shares of the holding company?
A. No. The shares of WSB Holding Company are not savings deposits
or savings accounts and are not insured by the FDIC or any
other government agency.
25. Q. If I subscribe for shares and later change my mind, will I be
able to get a refund or modify my order?
A. No. Your order cannot be canceled, withdrawn or modified once
it has been received by Workingmens Savings Bank without the
consent of Workingmens Savings Bank.
ABOUT VOTING "FOR" THE PLAN OF CONVERSION
-----------------------------------------
26. Q. Am I eligible to vote at the Special Meeting of Members to be
held to consider the Plan of Conversion?
A. You are eligible to vote at the Special Meeting of Members to
be held on __________, 1997 if you were a depositor or
borrower of Workingmens Savings Bank at the close of business
on the Voting Record Date (_______, 1997) and continue as such
until the Special Meeting. If you were a member on the Voting
Record Date, you should have received a proxy statement and a
proxy card with
<PAGE>
which to vote.
27. Q. How many votes do I have?
A. Each account holder is entitled to one vote for each $100, or
fraction thereof, on deposit in such account(s). Each borrower
member is entitled to cast one vote in addition to the number
of votes, if any, he or she is entitled to cast as an account
holder. No member may cast more than 1,000 votes.
28. Q. If I vote "against" the Plan of Conversion and it is approved,
will I be prohibited from buying stock during the Subscription
Offering?
A. No. Voting against the Plan of Conversion in no way restricts
you from purchasing WSB Holding Company common stock in the
Subscription Offering.
29. Q. Did the Board of Directors of Workingmens Savings Bank
unanimously adopt the Conversion?
A. Yes. Workingmens Savings Bank's Board of Directors unanimously
adopted the Plan of Conversion and urges that all members vote
"FOR" approval of such Plan.
30. Q. What happens if Workingmens Savings Bank does not get enough
votes to approve the Plan of Conversion?
A. The Stock Conversion would not take place, and Workingmens
Savings Bank would remain a mutual savings institution.
31. Q. As a qualifying depositor or borrower of Workingmens Savings
Bank, am I required to vote?
A. No. However, failure to return your proxy card or otherwise
vote will have the same effect as a vote AGAINST the Plan of
Conversion.
32. Q. What is a Proxy Card?
A. A proxy card gives you the ability to vote without attending
the Special Meeting in person. If you received more than one
informational packet, then you should vote the proxy cards in
all packets. Your proxy card(s) is (are) located in the window
sleeve of your informational packet(s).
You may attend the meeting and vote, even if you have returned
your proxy card, if you choose to do so. However, if you are
unable to attend, you still are represented by proxy.
Previously executed proxies, other than those proxies sent
pursuant to the Plan of Conversion, will not be used to vote
for approval of the Plan of Conversion, even if the respective
members do not execute another proxy or attend the Special
Meeting and vote in person.
33. Q. How can I get further information concerning the stock
offering?
A. You may call the Stock Information Center at (412) ________
for further information or to request a copy of the
Prospectus, a stock order form, a proxy statement or a proxy
card.
THIS INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY WSB HOLDING COMPANY COMMON STOCK. SUCH OFFERS AND
SOLICITATION MAY BE MADE ONLY BY MEANS OF THE PROSPECTUS. COPIES OF THE
PROSPECTUS MAY BE OBTAINED BY CALLING THE STOCK INFORMATION CENTER AT (412)
______________.
THE SHARES OF WSB HOLDING COMPANY COMMON STOCK BEING OFFERED ARE NOT
SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT INSURED BY THE
<PAGE>
SAVINGS ASSOCIATION INSURANCE FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY.
<PAGE>
IV. IRA Mailing
A. Explanation
A special IRA mailing is proposed to be sent to all IRA customers of
the Savings Bank in order to alert the customers that funds held in an
IRA can be used to purchase stock. Since this transaction is not as
simple as designating funds from a certificate of deposit like a normal
stock purchase, this letter informs the customer that this process is
slightly more detailed and involves a personal visit to the Savings
Bank.
B. Quantity
One IRA letter is proposed to be mailed to each IRA customer of the
Savings Bank. These letters would be mailed following OTS approval for
the conversion and after each customer has received the initial mailing
containing a Proxy Statement and a Prospectus.
C. Example - See following page.
<PAGE>
Workingmens Savings Bank Letterhead
___________, 1997
Dear Individual Retirement Account Participant:
As you know, Workingmens Savings Bank is in the process of converting
from a federally-chartered mutual savings bank to a federally-chartered stock
savings bank and has formed WSB Holding Company to hold all of the stock of
Workingmens Savings Bank (the "Conversion"). Through the Conversion, certain
current and former depositors and borrowers of Workingmens Savings Bank have the
opportunity to purchase shares of common stock of WSB Holding Company in a
Subscription Offering. WSB Holding Company currently is offering up to _________
shares, subject to adjustment, of WSB Holding Company at a price of $10.00 per
share.
As the holder of an individual retirement account ("IRA") at
Workingmens Savings Bank, you have an opportunity to subscribe for shares of
common stock of WSB Holding Company using funds being held in your IRA. If you
desire to Subscribe for shares of common stock of WSB Holding Company through
your IRA, Trident Securities, Inc. and Workingmens Savings Bank can assist you
in self-directing those funds. This process can be done without an early
withdrawal penalty and generally without adverse tax consequence to your
retirement account.
If you are interested in receiving more information on self-directing
your IRA, please contact our Conversion Center at (412)________. Because it may
take several days to process the necessary IRA forms, a response is requested by
_______, 1997 to accommodate your interest.
Sincerely,
Robert Neudorfer
President
This letter is neither an offer to sell nor a solicitation of an offer to buy
WSB Holding Company common stock. The offer is made only by the Prospectus,
which was recently mailed to you. The shares of WSB Holding Company common stock
are not deposits and will not be insured by the Federal Deposit Insurance
Corporation or any other government agency.
<PAGE>
V. Counter Cards and Lobby Posters
A. Explanation
Counter cards and lobby posters serve two purposes: (1) As a notice to
Workingmens Savings Bank's customers and members of the local community
that the stock sale is underway and (2) to remind the customers of the
end of the Subscription Offering. Trident has learned in the past that
many people forget the deadline for subscribing and therefore we
suggest the use of these simple reminders.
B. Quantity
Approximately 2 - 3 Counter cards will be used at teller windows and on
customer service representatives' desk.
Approximately 1 - 2 Lobby posters will be used at each office of
Workingmens Savings Bank
C. Example
D. Size
The counter card will be approximately 8 1/2" x 11".
The lobby poster will be approximately 16" x 20".
<PAGE>
C. POSTER
OR
COUNTER CARD
================================================================================
"TAKE STOCK IN OUR FUTURE"
"STOCK OFFERING MATERIALS
AVAILABLE HERE"
WORKINGMENS SAVINGS BANK
================================================================================
<PAGE>
VI. Proxy Reminder
A. Explanation
A proxy reminder is used when the majority of votes needed to adopt the
Plan of Conversion is still outstanding. The proxy reminder is mailed
to those "target vote" depositors who have not previously returned
their signed proxy.
The target vote depositors are determined by the conversion agent.
B. Example
C. Size
Proxy reminder is approximately 8 1/2" x 11".
<PAGE>
B. Example
- --------------------------------------------------------------------------------
P R O X Y R E M I N D E R
Workingmens Savings Bank, FSB
YOUR VOTE ON OUR PLAN OF CONVERSION HAS NOT BEEN RECEIVED.
YOUR VOTE IS VERY IMPORTANT, PARTICULARLY SINCE FAILURE TO VOTE IS EQUIVALENT TO
VOTING AGAINST THE PLAN.
VOTING FOR THE CONVERSION WILL NOT AFFECT THE INSURANCE OF YOUR ACCOUNTS.
DEPOSIT ACCOUNTS WILL CONTINUE TO BE FEDERALLY INSURED UP TO THE APPLICABLE
LIMITS.
YOU MAY PURCHASE STOCK IF YOU WISH, BUT VOTING DOES NOT OBLIGATE YOU TO BUY
STOCK.
PLEASE ACT PROMPTLY! SIGN THE ENCLOSED PROXY CARD AND MAIL, OR DELIVER, THE
PROXY CARD TO WORKINGMENS SAVINGS BANK TODAY. PLEASE VOTE ALL PROXY CARDS
RECEIVED.
WE RECOMMEND THAT YOU VOTE TO APPROVE THE PLAN OF CONVERSION. THANK YOU.
THE BOARD OF DIRECTORS AND MANAGEMENT OF
WORKINGMENS SAVINGS BANK
- --------------------------------------------------------------------------------
IF YOU RECENTLY MAILED THE PROXY,
PLEASE ACCEPT OUR THANKS AND DISREGARD THIS REQUEST.
FOR FURTHER INFORMATION CALL (412)_____.
